eBay Inc (EBAY)

eBay is a website where strangers buy and sell things to each other. You list an item for sale, take photos, set a price or let people bid, and when it sells, eBay takes a cut. A buyer can then message the seller, pay through eBay’s system, and arrange for the item to ship. The company does not own the goods, does not run warehouses, and does not ship packages itself — instead, it takes about five to fifteen percent of every sale and handles disputes when deals go wrong. It is one of the oldest internet companies still operating, and it remains one of the largest e-commerce platforms in the world. The stock trades on NASDAQ under EBAY.

How it started

In September 1995, Pierre Omidyar, a software engineer in San Jose, launched a website called AuctionWeb. It was one line of code solving a simple problem: his girlfriend collected PEZ dispensers and wanted a way to find other collectors. Omidyar built a site where anyone could list an item, set a starting bid, and let buyers bid against each other. The first item sold was a broken laser pointer to a collector who knew what he was doing — it sold for $14.83.

The site caught on. By 1998, it was processing millions of dollars in transactions and Omidyar renamed it eBay. He hired Meg Whitman as CEO, and she scaled the company with ruthless discipline. Rather than compete on delivery speed or selection breadth — which would have required building warehouses and buying inventory — eBay’s strategy was pure platform: provide the tools, take a cut, and let millions of individual and small-business sellers do the work. By the time eBay went public in 1998, it had created something that had never existed before: a real-time economic system where supply and demand set prices every minute of every day.

What makes eBay different from Amazon

Amazon is a retailer. Amazon buys goods, stores them, ships them, and refunds your money if you are unhappy. Amazon holds the risk. eBay is a marketplace. eBay does not buy anything. A seller on eBay takes the risk that the buyer will dispute the purchase, claim the item was not as described, or simply refuse to pay. eBay’s role is to set the rules, provide the platform, and arbitrate when disputes happen.

This distinction matters because it makes the two companies extremely different in economics. Amazon needs massive capital for warehouses and logistics. eBay needs servers and software. Amazon’s margins are squeezed because it absorbs returns and handles customer service directly. eBay’s model is to take its commission and let the buyer and seller sort it out, with eBay stepping in only when necessary.

The downside of eBay’s model is that it relies on millions of small sellers who are not employed by eBay and do not always deliver. A buyer’s experience depends entirely on the seller. eBay solved this with reputation: every user on the site has feedback scores and ratings visible to everyone else. A seller with one-hundred percent positive feedback and ten thousand sales is trustworthy; a new seller with no rating is not. This reputation system became the foundation that made person-to-person trading at scale possible.

How eBay makes money

eBay collects revenue from three sources. First, there is the final-value fee, which is typically ten to fifteen percent of what the item sells for. A seller lists a vintage bicycle for one hundred dollars, it sells for one hundred dollars, and eBay takes twelve dollars. Second, the company charges for listing upgrades — a seller who wants the item featured more prominently or wants to list ten thousand items a day pays for that privilege. Third, eBay Managed Payments is a payment system where eBay takes a cut of the transaction fee in addition to the percentage-of-sale commission. Together, these streams create what looks like a simple business: a marketplace that takes rent from transactions.

The business works in boom and bust cycles tied to the overall health of consumer spending. When people have money and feel optimistic, they buy more. When they are worried, they buy less. Seasonality also matters — the fall and winter are strong because of holidays, and spring is weaker. During the pandemic, eBay saw enormous growth as people sorted through possessions at home and listed things for sale, and as lockdowns drove people online. That surge did not last, and growth has since slowed as consumer spending tightened.

Who sells on eBay now

The original eBay was dominated by individual collectors and casual sellers — people with a garage full of old toys or someone who inherited their uncle’s vintage camera collection. That is still a meaningful segment. But over the years, eBay has become increasingly focused on small businesses: people who import items from overseas and resell them, retailers who use eBay as an additional sales channel, and dealers in specific categories like sneakers or coins who operate a full-time business on the platform.

eBay has also shed categories. It used to be a destination for electronics — you could buy used cameras and computers. Over time, Amazon and specialized retailers captured most of that. eBay is now strongest in collectibles, vintage goods, used cars, and niche categories where expert buyers want to find items they cannot get anywhere else. The categories where eBay still thrives tend to be ones where buying and selling are driven by hobbyists and enthusiasts rather than people who just need to buy something cheap.

The challenge

eBay’s biggest challenge is that it is old. The website design feels dated compared to mobile-first competitors and the many specialized marketplaces that have sprung up — Etsy for handmade goods, Depop for fashion, Mecari for secondhand items in Japan. Shipping has become expensive and complicated, and international shipping is often not worth the hassle for either buyer or seller. eBay’s fee structure is also higher than some alternatives, so sellers sometimes choose other platforms.

eBay has tried to modernize. The company shut down eBay Motors, its used-car section, to focus on core categories. It has pushed authentication services for high-value items like watches and collectibles, so a buyer can trust the item is real. It has built advertising tools for sellers, creating a new revenue stream. But the fundamental challenge remains: eBay is a platform for buyers and sellers to meet, and if buyers go elsewhere or sellers prefer a different platform, eBay loses. The company’s competitive advantage is the sheer number of listings — someone looking for a rare item will often start on eBay because it might be there — but that advantage can erode if sellers migrate away in large numbers.

Researching eBay

The SEC filing to read is the 10-K (CIK 0001065088), which breaks down revenue by category and region and outlines how the company is faring against competition. The quarterly earnings calls reveal trends in seller growth, buyer activity, and whether the company is gaining or losing ground in its core categories. Anyone tracking eBay should watch active listing count — the total number of items for sale on the site at any given time — which indicates whether eBay is gaining or losing sellers.

The key question is whether eBay can arrest its slow decline in categories where it once dominated and grow in the categories where it remains strong. The shift to collectibles and specialist categories is a logical retreat to where eBay’s strengths matter most, but it also makes the company smaller. The investment question is whether that smaller, more-focused eBay is stable and profitable or just a slower decline.