The story of the online auction monopolist eBay

eBay. A firm which in 2011 had a net income of more than 3.2 billion. A website which almost everyone has heard of.

In an article I recently posted which explored whether there is really that much diversity online, I noted how eBay owned four websites in Alexa’s top 100 ranking –,, and

There is no doubt that eBay holds a monopoly on the online auction market. But how did it get there? On September the 2nd 1995, eBay didn’t exist. One day later on September the 3rd it did, and after just over 3 years and 6 months, the site made its first major acquisition, the auction house Butterfield & Butterfield which it purchased for the price of $260,000,000 USD. A spend of 260 million after less than four years trading? eBay’s rapid early growth set it up to become a global internet phenomenon.

eBay kept buying up smaller firms, but not spending nearly as much as it had on its first purchase until mid-2000 when it forked out 318 million (USD) to buy This was an amazing investment at the time, as even today it stands as eBay’s 6th largest ever investment, and it has made hundreds.

PayPal's logoThat said, the purchase of was to prove small fry to PayPal, which the now giant auctioneer purchased 2 years later in July 2002 for an astounding $1.5 billion. PayPal integration with eBay is (in my opinion) one of its greatest ever business moves. eBay is now able to seamlessly integrate processing credit card payments without having to pay millions every year to third parties. Fees eBay would have lost to PayPal are now extra revenues.

eBay wasn’t done though, going on to make the biggest purchase in its history, by buying Skype Limited for more than $2.5 billion. The auction site purchased the Luxembourg based company in 2005, only to sell 70% of its shares in 2009 for $2 billion – a healthy profit. Later, in May 2011, Microsoft bought Skype in its entirety for $8.5 billion, an investment which I am not sure it will see great returns on in the near future at least.

Skype's LogoeBay started to turn into a Microsoft and a Google. It was fast becoming an internet giant which bought up pretty much anything it could see turning it a bigger profit, or anything which posed a threat – in terms of competition. Just some of its purchases include StumbleUpon, Bill Me Later and Magento, the ecommerce web application.

Many say that eBay is one of the most notable successes the dot-com bubble, and I have to agree. Without the internet, eBay would be nowhere. It got in early and grew from the start, giving its competition very little chance.

Like it or hate it, eBay is an internet phenomenon, and also an internet giant. In my opinion it is successful down to luck: a good idea at the right time. Had it been thought of a year later, eBay might not be what it is today, had the internet not really taken off as it has and still is doing, eBay would again might not be where it is today.

What are your views on eBay? Were you aware of how much it owns and how rich it is? Is its monopoly unfair, or don’t you mind?

12 thoughts on “The story of the online auction monopolist eBay

  1. I personally don’t like ebay and I have heard many horror stories about people who had to deal with issues from them and paypal. I am fortunate not to have to use either one.

  2. There’s certainly no getting away from how massive eBay is. If you asked almost anyone to name an auction site (or even be more vague and say shopping site) they would probably say eBay. It is a massive ‘brand’.

    I use it occasionally and have always found good deals and never had any issues, although I know people who have had problems — it’s to be expected with such a beast.

    I personally think the site is in need of a huge facelift as it feels quite dated but I image that would be quite a task. The auction pricing structure is often complicated too.

    There are several other good auction sites around now, but no one has the exposure of eBay.

    • Christopher (admin team)

      It is always hard to know when to update your design, as if you do, people may hate it, but then you are at risk of becoming, as you say David, dated.

  3. Hi Christopher,

    The move by ebay to buy paypal was certainly a brilliant business move. Between the 2 companies ebay is now getting almost 10% of every sale. Even with this 10% cost I know a number of people who are doing really well out of having ebay shops. My feeling with Skype and Microsoft is that they will need to start monetising it soon if they expect to get anything back on that huge investment.

    • Christopher (admin team)

      eBay certainly make a lot of money!

      I wonder if Microsoft is past it, and it is helplessly buying things, to try and keep up with Google and Apple.

  4. I doubt that Microsoft are helplessly buying things. More likely the strategy guys are not thinking through how they make money out of the things that they buy. Skype is a great concept however people are so used to getting it for free it will be difficult to turn it around. Interesting that you mention Google and Apple, I can see Samsung overtaking apple in the not too distant future.

    • I don’t think Microsoft will try to monetize Skype, instead I think it will integrate it to their current services to make the overall product much better.
      As for eBay I’m not a huge fan of the company and there are quite a few auction services that are coming up, especially location/country based ones.

  5. I used to be an eBay Power Seller. The fact that eBay is huge really makes selling an ease. Whether you’re going to sell your items via auction or “Buy It Now”, interested buyers tend to look to eBay for bargains because eBay is a trusted brand. A seller is almost certain to get a deal done if he/she is listing an item for sale on eBay. The integration with PayPal not only made sending and receiving payment convenient to both sellers and buyers, it also provides purchase protection plan to buyers in the event of lost of items or items received are not as described if buyers paid via PayPal. The whole selling and buying process has been made easy, fast, secure and convenient. For that, I personally think they deserve to be what they are today. eBay is already a well established brand and it will take something really “big” to take them down.

  6. Even though I hardly use eBay, I just realized that many I am using their services / products a lot. I have been using skype from the time eBay had it. StumbleUpon is one of my favorite way to stumble upon things on the internet and PayPal is used by mostly everyone who uses eCommerce.

    • They certainly seem to have the market sewn up for payment, with Paypal. There are very few competitors out there and everyone seems to trust the PayPal name.

      I wonder why there are so few alternatives — regulations? Cost? Who know, but competition is always good!

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