EBay - Profit and Transactions

Profit and Transactions

eBay generates revenue from various fees. The eBay fee system is quite complex; there are fees to list a product and fees when the product sells (Final Value Fee), plus several optional adornment fees, all based on various factors and scales. As of November 2012, the U.S.-based eBay.com takes $0.10 to $2 (based on the opening or reserve price) as an insertion fee for a basic auction-style listing without any adornments, and 9% of the total amount of the sale (price of the item plus shipping charges) as a final value fee. Fixed-price listings have an insertion fee of $0.50, and the final value fee varies based on category and total amount of the sale (e.g. 13% for DVDs & Movies up to $50). The UK based ebay.co.uk takes from GBP £0.15 to a maximum rate of GBP £3 per £100 for an ordinary listing and from 0.75 percent to 10% (writing as of June 2009) of the final price. Reduced Final Value Fees are available to business registered customers. In addition, eBay owns the PayPal payment system that has fees of its own.

Under current U.S. law, a state cannot require sellers located outside the state to collect a sales tax, making deals more attractive to buyers. Although some state laws require purchasers to pay sales tax to their own states on out-of-state purchases, it is not a common practice. However, most sellers that operate as a full-time business do follow state tax regulations on their eBay transactions. However Value Added Tax (VAT), a form of sales tax in EU countries, is different. eBay requires sellers to include the VAT element in their listing price and not as an add-on and thus eBay profits by collecting fees based on what governments tax for VAT; i.e. it not only receives fees as a percentage of the sale (net) price but also a similar percentage of the VAT element of the overall (gross) price.

The company's current business strategy includes increasing international trade. eBay has already expanded to over two dozen countries including China and India. The only places where expansion failed were Taiwan and Japan, where Yahoo! had a head start, and New Zealand where TradeMe, owned by the Fairfax media group is the dominant online auction website.

A more recent strategy involves the company increasingly leveraging the relationship between the eBay auction site and PayPal: The impact of driving buyers and sellers to use PayPal means not only does eBay turn buyers into clients (as a pure auction venue its clients used to be predominantly sellers) but for each new PayPal registration it achieves via the eBay auction site it also earns offsite revenue when the resulting PayPal account is used in non-eBay transactions. In its Q1 2008 results, total payment volume via PayPal increased 17 percent, but off the eBay auction site it was up 61 percent.

For most listing categories, eBay sellers are permitted to offer a variety of payment systems such as PayPal, Paymate, ProPay, and Moneybookers.

eBay runs an affiliate program under the name eBay Partner Network. eBay affiliate marketers were originally paid a percentage of the eBay seller's transaction fees, with commissions ranging from 50% to 75% of the fees paid for an item purchased. In October 2009, eBay changed to an affiliate payout system that it calls Quality Click Pricing, in which affiliates are paid an amount determined by an undisclosed algorithm. The total earnings amount is then divided by the number of clicks the affiliate sent to eBay and is reported as Earnings Per Click, or EPC.

On April 18, 2012 eBay reported a 29% Q1 revenue increase to $3.3 billion compared to their Q1 in 2011. Net income was reported to be at $570 million for the quarter.