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Business Operations Business Models

How Does eBay Make Money (Business and Revenue Model)

The eBay business model

How Does eBay Make Money?
Here’s what you should know:
  • What is eBay, and how does eBay work?
  • How does eBay make money?
  • Final Value Fees (Commission Fees)
  • Advertising (Promoted Listings)
  • Insertion Fees
  • Store Subscriptions
  • Marketing Services and Other Revenues
  • eBay’s Subsidiaries, Acquisitions, and Exits
  • eBay’s profit and revenue
  • What is the eBay business and revenue model?
  • eBay’s funding and market cap

How does eBay make money? Here is a full, in-depth, breakdown of their five (5) revenue streams and the different products and services they offer, as well as the eBay business model, their year-over-year revenue, and how eBay works.

What is eBay, and how does eBay work?

eBay is an e-commerce marketplace that connects buyers and sellers.

Founded in 1995 by Pierre Omidyar, eBay began trading on the NASDAQ on September 24, 1998, under the ticker symbol “EBAY”. Since then, eBay has since become one of the largest online marketplaces with over 19 million sellers and approximately 1.7 billion live listings globally.

How eBay works is: Users can browse from over 1.7 billion listings on the marketplace. And depending on the listing type, they can bid on Auction type listings, send offers to sellers with Fixed Price type listings, or buy it at the set Buy it Now price. Once ready for purchase, users can checkout as a guest or create an account.

Some of eBay’s competitors include Poshmark, EtsyOfferUpVinted, DepopFacebook Marketplace, Mercari, Amazon, and other marketplace apps.

eBay App in Apple App Store | eBay Business Model | How Does eBay Make Money?
Source: Apple App Store | eBay

How does eBay make money?

According to page 7 of eBay’s 2020 Form 10-K, eBay has more than 185 million active buyers and over 19 million sellers on the platform. To add to that, eBay has roughly 1.7 billion live listings globally that facilitated $100 billion in gross merchandise value (“GMV”) in 2020.

So how does eBay make money off of all those buyers, sellers, listings, and gross merchandise value transacted?

Below is a breakdown of how much money eBay makes and its revenue model. Including all revenue streams and how much they charge for their services.

Here are the 5 ways of how eBay makes money (in 2021):

eBay has a revenue model that makes money in five (5) ways – commissions, advertising, insertion fees, subscriptions, and other services.

#1. Final Value Fees (Commission Fees)

Like most marketplaces, eBay makes the bulk of its money from commission fees they charge the seller on items sold on the platform.

As mentioned above, eBay processed over $100 billion of gross merchandise value (“GMV”) on its platform in 2020. Of which, eBay takes between 3% to 15% + $0.30 on each of those transactions.

eBay Final Value Fee:

  • 3% to 15% plus $0.30 per order (percentage varies on the category the item is sold under)

Note: The commission percentage varies based upon the category the item is sold under.

In addition to eBay’s seller fees, eBay also makes money by offering advertising services to its sellers as a tool to promote their listings.

The way it works is, sellers click the “Sell It Faster” option in the Seller Hub and choose an ad rate between 1% to 100%. The higher the ad rate, the more eBay will promote the listing. Ad rates are the percentage eBay will receive of the final sales price of the item once the item sells.

eBay Promoted Listings Fee:

  • 1% to 100% of the item’s sale price
eBay Promoted Listings Fee | eBay Business Model | How Does eBay Make Money?
Source: eBay

#3. Insertion Fees

Another fee eBay makes money from is charging sellers insertion fees.

For most sellers, it’s free to list on eBay. But if a seller lists more than 250 items per month, they’ll start paying a $0.35 insertion fee for every listing thereafter. Certain categories will incur insertion fees between $20 to $300 per listing depending on the category of the item.

eBay Insertion Fee:

  • $0.35 per listing (applicable to the 251st item listed per month) or;
  • $20 to $300 per listing (apply’s to selective categories only)

#4. Store Subscriptions

Another service eBay offers to its sellers is store subscriptions for its more high volume sellers on the marketplace.

eBay offers five (5) tiers for their store subscription service: Starter, Basic, Premium, Anchor, and Enterprise. All of which offer their own set of perks like cheaper insertion fees, up to $150 off of eBay shipping supplies per quarter, lower commission fees, dedicated customer support, and more.

eBay Store Subscription Cost:

  • $4.95 to $2,999.95 per month (from 5 available paid tiers)
eBay Store Subscription Cost | eBay Business Model | How Does eBay Make Money?
Source: eBay

#5. Marketing Services and Other Revenues

eBay makes the remaining portion of its money from what eBay refers to, on its 10-K Form, as “marketing services and other revenues”.

These revenues, as described by eBay on page 37 of eBay’s 2020 Form 10-K, are generated from “the sale of advertisements, revenue sharing arrangements and first-party inventory programs.”

eBay’s Subsidiaries, Acquisitions, and Exits

To date, eBay Inc. has made a total of 65 acquisitions, 45 investments, 14 lead investments, and 14 successful exits.

eBay Acquisitions
Source: Crunchbase

eBay’s profit and revenue

In 2020, eBay reported $10.27 billion in revenue.

Note: Because eBay Inc. is a publicly traded company, under the Securities Exchange Act of 1934, they must file continuous financial filings with the U.S. Securities and Exchange Commission (SEC). You can find all of eBay’s publicly released financial reports, including annual reports, through eBay’s investor section on their website.

What is the eBay business and revenue model?

eBay makes money through a few revenue models that they combine within their company, they are:

  • Commission based business model
  • Fee-for-service (FFS) business model
  • Advertising business model
  • Subscription based business model
  • Mergers & acquisitions (M&A) business model

eBay’s funding and market cap

According to eBay’s Crunchbase profile, eBay has raised $6.7 million over 2 rounds and has a market cap of $48.18 billion as of September 2021.