How did eBay pursue international growth?

Since its inception in 1995, eBay had enjoyed strong revenue growth, and was a dominant player in the worldwide online auction industry. eBay’s business model was based on a person-to-person marketplace on the Internet, where sellers conveniently listed items for sale, and interested buyers bid on these items. The objective was to create a forum that allowed buyers and sellers to come together in an efficient and effective manner. The business model overcame the inefficiencies of traditional fragmented marketplaces, which tended to offer a limited variety of goods. The company’s success relied primarily on establishing a trustworthy environment that attracted a large number of buyers and sellers.

Despite eBay’s growth performance, achieved mainly through both foreign and U.S. acquisitions, the company still faced a number of challenges. With traffic and sales slowing over the years, eBay had tried to reposition its well-known auction site from being an online yard sale to being a trendy e-retailer. But the company faced intense competition in the U.S. from online giants like Amazon and Google and relative newcomers like Etsy, as well as from traditional brick-and-mortar retailers like Walmart, Staples, and Home Depot, which were now aggressively promoting their online retail sites.

As a growth strategy, eBay had targeted distinct market niches to distinguish itself from competitors. eBay had successfully competed in certain international markets, including Europe and Latin America, but eBay’s numerous attempts to penetrate the Asia-Pacific market, specifically China and Japan, had ended in failure. To remain successful and enjoy the same financial performance as it had in the past, eBay needed to develop an effective strategy to compete in major Asian markets while mitigating the risk of existing local competitors.

With intense competition in the online auction industry, eBay had tried to increase its market share and revenue through acquisitions and partnerships in related and unrelated businesses. However, activist investors, namely Carl Ichan, were pushing for strategy changes, while eBay management was engaged in spinning off the Payments (PayPal) and Enterprise businesses. Industry analysts were wondering about a potential acquisition of the remaining online auction business by a player like Alibaba. Only time would tell which option would prove right for the company and increase shareholder value over the long term.