Page 507 -

CASE 10 • EBAY INC. — 2009 103

Bill Me Later, acquired by eBay Inc. in 2008, offers consumers instant credit at the point
of sale through over 1000 online U.S. merchants. Retailers that offer the Bill Me Later service
include: Borders, Continental Airlines, Fujitsu, JetBlue, Overstock, QVC, Toshiba, Toys “R”
Us, and Walmart.com. Because Bill Me Later is not a chartered financial institution, an
arrangement with CIT Bank allows Bill Me Later to extend credit to customers. When a con-
sumer makes a purchase on credit, CIT Bank initiates a consumer loan at the point of sale. Bill
Me Later then purchases the consumer’s loan from CIT Bank. Bill Me Later earns revenues
from interest on the outstanding balances, late fees, and transaction fees.
EBay’s management seeks to become the number-one online payment solution. EBay
plans to focus on improving the customer experience, enhancing security, expanding product
offerings, enhancing buyer and seller protection programs, adding innovative features, and
expanding its sales channels. Global expansion and increased revenues are to be gained by
integrating PayPal with eBay.com listings and other Marketplaces businesses. Expansion
into international markets and more currencies is expected to improve the ease and efficiency
of cross-border transactions and grow both the Marketplaces and Payments segments.

Business Segment III: Communications

Skype
The Communications segment is composed of Skype, which was founded in 2003 and
acquired by eBay in 2005. Skype is the world’s fastest-growing Internet communication
software platform. As of 2008, Skype had approximately 405.3 million registered users
worldwide. Skype headquarters are located in Luxembourg, with global offices in Europe,
the United States, and Asia. EBay’s proprietary Skype technology has been downloaded
more than a billion times. Why? Skype allows buyer/seller communications 24/7 in a
secure and trusted community that is supported by free unlimited Internet voice and video
communication to over 225 countries in 28 languages. Interestingly, nearly 11 million
Skype downloads are to mobile devices.
Skype revenue is earned through premium services such as making/receiving domes-
tic or international calls to and from landline and mobile phones, voicemail, call forward-
ing, and personalization, such as ringtones. As of December 2008, Skype had acquired
370 million users, a 51 percent growth over the same time a year ago. Registered sub-
scribers are expected to reach 500 million by 2012 and revenues are anticipated to double
by 2011. In 2008, Skype users logged approximately 16 billion minutes in a single quarter,
an increase of 54 percent from the prior year. Large volumes are also easily supported by
Skype software. At any given point in time there may be 300,000 simultaneous calls and
over 100,000 information queries per second. Overall, Skype accounted for 6 percent of
international worldwide calling minutes in 2007. Business calls represent 30 percent of
current Skype usage and 25 percent of calls also use video technology.
EBay Inc. plans to implement a customer management program that emphasizes
acquiring new users and upgrading current Skype users to premium products. Future plans
include expanding Skype’s desktop product to mobile user devices and other Web-based
devices. Plans include also offering solutions to a more diverse business user and enhanc-
ing the Skype’s current platform for greater revenues because the worldwide communica-
tions market is expected to grow by 5.5 percent annually with U.S. Web conferencing
expected to grow 14.1 percent from 2008 through 2011 (eBay.com 2009). EBay’s prior
expenditures were focused on traditional wired routes; however, 50 percent of expendi-
tures are now in the wireless telecommunications sector.

Competition
E-Bay competitors include: online and offline retailers, distributors, liquidators, import
and export companies, online and offline auctioneers, catalog and mail-order companies,
classifieds, directories, search engines, products of search engines, virtually all online
and offline commerce participants (consumer-to-consumer, business-to-consumer and
business-to-business), and online and offline shopping channels and networks. However,
Amazon’s strong growth and satisfied customer base pose the greatest threat to eBay.