eBay 1998 Annual Report Download - page 9

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receive a watch at the same price and all lower bids would be rejected. To be eligible to hold a Dutch auction, a
seller must have a sufficiently high feedback rating and must have been a registered seller for at least 60 days. A
seller may also specify that an auction will be a private auction. With this format, bidders’ e-mail addresses are not
disclosed on the item screen or bidding history screen.
Sellers pay a nominal placement fee to list items for sale—$0.25 for an auction with a minimum starting price
of less than $10.00, $0.50 for a minimum starting price of $10.00 to $24.99, $1.00 for a minimum starting price of
$25.00 to $49.99 and $2.00 for a minimum starting price of $50.00 or more. By paying incremental placement fees,
sellers can have items featured in various ways. The seller can highlight his or her auctions by utilizing a bold font
for the auction heading for an additional fee of $2.00. A seller with a favorable feedback rating can have his or her
auction featured as a “Featured Auction” for $99.95, which allows the seller’ s item to be rotated on the eBay home
page, or as a “Category Featured Auction” for $14.95, which allows his or her item to be featured within a particular
eBay category. The seller can choose to place a seasonal icon (such as a shamrock in connection with St. Patrick’ s
Day) next to his or her listing for $1.00. A seller can also include a description of the product with links to the
seller’ s website. In addition, the seller can include a photograph in the description if the seller posts the photograph
on a website and provides eBay with the appropriate Web address. Items auctioned in the Gallery section of the
“Antiques” category are all showcased in a catalog of pictures rather than text. A seller who uses a photograph in his
or her listing can have this photograph included in the Gallery section for $0.25 or featured in the Gallery section for
$19.95. The Company plans to introduce this proprietary presentation format to other eBay categories in 1999.
During the course of an auction, sellers are notified of the status of their auctions on a daily basis via email.
How Transactions are Completed. At the end of an auction period, if a bid exceeds the minimum price and, if
one is set, the reserve price, eBay automatically notifies the buyer and seller via email and the buyer and seller can
then consummate the transaction independently of eBay. At the time of the email notification, eBay charges the
seller a success fee equal to 5% of the first $25 of the purchase price, 2.5% of that portion of the purchase price from
$25.01 to $1,000, and 1.25% of that portion of the purchase price over $1,000. At no point during the process does
the Company take possession of either the item being sold or the buyer’ s payment for the item. Rather, the buyer
and seller must independently arrange for the shipment of and payment for the item, with the buyer typically paying
for shipping. A seller can view the buyer’ s feedback rating and then determine the manner of payment, such as
personal check, cashier’ s check or credit card, and also whether to ship the item before or after the payment is
received. Under the terms of the Company’ s user agreement, if a seller receives one or more bids above the stated
minimum or reserve price, whichever is higher, the seller is obligated to complete a transaction, although the
Company has no power to force the seller or bidder to complete the transaction other than to suspend them from
using the eBay service. In the event the buyer and seller are unable to complete the transaction and the seller notifies
eBay, eBay credits the seller the amount of the success fee. Invoices for placement fees, additional listing fees and
success fees are sent via email to sellers on a monthly basis. Typically, sellers have a credit card account on file with
eBay and that account is charged shortly after the invoice is sent.
Feedback Forum. eBay pioneered this feature to facilitate the establishment of reputations within its
community by encouraging individuals to record comments about their trading partners on each transaction or other
eBay users with whom they have interacted. Every registered eBay user has a feedback profile containing
compliments, criticisms and other comments by users who have conducted business or interacted with the person. A
recent enhancement to the Feedback Forum permits users to differentiate between transaction-specific feedback and
general feedback. This information is recorded in a feedback profile that includes a feedback rating for the person
and indicates comments from other eBay users who have interacted with that person over the past seven days, the
past month, the past six months and beyond. Users who have developed positive reputations over time will have a
star symbol displayed next to their user name, which is color coded to indicate the amount of positive feedback as
compared to negative feedback received by the user. eBay users may review a person’ s feedback profile to check on
the person’ s reputation within the eBay community before deciding to bid on an item listed by that person or in
determining how to complete the payment for and delivery of the item.
The terms of the Company’ s user agreement prohibit actions that would undermine the integrity of the
Feedback Forum, such as a person’ s leaving positive feedback about himself or herself through other accounts or
leaving multiple negative feedback for others through other accounts. The Feedback Forum system has several
automated features designed to detect and prevent some forms of abuse. For example, feedback posting from the
same account, positive or negative, cannot affect a user’ s net feedback rating (i.e., the number of positive postings,