Profit and transactions
eBay generates revenue by a complex system of fees for services,
listing product features,and a Final Value Fee for sales proceeds by sellers.
As of November 2012, the U.S.-based eBay.com charges $0.10 to $2,
based on the opening or reserve price, as an insertion fee for a basic
auction-style listing without any adornments. The Final Value Fee amounts to 10%
of the total amount of the sale, which is the price of the item plus shipping charges. 
Fixed-price listings have an insertion fee of $0.30, 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 £0.15 to a maximum rate of £3 per £100
for an ordinary listing and from 0.75% 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 U.S. law, a state cannot require sellers located outside
the state to collect a sales tax, making purchases more attractive to buyers.
Although some state laws require resident purchasers to pay use tax on out-of-state
purchases, it is not a common practice. However, sellers that operate
as a business do follow state tax regulations on 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 profits by collecting fees based on what governments tax for VAT;
it not only receives fees as a percentage of the sale price “ex VAT” but also the
same percentage on the VAT itself. In a similar manner eBay also charges its
FVF on the shipping fees charged by the Post Office (USPS) or other third party
shippers, even when shipping is a separate charge. The company’s business strategy includes
increasing international trade.
eBay has already expanded to over two dozen countries including China and India. Strategic
international expansion has failed in 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. eBay also notably failed in China due to competition
from local rival Taobao. eBay entered the Chinese market in 2002 and shut down its Chinese
site in 2007. In its Q1 2008 results, total payment volume via PayPal increased 17%, but off
the eBay auction site it was up 61%. For most listing categories, eBay sellers are permitted
to offer a variety of payment
systems such as Escrow.com, PayPal, Paymate, ProPay, andMoneybookers. Escrow.com
is eBay’s approved escrow site. The transactions processed through Escrow.com largely are
in relation to eBay Motors; they are not restricted to this type of listing however.
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.
In October 2013, ePN launched a new pricing model. The new model is more transparent,
and is based on category-level base commission rates with bonuses available for
referring new and reactivated buyers. 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.