Tuesday, May 27, 2008

Amazon vs. eBay -- Apples to Apples Comparison!

For your weekend reading pleasure:

It is difficult to do an Apples-to-Apples comparison of eBay and Amazon, because they are so different, eBay is in 39 countries, has auctions, sells cars and tickets, has a payments business (PayPal) a communications business (Skype) and a classifieds business (Kijiji, et al) while Amazon really is a retailer with a small (30% of units sold) but growing 3P merchant business.

They are also different because they use different terminology. Amazon uses "Revenue" because they actually own the inventory and sell things and they include GMV from 3P merchants in their revenue because they handle the entire payment transaction. eBay uses GMV to discuss the amount of product sold in their marketplace business; eBay's "Revenue" is really the money they get from fees and other business segments. While these two metrics are different, they are similar enough for my comparison. For this purpose I will call Amazon's Revenue, GMV (Gross Merchandise Value).

I will also compare growth rate Y/Y once I've made the 2007 comparison.

Well, right off the bat, it appears we have a problem. eBay had 2007 GMV of $59.35 billion (13% Growth Y/Y) while Amazon had GMV (revenue) of $14.84 billion in 2007 39% Growth Y/Y. eBay certainly is a bigger business, so the only real point of comparison, in my mind, is a comparison of each companies North American Fixed Price business. That's about as Apples-to-Apples as we are going to get with these two companies.


If we back out all of eBay's businesses, that do not compete directly with Amazon (Auctions, StubHub, Automobile Sales, Classifieds, Non-GMV business, PayPal and Skype) and concentrate solely on the North American Fixed Price business, we have a point of comparison that will give us a snapshot of each business to draw some conclusions. Because, eBay does not separate out each of their businesses, I do have to make a few assumptions, but at the most I won't be off by more than a couple $100 million either way.

So here we go: For ease of explanation I've changed North American, which includes Canada to US. Apologies to my friends in the Great White North.
  • Amazon's 2007 number is easy. US GMV (revenue) was $8.1 billion. Since all of their GMV is Fixed Price (their Auctions business was minuscule in 2007) we will compare this number to eBay's US Fixed Price business. BTW, Amazon's US GMV (revenue) grew by 38% Y/Y.

We have to do more work on eBay's numbers, to get to their US Fixed Price GMV.

  • First we need to identify eBay's US GMV, which for 2007 was 46% of Worldwide GMV or $27.04 billion. 8% growth Y/Y.
  • Because eBay Motors is such a huge part of the eBay Marketplace business and Amazon only recently began competing in the Parts and Accessories category and doesn't sell cars (the vast majority of eBay Motors GMV ) I've just backed out eBay Motors completely. eBay Motors contributed an estimated $10.5 billion in US GMV in 2007, so after removing Motors from eBay's US GMV, I come up with $16.54 billion US GMV in 2007
  • Next we have to remove GMV derived from Auctions and here is where I make my biggest assumption, because eBay doesn't report this.

    John Donahoe mentioned in the Q1 2007 Earnings call; "Our global fixed price business already accounts for more than 40% of our GMV..." Now, I believe Fixed price is a greater share of eBay's US GMV than 40% and could be anywhere from 42 to 50% of US GMV so I will use 45% as an estimate -- remember this is a snapshot of the business.

    If 45% of eBay's US GMV is Fixed Price that would put their 2007 Fixed price GMV at $7.44 billion. Fixed Price Y/Y growth is difficult to determine accurately, but we can assume Fixed Price GMV grew faster than Auction GMV, because in Q1 of 2007 eBay stated Fixed Price was 39% of Global GMV and Donahoe just mentioned it was more than 40% in Q4 of 2007. Now, I'm starting to get a headache over my right eye trying to calculate the growth rate of Fixed Price Y/Y, so for arguments sake lets just say it was greater than the 8% Y/Y growth in US GMV.
  • One more metric to back out of the calculation: Since Amazon does not sell Tickets, I will back out StubHub's $650 million in 2007 GMV from the US GMV numbers, to give us an estimated $6.79 billion in comparable US GMV

Drum roll please!

In 2007, it looks like eBay did $6.79 billion in comparable Fixed Price GMV to Amazon's $8.1 billion and Amazon's Fixed Price business grew 38% Y/Y while eBay's US Fixed Price business grew 20% Y/Y.

When you do an Apples-to-Apples comparison of the two businesses, Amazon clearly comes out the winner in US GMV and in Y/Y growth.

Of course if we continued this exercise on the profit side of the story, the results would be much different, but that is for another day... for now, I need to take a nap.

17 comments:

Cliff said...

Randy,

Read this twice and was wondering:

Do these numbers include all of Amazon or just the 3P Merchants?

Cliff

Randy Smythe said...

Cliff,

It is all of Amazon's North American Revenues including 3P Merchants biz. It includes all of their businesses in North America but the vast majority of revenue comes from Fixed-Price sales.

30% of the units they ship worldwide are from 3P merchants so you could estimate greater than $2.4 billion in 3P GMV in North America and be in the ball park (3P biz in the US is greater than International, I believe).

Amazon doesn't break out 3P business other than units sold.

Cliff said...

Okay, that's what I thought.

So from my perspective the ballpark apples to apples would be eBay at $6.79 billion to that $2.4 billion number for Amazon.

I think you've still got apples to oranges when including that other 70% for Amazon.

As a third party seller I don't particularly care how much Amazon made on their own product.

Of course, as you point out this is all quite fuzzy. Good job pulling it all together, thanks!

Randy Smythe said...

I was looking at this more as a marketplace to marketplace thing.

The sales that are being generated by Fixed Price regardless if they are sold by 3P merchants.

eBay wants to be considered a retailer so why not compare them to a retailer.

Cliff said...

I agree with you when looking outward, as say a customer of both.

But as a seller I have to disagree, at the very least those apples are of a different breed.

The growth numbers are encouraging, because Amazon has much more room to grow with 3P sellers than eBay, so I expect them to top eBay every time in the near future, but it is also encouraging that eBay is still posting a respectable number in its own right.

With two real money-makers in town this game is getting fun!

Steve L. said...

Randy, we have been thinking along the same lines, however my comparison is more user experience flavored. Amazon wins there too...
http://genuineseller.com/comparison-ebay-amazon/

Steve L.

Randy Smythe said...

Steve, I liked your post. I've always been curious how eBay and Amazon stack-up as eBay tries to become a fixed-price marketplace.

Amazon is growing faster and still has a ton more growth in the 3P business. I think eBay is growing their Fixed-price business at the detriment of their tried and true Auctions business.

Henrietta said...

Big Boy stuff.

Have a nice nap dear, you have earned it.

Now I am going to read it all over again.

Adam Nash said...

Hi Randy,

This post doesn't make a lot of sense to me - you basically excluded everything that eBay does better than Amazon, and included only the items that Amazon focuses on.

For example, excluding tickets is just excluding a category that eBay has succeeded in which Amazon has not. Why not exclude Collectibles, Coins, Business & Industrial, and the six or seven other billion dollar plus categories that eBay has vs. Amazon?

Excluding auctions is completely arbitrary as well, since obviously auctions & fixed price have a substitution effect on eBay (inventory moves to auctions because of its advantages, which lowers fixed price volume).

Also agree with the lack of evaluation of Amazon 3P business vs. their own retail business. Amazon's own business "competes" with its 3P business, so the real issue might be the size of "the marketplace" for third parties.

There is only one business where Amazon is larger than eBay, and that is Media (Books, Movies, Music).

- Adam

Randy Smythe said...

Adam,

You said: "This post doesn't make a lot of sense to me - you basically excluded everything that eBay does better than Amazon, and included only the items that Amazon focuses on."

That was exactly my goal. I'm trying to compare the areas they have in common; where they compete. Not the areas that they do not have in common, like auctions, tickets, motors etc.

I wasn't doing a company to company comparison, but trying to get a snapshot of each companies Fixed Price business using the data I had at my disposal. I wish I could have done a category by category comparison but I couldn't get my hands on that data. If backed out Collectibles and the other categories you mentioned eBay's US GMV number would be much smaller.

I also have no problem combining Amazon retail sales with their 3P sales and comparing that to eBay's Fixed Price GMV. Just think of Amazon's retail sales as being similar to Buy.com's eBay sales (just on a larger scale).

Based on what I see Amazon has tons more headroom for growth then eBay does.

Amazon's 3P business is maybe 30% of their Revenue while eBay's 3P business is 100% of their GMV. Amazon's growth is going to come from category expansion and more 3P sales.

So if Amazon's US Revenue/GMV is $8.1 billion and they are growing 38% Y/Y, while eBay's Fixed price GMV is $6.79 billion and they are growing 20% Y/Y, which company looks like it has the most upside in the Fixed-price business?

eBay's fixed price business will grow by taking share away from auctions not from Amazon. The eBay US Marketplace pie is not getting much bigger.

Amazon on the other hand continues to grow at a better than 30% clip in far fewer categories and markets.

Anonymous said...

Well - I'm with Henrietta on this one. Read it several times and now wandering off to do other things. My gut tells me ebay is not only declining but on a destruction course. They want to be Amazon simply by putting lipstick on a pig. It just doesn't work that way. Unless they take a hands-on approach (and everyone knows they won't) then all I see is failure for them. They'll be a cheesy Amazon clone and still have that reputation dragging along behind them like toilet paper stuck to their foot! ;-)

Anonymous said...

"They'll be a cheesy Amazon clone and still have that reputation dragging along behind them like toilet paper stuck to their foot! ;-)"

What an amazing metaphor :) I always felt that the number one thing eBay need to do after purging all of the bad sellers and promote the good ones, is get the best PR team they can find and LET THE WORLD KNOW that they have cleaned up their act!

roo said...

Randy,

I think you are on the right track.

For us, we are selling the same catalog of items on Amazon as on eBay for exactly 1 year now.

May 2007 had 93% of our Revenue coming from eBay, and 0% from Amazon.

In May 2008, eBay is down to 34% of our revenue, while Amazon was 63%.

We see the trend continuing downward, and the new changes are only going to drive more people away. The core issue is how much time eBay takes for both buyers and sellers, as well as the never-ending problems with anonymity and fraud.

It seems that eBay is "listening", but then doing the opposite of what many of us are saying. Makes me wonder if we should just all say in unison "Destroy the site! Destroy the site!" in some reverse-psychology attempt to get them to do what we really want.

All I can say is that many thanks should go out to people like yourself that are leading the survivors in exodus to sites like Amazon. It may not be the promised land, but without it, many of us would be facing the end of our businesses.

roo

MBA Internet Marketing Manager said...

Very interesting figures Randy.
I would add another point to make a valid comparison:

The estimated amount of goods sold by 3rd party sellers was, according to Piper Jaffray of Munster

- eBay: US$62 billion
- Amazon: US&6 Billion

There is also a more detailed analysis of Amazon vs eBay (The sellers perspective) in my blog post

http://mbainternetmarketingmanager.blogspot.com/2008_10_20_archive.html

Ethan Smith said...
This comment has been removed by the author.
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