Amazon vs. eBay: Business Models and Profitability Compared
This paper compares Amazon and eBay across several financial and strategic dimensions, arguing that despite surface similarities as e-commerce platforms, the two companies differ fundamentally in business model, focus, and profitability. The analysis examines three key profitability ratios (P/E ratio, net profit margin, and return on assets), reviews significant news events for each company, and interprets income statement data and vertical analysis figures. The paper finds that eBay consistently outperforms Amazon on traditional profitability metrics, while Amazon's growth depends heavily on its Amazon Web Services (AWS) division. The conclusion offers strategic recommendations for both companies going forward.
- Introduction: Apples and Oranges: Contrasting core business models of Amazon and eBay
- Company Synopses: Origins, product focus, and revenue streams of each company
- Three Profitability Ratios: P/E ratio, net profit margin, and ROA compared
- Two Key News Events: eBay–PayPal split and Amazon AWS growth
- Income Statement Analysis: Gross profit, operating loss, and net income figures
- Vertical Analysis and Investment Outlook: Assets, liabilities, debt risk, and strategic recommendations
✍️ How to write this paper — guide, tools & examples ▾
What makes this paper effective
- Uses concrete financial figures (P/E ratios, net profit margins, ROA percentages) to anchor comparative claims rather than relying on general impressions.
- Maintains a clear evaluative thread throughout — each section circles back to the question of which company represents a sounder investment.
- Balances descriptive background with analytical commentary, showing how news events and structural decisions (e.g., the eBay–PayPal split) translate into measurable financial outcomes.
Key academic technique demonstrated
The paper demonstrates applied financial ratio analysis in a comparative framework. Rather than analyzing each company in isolation, it uses three standard profitability ratios as a consistent measuring stick across both firms, allowing direct, apples-to-apples comparison even when the underlying business models differ significantly. This technique is a staple of undergraduate business and finance writing.
Structure breakdown
The paper opens with a conceptual introduction distinguishing the two companies' core models, then provides background synopses. It moves systematically through three profitability ratios, two news events (one per company), and income statement data, before concluding with vertical analysis and investment recommendations. This funnel structure — from broad context to specific numbers to strategic conclusions — is well suited to financial comparison essays.
Introduction: Apples and Oranges
Comparing Amazon and eBay is really like comparing apples and oranges. The two, while appearing to be the same on the surface, are nothing alike once the superficial labels are peeled off. eBay began as a C2C e-commerce site — consumers selling to consumers. That gradually morphed into B2C as businesses (from large car dealerships to small business owners) saw the advantage of posting items on eBay in order to boost sales. Amazon may appear to the untrained eye to follow in eBay's footsteps by offering a web-based platform where all sorts of sales strategies can be employed — C2C, B2C, B2B — and yet Amazon's ability to dominate the online marketplace has not resulted in significant income from this particular eBay-like niche.
Beyond the platform, the two companies are not similar in terms of how products are sold: eBay offers bidding and direct correspondence between vendor and customer, while Amazon itself acts more as the middleman, allowing vendors to post on the site so that customers can shop. Amazon's core money-maker is in cloud services — not in transactions between a vendor selling goods to a customer, or a consumer purchasing books online. Amazon is everywhere and is generally regarded as having ushered in the demise of the American mall — the traditional brick-and-mortar store. eBay is not credited with this. Yet what money Amazon does make is not generated via the platform that eBay essentially pioneered, though demand at Amazon is less price-elastic than among competitors like Barnesandnoble.com (Chevalier & Goolsbee, 2003). Amazon is carving out its own path behind the e-commerce facade — yet if Amazon is ever to be consistently profitable, it has a long path forward.
References
Chevalier, J., & Goolsbee, A. (2003). Measuring prices and price competition online: Amazon.com and Barnesandnoble.com. Quantitative Marketing and Economics, 1(2), 203–222.
Curbera, F., et al. (2007). Bite: Workflow composition for the web. Service-Oriented Computing, 4749, 94–106.
Di Pietro, I., et al. (2009). Semantic web service selection at the process-level: The eBay/Amazon/PayPal case study. Web Intelligence and Intelligent Agent Technology. DOI: 10.1109/WIIAT.2008.237
Linden, G., Smith, B., & York, J. (2003). Amazon.com recommendations: Item-to-item collaborative filtering. IEEE Internet Computing, 7(1), 73–82.
Statt, N. (2016). Amazon's earnings soar. The Verge. Retrieved from http://www.theverge.com/2016/4/28/11530336/amazon-q1-first-quarter-2016-earnings
Create your account
Always verify citation format against your institution’s current style guide requirements.