How Does eBay Make Money? A Small Business Perspective

As an entrepreneur and small business owner, you may be considering online marketplaces like eBay to sell products or services. But before opening up an eBay store, it‘s important to understand exactly how eBay makes money—and how you can leverage eBay‘s monetization strategies for your own business goals.

In 2021, eBay generated over $10.4 billion in total revenue. As one of the world‘s largest e-commerce platforms, connecting buyers and sellers across over 190 countries, eBay accumulates profits from three main streams:

  1. Transaction fees from sellers
  2. Advertising income
  3. Additional service fees

Let‘s break these down in more detail, including advice for applying eBay‘s tactics to your own small business monetization plans.

Seller Transaction Fees: eBay‘s Primary Revenue Engine

The bulk of eBay’s annual revenue—80% as of 2021—comes from various transaction fees charged to sellers:

Final Value fees
eBay charges you a percentage fee based on the total dollar amount of each item sold, including shipping/handling charges.

I’ve sold over $500k in sporting goods on eBay in the past decade. In my category, the final value fee is 10% of the total transaction. If you sell a $100 baseball glove with $10 shipping, eBay takes 10% of $110, or $11 per order.

These final value percentages vary across over 30 product categories on eBay:

  • Books/DVDs: 12.55%
  • Electronics: 7-10%
  • Fashion/Accessories: 9-12%
  • Home & Garden: 12.9%
  • Motors: 5-10% depending on price

Insertion Fees
For high-ticket or specialized categories like vehicles and real estate, eBay adds fixed insertion fees to list products for sale, on top of final value fee.

Shipping Fees
If you utilize eBay‘s Global Shipping Program to expand internationally, eBay charges additional fees calculated from the item price plus your domestic shipping costs.

Key Takeaway: Transaction fees drive the vast majority of eBay‘s annual revenue. Likewise, your own small business can implement similar transaction fee structures when leveraging third-party platforms and marketplaces.

Advertising Income: Promoted Listings & Display Ads

As the second largest revenue stream, advertising and marketing services bring in over 15% of total income for eBay. Sellers and outside brands pay to promote listings/products to eBay‘s 187+ million global shoppers.

Promoted Listings
eBay launched an advertising program in 2017 enabling sellers to pay one-time fees to bump listings up in search results and category/brand pages. I‘ve used promoted listings to great effect when selling high-priced lacrosse gear—for my $400 stick, a $20 promoted listing fee almost always results in a quick sale.

Display Ads
For additional fees, eBay displays targeted banner and display ads to buyers across the marketplace. As a small business, you may consider eBay‘s demographic-focused display advertising to promote your products, services, or brand—leveraging your ad spend for laser-targeted campaigns.

Key Takeaway: Consider an advertising model akin to eBay‘s to generate secondary income from your core business operations—promoting other brands, products, or services to your existing customer base.

Additional eBay Services

Besides marketplace transactions, eBay also offers other services that contribute single-digit percentages of total company revenues:

  • StubHub: eBay‘s ticket resale marketplace charges transaction fees to ticket buyers and sellers.
  • Classifieds: eBay sites like Gumtree and Kijii allow premium/featured upgrades for classified listings.
  • Payment Processing: eBay‘s managed payments solution processes transactions between buyers/sellers for an intermediary fee.

Key Takeaway: Think creatively about what value-added services you could provide to supplement your core business offerings—payment processing, lead generation, data analytics, etc. eBay provides a blueprint for monetizing a marketplace ecosystem from all angles.

Understanding eBay‘s Revenue Mix Informs Your Own Strategies

As a small business owner, thoroughly analyzing how eBay—a $10B+ marketplace ecosystem—generates profits at scale provides an invaluable framework to apply to your own monetization models. Follow eBay‘s lead by:

  • Establishing tiered transaction fees
  • Adding an advertising/promotions program
  • Providing premium value-added services

While each business model is unique, eBay‘s multi-pronged revenue mix demonstrates how to extract income from your core product while identifying secondary and tertiary monetization verticals. With some strategic creativity, your small business can implement similar methods to drive sustainability and scale.