Emerging in the 1990s, both Amazon.com (AMZN) and eBay Inc (EBAY) facilitated the expansion of the global electronic commerce sector. Although Amazon and eBay are both multinational e-commerce corporations, eBay is solely a marketplace to conduct business, whereas Amazon is both a marketplace and a retailer.
Formerly just an online bookstore, Amazon expanded into a superstore selling digital media as well as physical products. On the other hand, eBay transformed online marketplace auctioning from what was just collectibles to a significantly larger array of products. Additionally, through its acquisition of PayPal, eBay revolutionized the profile of digital payments, spinning off the business in 2014, further supporting the growth of e-commerce payments platforms.
Key Performance Indicators
The success of either Amazon or eBay is evaluated by looking at both companies' key performance indicators (KPIs), which can be broken down into four categories:
- Sales and Revenue: Which company has a higher increase rate?
- Profitability: Which company has a higher margin?
- Valuation Metrics: Which company is worth more?
- Active User Base: Which company has many new versus existing customers?
- Seller Rating: Which company is more reputable?
Sales and Revenue
As of August 31, 2018, Amazon had trailing-12-month revenue of $208.13 billion – an increase of 30.8% from 2017. In contrast, eBay's revenue totaled just $10.07 billion, with an increase of 6.6% from 2017. Over the past three years, Amazon has significantly outpaced eBay in revenue growth with average annual revenue growth of 25.97% versus 2.86% for eBay.
As expected, Amazon also has higher net income at $300 million for the trailing 12 months versus -$147 million for eBay. Both companies have seen some challenges in direct and indirect costs affecting gross margin and operating margin metrics. Through August 31, 2018, Amazon is reporting a five-year gross margin average of 20% compared to 74% for eBay. Meanwhile, five-year average operating margin levels are 1.74% and 23.16%, respectively for Amazon and eBay. Despite the margin outperformance from eBay, Amazon has still outpaced eBay in net income growth with a trailing 12-month growth rate of 27.92% for Amazon versus no net income growth for eBay.
Valuation metrics such as the price-to-sales (P/S) ratio and price-to-earnings (P/E) ratio essentially show which company's stock has earned a greater value from investors. In 2018, Amazon’s P/S ratio stood at 4.76, whereas eBay's was 3. 33. In 2018, Amazon’s forward P/E ratio is much higher than eBay’s at 72.99 versus 12.72 for eBay. Among the FAANG stocks (Facebook, Amazon, Apple, Netflix, and Google). Amazon’s P/E is second to Netflix with a P/E of 85.74. Amazon also falls in the top quartile of this group while eBay is in the bottom quartile with a group average of 38.36. Based on forward P/E valuation alone, Amazon is the favored investment.
Active User Base
According to data from Statista, Amazon was the most popular e-commerce marketplace as of December 2017 with 197 million users per month. eBay however, was Amazon’s third-closest rival with approximately 113 million unique monthly visitors. Other high traffic competitor sites include Craigslist, Etsy, Walmart, and Overstock.
Seller rating is a conglomeration of consumer opinions on seller profitability, customer service, communication, ease of use and recommendation with a leading measurement reported by Ecommercebytes Sellers Choice. As of 2018, the EcommerceBytes Sellers Choice report showed Amazon and eBay with the top two rankings at 6.23 and 6.18 respectively.
The Bottom Line
Amazon by far is the bigger corporation, dwarfing eBay in sales and income. Amazon has a significantly higher forward P/E showing greater room for growth. As of September 2018, Amazon was trading at $2,002,90 versus $33.02 for eBay. Amazon has been making investments to become the world’s top e-commerce marketplace and retailer. Its potential is substantially outpacing other specialty e-commerce marketplaces such as Etsy and Overstock. Amazon is also a top investment in comparison to the FAANG stocks, which adds greater credibility to Amazon’s investment opportunity given the valuation metrics of the FAANG group as well.