eBay

eBay Network Effects Case Study

eBay and Marketplace Platforms: eBay is a classic case of an auction marketplace that achieved dominance through network effects. In any country where eBay reached critical mass of buyers and sellers first, it became extremely difficult to unseat. Buyers go where the listings are, and sellers go where the bidders are. eBay's head start meant it had the widest selection and largest bidder audience, which reinforced its lead (eBay famously "won" online auctions in the US, whereas some other countries saw local rivals win early and eBay struggled there) (What Are Network Effects? | HBS Online). Other marketplace successes include Etsy (connecting artisans with buyers) and Alibaba (B2B and B2C commerce in China), which similarly used network effects to create deep moats. Once a marketplace achieves liquidity (a high likelihood that any given listing finds a buyer in reasonable time), it develops a self-sustaining reputation that draws even more users. This is why platform businesses often push for rapid expansion: being the first to reach liquidity can lead to a runaway advantage, as seen with eBay and its early competitors.