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The eBay story and how it all started

September 6, 2005

French-born programmer Pierre Omidyar was just 28 years old when he started to write the original computer code for what eventually became an Internet icon: auction site eBay. That was on the labor day weekend of 1995. It actually wasn't even called eBay at the time of its launch. Instead, it first appeared on the Web under the more subtle title of Auction Web. The rest as they say, is history.

That opening day was not exactly a roaring success. In fact, the site attracted no visitors at all in its first 24 hours.

But within weeks, a few dozen items were already being offered for sale, including a warehouse in Idaho and a 1937 Rolls-Royce.

By the end of 1995, several thousand auctions, attracting more than 10,000 bids, had taken place.

Now eBay has 157 million users in 34 countries, with annual profits expected to reach $1bn this year.

"It's certainly a poster-child of the dotcom boom," says Charles Abrams, research director for technology analysts Gartner.

Legends have grown up about the early days of Auction Web, which changed its name to the more familiar eBay in 1997.

According to one myth, the site came into being because Mr Omidyar's fiancee, Pam Wesley, wanted to contact other people who shared her hobby of trading Pez sweet dispensers.

That story was a product of public relations - but it is true that the first item sold was Mr Omidyar's own broken laser pointer, which went for $14 despite being essentially worthless.

After that modest start, the milestones came thick and fast:

-- Auction Web starts charging users a percentage of the sale fee in February 1996, becoming a real business for the first time. The feedback system, allowing buyers and sellers to rate each other, is introduced.

-- Monthly revenues reach $10,000 in June 1996, prompting Mr Omidyar to leave his job and run the site full-time.

-- In 1997, the newly-renamed eBay marks its 1,000,000th sale - a Big Bird toy, based on the Sesame Street TV character.

-- Meg Whitman joins as chief executive in 1998. Later that year, the company goes public - more than one million people are registered users and 8% of the items on sale are Beanie Babies.

-- eBay sets up local sites in the UK and Germany in 1999 and overcomes a serious crash that closes the site for 22 hours.

Surviving the dotcom bust, it overtakes Amazon as most visited eCommerce site in 2001 and buys the Paypal online payment service in 2002 - but suffers a setback in Japan, withdrawing from the market after losing out to Yahoo.

Of course, eBay's rise to global prominence has not met with universal acclaim.

Some users object to its reliance on the feedback mechanism to root out dishonest traders and want the company to take more decisive anti-fraud action.

US jeweller Tiffany's has even tried to make eBay liable for the sale of counterfeit goods in its auctions, by suing for damages of up to $1m for every counterfeit Tiffany's item sold.

For its part, eBay says the listing of such items in its auctions is prohibited and reserves the right to remove them from the site.

But in the words of Charles Abrams, eBay's achievement lies in "empowering the end user - enabling consumers, and later businesses, to compete in a universal market in ways that they could not before".

He told the BBC News website: "If I wanted to sell a collector's plate 15 years ago, I would have to go to my local antique store and hope they would give me a fraction of the price. I would not have had a mass market open to me."

However, Mr Abrams believes the old view of eBay as mainly the preserve of individuals selling collectable items is increasingly out of date, even if the company still prides itself on its community spirit.

"Sixty percent of eBay postings today are being done programmatically - that is, by machines," he said. That means that small businesses, using the latest web services technology to automate listings, are playing a growing role in e-commerce.

The next step, he argues, is for eBay to become a business-to-business platform as well, offering a channel for large-scale supply and procurement.

eBay spokesman Richard Ambrose confirms that the company intends to make the site more user-friendly for businesses trading in bulk.

"If you want to sell, say, 50,000 Jiffy bags or 25,000 bricks, you can do it, but it's not a great experience," he told the BBC News website. "In the next few years, we will be making it easier to wholesale items on the site."

Mr Ambrose says that despite eBay's dominant market position in many countries, the company is not complacent about the future.

"We're in a strong, but not impregnable position," he says. "We're under severe pressure from Yahoo! in Asia - we're in a fierce battle with them in China."

eBay stirred up controversy among users by increasing some of its fees earlier this year. Mr Ambrose says this was to ensure that certain popular ways of making sellers' listings stand out were not devalued through overuse.

"From the outside, it's easy for it to seem that we're trying to flex our muscles. But in the long term, we want people to grow on eBay and maximise their profits. When they grow, so do we."

Source: BBC News

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