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Joseph Lien
Author's Bio
Adam Cohen is a lawyer and author, with a particular interest in legal issues, politics and technology. He was born in Manhattan and is a graduate of Bronx High School of Science, Harvard College and Harvard Law School. Before he started his career in journalism, he was an education-reform lawyer, and a lawyer for the Southern Poverty Law Center in Montgomery, Alabama. Before joining the Times editorial board in 2002, he was a senior writer, writing articles about the Supreme Court, internet privacy, the Microsoft antitrust case, and more.
EBay: A History in the Making
The internet has forever changed the way people interact with each other. The Perfect Store, written by Adam Cohen, portrays the growth of the legendary company created by Pierre Omidyar, a "ponytailed computer programmer who looked about eighteen," and the inspiration to create a site where strangers would trade with strangers in online auctions.1 In the fall of 1995, he created AuctionWeb, later renamed eBay, on Labor Day weekend only as a hobby, but by 2000, it was worth more than Yahoo! and Amazon combined. It became a "single, global marketplace that everyone in the world could participate in on an equal basis."2 As cyberspace became more popular, Omidyar began to see it as a "hyperefficient way of selling things."3
Pierre Omidyar was born in Paris in 1967. As a child, he had an early fascination with computers. He majored in computer science at Tufts University in Massachusetts "just as the tech world was about to explode."4 By Labor Day of 1995, AuctionWeb was up and running. Its categories were computer hardware and software, consumer electronics, antiques and collectibles, books and comics, automotive, and miscellaneous. However, he soon needed help putting together a business plan. He found Jeff Skoll, a Stanford MBA, who became the yang to Omidyar's yin. Skoll's job was to professionalize the AuctionWeb site. In 1996, Jim Griffith became AuctionWeb's second part-time employee with a salary of $100 a month. The third employee was Patti Ruby, who quit her programming job to work full-time for AuctionWeb. In October, 1996, Mary Lou Song, who was a perfect blend of community and commerce reported for work. As the popularity of Beanie Babies began to rise, AuctionWeb became the nation's leading Beanie Baby trading post. In May 1997 alone, AuctionWeb sold $500,000 worth of Beanie Babies. The first few months of 1997 are known as the Great eBay Flood. This name was given because in the entire year of 1996, 250,000 auctions were made; but, in January of 1997 alone, 200,000 auctions were made. From mid-January to the first of February, hits spiked from 600,000 to more than one million.
Posting photos on the Internet was problematic in early 1997. To solve this problem, a woman named Pongo joined the eBay team. As a result of the huge rise in users, AuctionWeb began to crash almost daily. Pongo solved this by creating Pongo.com which was an emergency eBay evacuation center. To gain funding, AuctionWeb began looking for other investors. The biggest advantage for AuctionWeb in doing this was that it became profitable to recruit more investors. In June 1997, Benchmark paid $5 million for 21.5 percent of the company. That portion would eventually be worth more than $4 billion. In September, 1997, the name AuctionWeb retired and was replaced by eBay. In October 1997, eBay hired its first lawyer, Brad Handler. He was amazed at how chaotic eBay's legal situation was. His job was to work with law enforcement to track down buyers and sellers that engaged in fraud. Also, in October 1997, eBay was confronted by its first large, well-funded competitors. Its two major threats were Auction Universe and Onsale Exchange. Unlike other small companies, humiliation alone was not enough to hold back these competitors; so eBay was forced to launch public-relations attacks against these smaller communities. The key to the defeat of these competitors was the "first-mover advantage" which meant that eBay could create anything they wanted; whereas the other companies had to copy eBay.5 Auction Universe stuck it out for a while but was unable to maintain its upward trajectory. EBay now had 300,000 users, which was more than enough to constitute critical mass. To help advertise, Westly, an employee, set his sights on AOL, which was in the business of selling ads. They decided on a $750,000-for-six-months deal for AOL to advertise for eBay. However, in Wilson's view, this deal sent eBay backwards, because AOL did not generate the amount of people eBay was expecting. As eBay became more powerful, it began to destroy commerce and capitalize. It became a "force for creative destruction of existing institutions and distribution patterns," causing ordinary sellers to abandon dealers for eBay.6 In December 1997, David Eccles created a program that automatically sets the last bid for a particular item so that he wins the bid every time. He called the program Cricket Jr., and the program made him many enemies. By the end of 1997, eBay was on its way to becoming a real company, but it had fewer than fifty employees; therefore, it hired Gary Bengier, a Harvard MBA, to be eBay's first chief financial officer.
By September, 1998, the entire management team was committed to going public. Their major leaders were Omidyar, chairman; Skoll, president; Bengier, chief financial officer; Westly, head of business development; Wilson, head of product development; and Thibault, head of off-line marketing. EBay began preparing itself for Wall Street's scrutiny. The first board of directors consisted of Whitman, Omidyar, Kagle, Intuit founder Scott Cook, and Starbucks CEO Howard Schultz. EBay announced that it was acquiring Jump, Inc. The company ran Up4Sale, which was a fast-growing person-to-person auction site. For further advertisement, eBay set another deal with AOL to pay $12 million over the next four years for prominent placement on the AOL website. From the first quarter of 1997 to the second quarter of 1998, the amount of registered users on eBay shot up from 88,000 to 851,000. Along with that, the amount of listed items on eBay rose from 492,000 to an astounding 6,584,000. The gross merchandise sales soared from $17.6 million to $139.6 million. Omidyar owned 42 percent of the company, Skoll owned 28 percent, Benchmark owned 21.5 percent, and Whitman had options worth 6.6 percent. In July of 1999, Forbes put Omidyar at number thirty-six in its "billionaires club," with $10.1 billion and Skoll was placed eightieth with $4.8 billion. EBay donated 107,250 shares to create the eBay Foundation which was soon worth nearly $40 million. In the 1998 holiday season, the must-have toy was the Furby. By Christmas, twenty thousand Furbies had been sold on eBay, raising the eBay stock to $262.25, a new high. In February, 1999, eBay banned guns and ammunition from the site because it was too much hassle to deal with legal requirements for purchasing a gun. The response on the message boards and in e-mails to eBay was volcanic. The ban made eBay more respectful of the community's role in bringing change to the site. Amazon soon launched its own online auction site, but eBay was assured that it had years of experience that could not be replicated overnight. In March 1999, Richard Rushton-Clem put up a pickle bottle for auction. He had bought it for three dollars, but collectors suspected that it was one of the rarest pickle bottles in the world and the final bid of the bottle came to $44,100. Later March 1999, eBay and AOL signed yet another deal that AOL would promote eBay to its 16 million members for $75 million over four years.
In June 1999, eBay crashed, ultimately slicing more than $6 billion from eBay's market capitalization. Later that month, eBay bought Alando.de, Germany's largest online auction site for more than $42 million in eBay stock. Nothing changed on the site except that the domain name changed from Alande.de to eBay.de, "Der Weltweite Online Marktplatz."7 On July 4, eBay launched its eBay-U.K. site, eBay.co.uk. In July 1999, while 29 year old Josh Kopelman was setting up a dot-com, he found a basic fact about eBay: it worked best for items whose values were uncertain. He created Half.com which was actually better than eBay in many ways. Cars had been showing up since AuctionWeb's first month but eBay had never actively pursued them. EBay launched its Automotive category in August 1999. In September, 1999, eBay announced that it was prohibiting the sale of alcohol and cigarettes because it had no means of ensuring that the buyer was of age. In November 1999, a small website called PayPal appeared in cyberspace. It was a new service that would allow people to transfer money from computer to computer, using e-mail but its small staff was overwhelmed and by mid-March the company had a backlog of 100,000 unanswered e-mails.
Half.com launched as scheduled on January 19, 2000. EBay admitted that Half.com was a brilliantly executed site and after three months of negotiating, "Half extracted roughly 5 million shares of eBay stock, worth about $340 million."8 In March 2000, Yahoo! made another run at eBay. Its marker soared to $90 billion, more than three times eBay's. In April, eBay Motors launched as a separate site within eBay. There were 5 major categories: cars, motorcycles, other vehicle, parts and accessories, and related collectibles. By the first quarter of 2004, eBay Motors was on track to sell $1 billion in cars a year. On July 4, 2000, the eBay community had its first revolution. The Million Auction March was a protest against eBay's overly corporate orientation. They emphasized what the group saw as the "continuing degradation of eBay's small sellers."9 As a result, eBay's listings were almost flat from March to September, 2000, and Yahoo! added almost one million new auctions. In August 1999, Dr. Kimberly Young presented a paper concerning eBay addiction. She claimed that internet addiction was become a recognized disorder, and that it made up 15 percent of all her addiction cases. Whitman hoped to draw a clear line between "X items, which eBay would allow to be listed on the site, and XXX items which it would not."10 EBay ended its reconsideration by taking a middle course: it renamed the Adults Only category to Mature Audiences and cleaned up some of the listings. EBay was working hard to attract sellers to the site, including government agencies. States began to use eBay to dispose of goods they acquired through seizure or repossession. By the end of 2001, eBay had 10 international markets with 120 million internet users, and by 2005, it had established in twenty-five countries and had 325 million users.
On October 16, 2000, eBay and Disney launched Disney Auctions and created the site eBay.Disney.com. It was aimed at anyone who wanted to "own a part of the Disney magic."11 Disney was the first large company eBay had ever done a deal with to sell new products rather than advertising old ones. In the summer of 2000, Song walked past Omidyar's cubicle and saw that his belongings were gone. His withdrawal from eBay was hardly unexpected; he had been speaking for years about wanting to move back to Paris. In March 1999, he handed the company to Whitman and made his move. The internet revolution had gone through a boom and eBay was one of the fastest creations of riches in the history of the world. EBay's success began with Omidyar's model that "Community has always been central."12
Adam Cohen's thesis is that "eBay's 'virtual marketplace' has indelibly changed not only the face of American business but the cultural landscape of the twenty-first century."13 This book definitely reveals this truth. As the internet began to rise, it was more accessible to the general public, making it the perfect time for eBay to rise. What started as a hobby for an eighteen year old teenager became the career of a lifetime. However, this author has a slightly biased view of eBay. He praises eBay effusively, while degrading other companies. Other companies surely do not feel the same about the monopolistic giant that put them out of business.
One review from the shelves of Unger Memorial Library written by John Sigwald notes that eBay grew "into the most successful, sustainable dot com ever."14 He states that Omidyar's philosophy of empowering individuals and giving them equal rights to become part of the community of eBay was the key to the success of the popular auction website. He notes the amount of drama that was formed in watching an "informal, idealistic project grow into a 20-million user 'community' with belatedly formal business management transforming eBay from grassroots to bona fide enterprise, even if it was -- and still is -- essentially virtual."15 He even participated in the 'eBay experience' by purchasing a pair of sunglasses. He feels that he is a part of the unique virtual community of eBay.
Another review written by Tao Yue, a graduate of MIT, states that The Perfect Store is "extremely thorough in its investigations, diverse in its viewpoints, and authoritative in its coverage."16 He believes that eBay has become an established pillar of capitalism. Yue distinguishes two themes that are present throughout the book: "eBay's responsiveness to customer interests and Omidyar's quest for a perfect market."17 He also says that eBay is closer to a market rather than a store because of its great diversity of goods. He believes that the book is extremely engaging and that it accurately describes the truly amazing rise of eBay.
I believe that this book had more strengths than weaknesses. The strengths of the book include good, interesting examples of past success stories, a history of the founder, Pierre Omidyar, with his "early fascination with computers," and an abundance of statistics that help you picture the amazing upcoming of eBay.18 Some failures of the book include too many statistics, which makes it boring, and it has too many pages, which makes it tedious. I enjoyed this book because I could actually relate to the subject ¨C my friends and I have used the site ourselves. What I thought was just a simple website, actually has an intriguing history behind it. It has amazing staff members working on it, who have helped the site become the success it is today.
The author, Adam Cohen believes that eBay "changed not only the face of American business but the cultural landscape of the twenty-first century."19 He presents facts in his book supporting his argument by explaining how, with the rise of the internet, purchases began to be made in cyberspace rather than in person. It changed American economy as eBay became powerful, putting other smaller companies out of business and marking the beginning of a virtual economy where you can find anything you need. It impacted America today because eBay is still around with millions of members who use it everyday.
I believe that although eBay is efficient as well as convenient, we should not rely on it too much. It is, of course, still a website rather than an actual store, so it could crash at any given moment. However, I agree with Cohen's thesis that it helped shape America into what it is now. The site affected how we purchase things in America today. Instead of having to physically travel to stores, we can get whatever we need in eBay's community. It was truly "an era when billion-dollar companies were routinely being run by recent college graduates."20
Overall, this book was educational as well as entertaining. It was enjoyable to read because it had intriguing stories that keep you interested. It is also a subject that many teenagers can relate to, making it an easier book to read. It does a great job in detailing the rise of the eBay superpower. It all started in the summer of 1995, when Omidyar "decided to write the computer code for a single, global marketplace that everyone in the world could participate in on an equal basis."21
Endnotes
1. Cohen, Adam. The Perfect Store. New York: Back Bay Books, 2002. 3.
2. Cohen, Adam 319.
3. Cohen, Adam 7.
4. Cohen, Adam 16.
5. Cohen, Adam 99.
6. Cohen, Adam 108.
7. Cohen, Adam 190.
8. Cohen, Adam 235.
9. Cohen, Adam 257.
10. Cohen, Adam 277.
11. Cohen, Adam 289.
12. Cohen, Adam 316.
13. Cohen, Adam Back Cover.
14. Sigwald, John. ""Empowering Individuals": History of the Community of eBay." 07 Mar 2003. 2 Jun 2007 .
15. Sigwald, John.
16. Yue, Tao. "The Perfect Store: Inside eBay." TaoYue. 17 Feb 2007. 2 Jun 2007 .
17. Yue, Tao.
18. Cohen, Adam 15.
19. Cohen, Adam Back Cover.
20. Cohen, Adam 315.
21. Cohen, Adam 319.
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