eBay is a global e-commerce platform that facilitates online buying and selling. It was originally known as an ‘auction’ site but now the majority of sales are from fixed-price listings. eBay has a market capitalisation of $31 billion, is one of the world’s most recognisable brands and holds the distinction of being one of the few early internet tech startups that survived the dot com crash of the late 90s / early 2000s.
Like many of the Big Tech companies that have billion dollar sky high valuations, eBay had humble beginnings.
In September 1995, Pierre Omidyar was working as a software engineer while also running a small consulting firm called Echo Bay Technology Group. As a side project, he spent a weekend writing code on his PC to set up a site in which users could buy and sell items through an auction-style format.
The site was named AuctionWeb. It was a straightforward concept that digitised the traditional auction bidding process.
A seller would fill out a basic form that included an item description, starting bid and auction duration. There would then be an incremental bidding process in which buyers would enter a bid amount higher than the current highest bid. When the auction ended, the highest bidder was declared the winner. There was no integrated payment system back then. Instead the buyer and seller would agree on a payment method and complete the transaction offline.
Soon the site started getting a steady flow of traffic. The first item sold was a broken laser pointer. Perplexed about why someone would purchase a broken laser pointer, Omidyar contacted the buyer to clarify that he had spent money on a broken item. The buyer replied that he was a collector of broken laser pointers.
This interaction helped validate AuctionWeb’s model; there were people out there willing to make unexpected purchases for the most peculiar of items.
5 months after launching AuctionWeb, Omidyar’s internet service provider contacted him, explaining he’d need to upgrade his hosting plan due to the heavy flow of traffic to AuctionWeb. In order to cover the costs, Omidyar charged users to list items on the site. In the first month of doing so, the site made $1000, and revenues continued to trend upwards as more people learned about and interacted with the site.
There’s a story that Omidyar first decided to build AuctionWeb because his wife wanted to collect Pez candy dispensers, but that story has been debunked.
By June 1996, over $7.2 million worth of items had been sold on AuctionWeb. But it was in 1997 when things really took off.
Beanie Babies were small, plush animal toys whose popularity went into overdrive. Since they were mainly sold in speciality stores, they had a limited-edition feel to them and people started seeing them as investments that would appreciate in value. Some Beanie Babies were selling for hundreds or even thousands of dollars, and AuctionWeb took advantage of the craze. $500 million worth of Beanie Babies were sold on the site.
Also in 1997, AuctionWeb introduced a feedback function that became a huge part of the company’s brand, the millionth item was sold, and AuctionWeb was officially renamed eBay. The following year in 1998, eBay completed its IPO and was listed on NASDAQ.
In the world of e-commerce and internet technology, the late 90s and early 2000s would be defined by the dot com bubble and the dot com crash. Investors had poured money into startups with .com in their names, convinced that these businesses would revolutionise their respective markets and industries.
Many of these companies, however, had weak business models, weren’t generating revenues anywhere near what would be expected for their valuations, and they were burning through tons of investor cash. Several high-profile companies such as Pets.com, a company that had spent almost $12 million on advertising but generated only $619,000 in revenue in its first fiscal year, went bankrupt. Thousands of other .com companies followed suit and there were massive layoffs.
But eBay managed to get through the dot com crash unscathed. Unlike many other .com companies at the time, eBay had a sustainable business model, generating revenues via listing fees and final value fees. It also didn’t burn through cash. Another online retailer based in the UK, Boo.com, spent $200 million in just six months. eBay also expanded wisely, setting up localised versions of its platform in other countries. And in 2002, it acquired PayPal, streamlining transactions on the site.
Over the next two decades, eBay has continued to expand via a combination of acquisitions and launching new localised eBay sites. It made a misstep in purchasing Skype for $2.6 billion in 2005, thinking it’d help improve buyer and seller communication. Skype was sold by eBay in 2009.
The following years would be defined by intense competition with Amazon and the emergence of the mobile revolution. eBay also introduced Promoted Listings, which helped sellers gain greater visibility for their items and helped eBay generate millions of dollars in revenue.
Today, eBay isn’t the dominant e-commerce platform that it once was in the early 2000s, but it’s a company that operates in over 190 countries, employs more than 12,000 people and serves 132 million yearly active buyers. eBay continues to be a household name and a go-to service for people looking to buy and sell items.
