The History of ebay
How did ebay get started and how did it become what it is today?Ebay will celebrate its fourteenth year in 2009. The company isn't that old, and yet it's been a member of the famed "Fortune 500" for years now. It's history may be short, but it's also interesting.
While ebay is by no means the only online shopping resource on the internet, it is by far the biggest. How is it that a simple startup that was created on the internet equivalent of the owner's garage became the single most powerful shopping site on the internet?
In the beginning
Ebay was started back in September of 1995 by Iranian computer programmer Pierre Omidyar. He started it on his own personal website. At the time he called it AuctionWeb. This was when the internet, or at least the World Wide Web, which is what we think of today as "the internet" was still new. It was just before the massive 1996 boom when the number of users on the 'net shot up from 50,000 into the millions.
This was also before people really trusted the internet and especially internet shopping. There was no really trusted payment system that protected both the buyer and seller and secured, encrypted websites were still largely a thing of the future.
The very first thing ever sold on the site was a broken laser pointer. Pierre was so shocked that someone purchased the item that he called the buyer to make sure he understood that it was broken. The buyer told him "I collect broken laser pointers," instantly proving to Pierre that there is a market out there for everything under the sun, if you can reach them. As a result of this philosophy, when seeking anything for sale, whether it's the perfect pair of jeans or the hottest cars in the world, you can find it on ebay.
The birth of ebay
The name of the company didn't become ebay until two years later in September of 1997. AuctionWeb was the property of Omidyar's consulting firm Echo Bay Technology Group. He tried to purchase the domain name echobay.com, but it was already taken, so he purchased ebay.com instead. The company became eBay. At this point it had already struck partnerships and deals with other companies and managed to $5,000,000 from a venture capital firm. With the capital in hand to expand the company, ebay would never look back. It would now become a key player in the huge internet boom of the late nineties and enter the world stage as a major player on the 'net.
One year later in September of 1998, just three years after Omidyar started that humble little auction site on his personal web page, eBay went public and Omidyar and the company's first president Jeffrey Skoll each became instant billionaires.
Online payment services
The owners of eBay knew that one of the things holding it back was the lack of trust in exchanging money over the internet, and that solving that problem of security and trust was key to their growth, so in May of '99 eBay purchased online payment system Billpoint to be used exclusively on the auction site.
However, not long after that an upstart called PayPal popped up on the internet. It was created when online financial companies X.com and confinity cooperated to create an online payment system in 1999. The two companies merged in March of 2000, due to the instant success of PayPal. Just before that point in Feburary 2000, PayPal had reached a level of 200,000 online payments per day while eBay's company Billpoint was seeing only 4,000 transactions a day.
Just to rub salt in the wound, nearly all of PayPal's payments were coming from eBay sales. PayPal very quickly became the payment service of choice for most internet shoppers due to enhanced security features and guarantees.
Ebay couldn't possibly miss the fact that PayPal's market dominance was becoming stronger and stronger, to be point of becoming a near monopoly, and in October of 2002 eBay purchased PayPal for $1,500,000.
Today with the combined might of ebay's own auction service and the powerhouse of PayPal's online banking, the company has reached new heights, operating in nearly 200 countries.
Not everyone loves ebay though. Some credit it for the complete destruction of entire markets. At one time, the market for action figures and other toys was booming and values were high. So high, that everyone wanted to get in on it. Many people who didn't know the market saw ebay as the perfect opportunity to make quick money on collectibles, so they would raid stores of popular items, sometimes even paying store or warehouse clerks to allow them to get the items before hitting store shelves and then turn around and sell them on ebay.
So many people started selling collectibles in this manner that suddenly ebay was flooded with items that once sold for fifty or a hundred dollars and it became impossible to sell the items for five dollars. The toy collectibles market was irrevocably damaged.
Others who ran businesses on ebay had to maintain tiny margins because of stiff competition. When ebay raised their rates, millions were forced to stop selling and go out of business because ebays new higher rates caused these companies to stop making a small profit and instead begin losing money.
Although ebay has remained highly successful, the amount of success any individual seller can achieve has been highly stifled by ebay's rising seller rates and heavy competition.