Internet Seller eBay Heads into Second Decade

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Part 2 of this Report

eBay, the pioneer of Internet profitability, is about to turn 10. In a decade, the online seller has become an integral part of online culture and the Internet economy.

RENEE MONTAGNE, host:

On Mondays, we focus on technology. Today, eBay heads into its second decade.

That pioneer of Internet profitability is about to turn 10. We're talking, of course, of eBay, a company we've mentioned on this program on occasion.

(Soundbites from previous broadcasts)

MONTAGNE: Good morning. I'm Renee Montagne. The adoration of Elvis has come to this. Three spoonfuls of water touched by the lips of The King have been sold on eBay for over $455.

STEVE INSKEEP (Host): Hurricane Frances brought a flood of items for sale on the auction Web site Web site, eBay.

MONTAGNE: Stu Hemesath is taking Rachel Kay to her senior prom. Rachel had the winning bid for Stu on eBay.

Typically, when eBay is in the news it's because someone is selling something unusual. The fact that they're selling it on an Internet auction site is no longer considered unusual at all. After 10 short years, eBay is now taken for granted as an integral part of both our culture and our economy. NPR's Scott Horsley has the first of two reports.

SCOTT HORSLEY reporting:

The secret to eBay's success is not in its computer code or banks of powerful servers. The company's competitive advantage is scattered among millions of users, like David Eeley(ph), a buyer and seller of model trains.

Mr. DAVID EELEY (eBay User): This one has a bell. No smoke. No whistle, but a bell.

(Soundbite of trains running)

HORSLEY: Eeley sells about $3,000 worth of trains and other toys every month on eBay. That makes the retired school administrator a power seller, though you might not know it from the modest workshop in his garage where Eeley photographs toys in a towel-lined cardboard box.

Mr. EELEY: After you take the pictures, you have to edit the pictures because nobody wants to see a picture of a Hot Wheel car with your whole garage in the background or your dining room set or yesterday's dinner. What they want to see is the Hot Wheel car clearly with every chip visible on their screen.

HORSLEY: Eeley and his wife, Jean(ph), used to travel to antique shows with crates full of toy trains, only to carry most of them home again once the antique show was over. As soon as they started selling on eBay, though, the crates emptied out. Merchandise now moves quickly in and out of the Eeleys' garage.

Mrs. JEAN EELEY (Ebay User): It has really changed our life in--toy train hobby. Instead of going to the toy train meets and hauling boxes--I've hauled my share of boxes and we don't have to do that anymore, except to the post office.

HORSLEY: In a given week, the Eeleys might ship their trains as far as Greece, New Zealand, even China. What connects their San Diego garage to this worldwide marketplace is Pierre Omidyar's auction software. Omidyar was a long-haired computer programmer when the 28-year-old created what became eBay over the Labor Day Weekend in 1995.

Mr. PIERRE OMIDYAR (eBay's Founder): I just sort of started it as this experiment, really, and as the service started getting busier I realized that I needed to start charging for the service. And by June of '96, the revenue was more than I was making at my day job, so that was sort of the first clue that, you know, this could actually turn into something serious.

HORSLEY: Omidyar, whose hair is now cut fashionably short, recalled those early days while sitting in the library of his personal investment company. `Even though eBay was profitable from the beginning,' he says, `the company operated on a shoestring that forced him to rely on users to build eBay into what it would become.'

Mr. OMIDYAR: For almost the first year, I was the only person running everything. You know, I was answering users' e-mails and helping them use the service. So because I had limited time, I really sort of very pragmatically said, you know, `I'm just trying to provide the environment here. You all, the community, you're the ones that will build this place into whatever it is that you want.'

HORSLEY: EBay's community also polices itself through the feedback forum in which buyers and sellers rate one another. Economist David Reiley, of the University of Arizona, says the public feedback helps build trust among people doing business with strangers. Good behavior is rewarded and bad behavior is relatively rare.

Mr. DAVID REILEY (Economist, University of Arizona): I have actually only ever given one negative rating myself, and it was--I'm going to be too embarrassed to go into this. OK, so it turns out that I am a collector of "Star Wars" action figures and I had ordered a spaceship for my collection and some of the decals were missing it turned out.

HORSLEY: That experience aside, economist Reiley says eBay has had a powerful effect, giving millions of buyers and sellers an easy way to find each other. Some Internet rivals have tried to challenge the company, but for a decade now, eBay has fended off competition for a simple reason: it's the site where buyers find the most sellers, and sellers find the most buyers. EBay hopes to sustain that advantage as it moves into new product lines and new countries. Founder Omidyar says no matter where you live, trading is second nature.

Mr. OMIDYAR: The earliest communities evolved around a market square. You would bring your goods from the countryside to a market and you would trade. And you would do that once a week, let's say, you know, in the very earliest--and that might have been the birth of the city. And so what's great about the Internet as a technology is that it enables communities to develop outside of geographic scale.

HORSLEY: Omidyar himself has moved outside eBay's Silicon Valley home. He lives in Las Vegas. With a personal fortune estimated at $10 billion, he now devotes most of his time to philanthropy. He's involved with an effort to make non-profits more efficient and he's investing in for-profit companies, like meetup.com, that seek to follow eBay's example of making money by bringing people together.

Mr. OMIDYAR: I used to get e-mails all the time: eBay has restored my faith in humanity. It turns out that people--they get in the habit of treating each other well. And that is a very positive, rewarding, uplifting kind of experience for everyone involved.

HORSLEY: Later this month, eBay users will gather in San Jose for three days of parties and training seminars. The annual event, known as eBay Live, is a chance for this virtual community to enjoy a rare physical get-together. This year, they'll be celebrating eBay's 10th anniversary and looking ahead to the future.

Scott Horsley, NPR News, San Diego.

MONTAGNE: Tomorrow, eBay's struggle to maintain its growth as the company begins its second decade.

This is MORNING EDITION from NPR News. I'm Renee Montagne.

INSKEEP: And I'm Steve Inskeep.

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