Tech Brew Ride Home - (IHP) The eBay Story Part 1

Episode Date: July 4, 2022

From my original Internet History Podcast, the first of my two episodes outlining the story of eBay, in-depth, as I make the strong case that it was maybe the most important and overlooked startup of the Web 1.0 era. Part 2 of this story coming on Friday. Learn more about your ad choices. Visit megaphone.fm/adchoices

On April 4th, 2023, around 2 in the morning, a man was found stabbed multiple times on a sidewalk in downtown San Francisco. Hey, who did this to you? What happened next turned the story into a political firestorm. Reports have identified the victim as Bob Lee, the founder of Cash App. From Bloomberg Podcasts, this is Foundering, the Killing of Bob Lee, beginning April 16. Welcome to the Internet History Podcast. I'm your host, Brian McCullough. Happy Memorial Day, everybody.

Today we're going to be talking about one of my favorite startup stories of all time. Early on in my career, I read about the eBay founding story, and it was very inspirational to me. I very much relate to the notion of a side project, a hobby, accidentally becoming a business. In many ways, I'm an accidental entrepreneur myself. I went to film school, not business school, and my first company started as a side project that morphed into a real company when I brought it online. So I can identify with something taking off, despite the fact that the founders really don't know what they're doing or what they're getting into, and the idea sort of takes on a life of its own.

In subsequent startups, I founded, I always had my team. teams read the book that a lot of this chapter is based on. It's called The Perfect Store, Inside eBay, by Adam Cohen. Because that book so vividly captures the startup experience, at least the way I've experienced it. Every startup tries to show the world a face that is competent and confident and professional. But if you've ever worked on a startup, then you know that you're really spending a lot of time trying to hide the fact that everything you're doing is really being held together with scotch tape, if you're lucky. In previous episodes, we've discussed at length that the very notion of e-commerce when it started,

of buying and selling goods online, was a dubious proposition to a lot of people for a long time. But when you think it through with any degree of rigor, then you can obviously come to the conclusion, that this is obvious. This is just another way of selling something. You present a good or service, people give you their credit cards, you ship it to them. Online commerce is just like catalog commerce, like a Sears catalog for a new era. So as the notion of e-commerce caught on, people logically started thinking of all the various ways that transactions could take place online. Concert tickets, for example, could be done online instead of the cumbersome 1-800-number system that existed previously. Individuals could buy and sell stocks online instead of going through a

broker. Banking could be done online. Travel, booking, dating, online personals, job openings, all these things that today we think logically make so much more sense in an online as opposed to a physical manifestation, people began experimenting with all these things in about 1994, 1995, 1996. But the biggest experiment in this era didn't involve a company going online and selling to people. It was instead about people going online and selling to each other, to other people. As we'll see, plenty of people who were already downright skeptical of e-commerce itself were more skeptical of what eBay was trying to do. The notion that complete strangers could come together

collectively and in an unmoderated way conduct commerce effectively seemed downright impossible to a lot of people 20 years ago, especially when all of this was being done online. But again, in retrospect, it's hard to see why people were so dubious. I mean, eBay was just taking online something that had to been a tried and true experience for hundreds of years. As long as classified ads have existed, people have used them to sell their crap to strangers. Things as expensive as used cars and even houses have been transacted perfectly effectively and without any oversight or regulation for hundreds of years on classifieds. So why would bringing them online be any different? It helped that in a way eBay was an outgrowth of something that I've touched on before, that notion that the culture of the internet grew out of this weird mashup between hippie culture from the 60s and libertarianism.

For much of its early life in the 1970s and 80s, the internet really did feel like this sort of unregulated, free-for-all nether zone. The counterculture notion that people are inherently good and fair, if given the chance, and that things, should be exchanged freely and fairly, coupled very nicely in this environment with the libertarian notion that people can get by perfectly well, thank you very much, without any kind of oversight or governance or regulation. This ethos manifested itself in things like freeware and shareware, file exchanges, and freely organizing communities of like interests and discussion. The very notion of peer-to-peer was baked into the very DNA of the internet, both literally and culturally. There was a faith in the wisdom of crowds, the fairness of strangers, all that, at least in large groups.

And this ethos led obviously to literal peer-to-peer technologies like BitTorrent eventually, but it also gave rise to things like Wikipedia, the also seemingly impossible notion that the group mind could actually come together to efficiently and more importantly accurately curate the collected knowledge of mankind. One young man who was fairly steeped into this hippie-slash-libertarian ethos was Pierre Omidyar. Pier Omidyar was born in Paris in 1967 to French-Iranian parents. When Omidyar was six, his family was immigrated to the U.S. when his father, a doctor, got a residency at Johns Hopkins. Growing up around the Washington, D.C. area, Omitiar was like so many of our subjects, a bit into

computers, anchoring around with TRS 80s and Apple 2s, and getting his start programming in Pascal. Omidyar attended Tufts University in the mid-1980s, where he pursued a computer science degree and developed a passion for Macintosh programming. His junior year, he answered an ad in the back of Mac World Magazine and made his first foray to Silicon Valley to intern at a Mac software company. He enjoyed California so much that he ended up moving there permanently, eventually finishing his degree at UC Berkeley. Omidyar worked briefly at Clarice, that Apple's subsidiary, and somewhat uniquely for the people we've looked at, he actually was involved in a successful startup

before launching the startup that would make him famous. With several of his Claris colleagues, he co-founded Inc. Development Corporation in 1991. Ink's original intention was to develop software for what people at the time thought would be the next big thing, pen-based computing, the progenitors of handheld devices, things like the Newton, which you'll notice a lot of other people at the time were very interested in and involved in startups around this area.

But of course, pen computing was a bit ahead of its time. It would be a while before PDAs caught on generally. So the company quickly pivoted to launch a product called e-shop, which essentially created an early e-commerce system for the online software. services at the time like Prodigy and CompuServe. When Microsoft purchased eShop a few years later, Omidyar's share in the windfall made him a millionaire. Not even 30 years old at this point, Omidiar had no intention of retiring.

In fact, his brief flirtation with developing for an online environment made him hungry to do something that was a bit more, a bit deeply enmeshed into what he thought was the true online experience, the internet. Given his age, Omidyar was perfectly positioned to be an early internet adopter. Omidiar had long been a regular on Mac Usenet news groups, and given that he was already plugged in and living in Silicon Valley in 1994 and 1995, Omidyar couldn't fail to get swept up in the groundswell of enthusiasm for the World Wide Web that was taking over the valley in those years.

Being the programmer and tinkerer that he was, he had done his own experimenting online, sort of side projects. Among other side projects, he had written a chess-by-email program, which he was offering for free on the net, as well as something he called Webmail Watch Service, which emailed users when a change had been made to a website they were interested in monitoring. Sort of an early stab at an idea that today we would think of as being RSS. But there was one more idea that was nagging at Omidyar.

Omidyar fell firmly into the libertarian side of the Internet's cultural ethos, and so he was wondering if perhaps the web would allow him to experiment with an idea that he thought of as creating a more perfect marketplace. His insight was that the traditional classified ad, say selling a used coffee table by taking an ad out in the newspaper, just wasn't an efficient use of. of perfect market dynamics. With a normal ad, you simply said, I want $100 for this table. And if someone agreed that that was a fair price, then you got your $100. But in a truly efficient market,

what if $100 wasn't the right price? How would you know? What if you could have gotten more for your coffee table? There was no way of finding out. but if you could create an auction scenario, then you'd be able to find out the true market price for your item. Physical newspapers printed on paper, of course, obviously couldn't do auctions,

but software on the web could. As Amityard described it, quote, instead of posting a classified ad saying, I have this object for sale, give me $100, you post it and say, here's a minimum price. If there's more than one person interested, let them fight it out. The seller would, by definition, get the market price for the item, whatever that might be on a particular day, end quote. In other words, Omidyar didn't just want to bring classified advertising to the web.

Others were already doing that, like the Monster Board for Employment Classifieds. He wanted to see if the web could create the perfect classified platform by introducing auctions as a new element. Omediar had, at the time, taken a job with General Magic, another software developer working within the Apple ecosystem. So all of these internet projects were things that Omitiart was tinkering with in his spare time. Thus, on Friday night before Labor Day weekend, 1995, a minnie are holed up in his home office on the second floor of his townhouse and began writing code for his auction experiment. By Labor Day itself, he had cobbled together a crude website that allowed users to do only three simple things. List items for sale, view items that were on sale, and place bids on those items.

He hosted the site on his home computer and connected to the web via his $30 a month account with, the local ISP. He called the site auction web, but he hosted it as a sub-site on his personal web page, eBay.com. So the URL for this new site was eBay.com forward slash a.W. Why auction web? Well, that name's pretty self-explanatory, but why eBay? Well, it turns out that after cashing out from the e-shop sale, Omidiar had done some web consulting. and freelance work, and decided to do so under the rubric Echo Bay Technology Group. He had chosen Echo Bay simply because it sounded cool. However, the domain, echobay.com, was taken, so he registered what he considered what he considered

to be the closest approximation, eBay.com. Omediar was already hosting an assortment of other sites on this domain. One was the homepage for a small biotech startup that his fiancé Pam Wesley was working at. Another was for the San Francisco Tufts Alliance, an alumni group that he was a member of. And the third was a site devoted to the Ebola disease, of all things. For some reason, Omidyar thought it would be cool to host stories and facts about the deadly disease and its recent outbreaks. So auction web was born, sandwiched between a host of other sites, including one with links to Ebola news. As far as Omidyar can recall, once he launched Aulde Web, not a single visitor came to see it on its first day online.

And so, in the coming days, in order to do a little promotion, Omidyar posted to the National Center for Supercomputing Applications website. Remember the place at the University of Illinois that Mosaic came from. The NCSA had a what's new page, so Omidyar posted there describing auction web as, quote, the most fun buying and selling on the web, end quote. Omidiar also began to make posts to relevant news groups. He had divided up auction web into categories that he thought would make for likely classified segments. So computer hardware and software, computer electronics, antiques, and collectibles, books and comics, automotive, and miscellaneous. So Omidyar began posting to, say, collectibles and antiques news groups announcing auction web's existence.

We don't actually know what the first thing successfully sold on eBay was, but we do know what the first item listed for sale was. It was a broken laser pointer, non-functional, that Omidyar himself put up for auction as a test. It ended up being purchased eventually by an unknown user for $14.83. We can get an idea, though, of some of the items that were for sale on auction web in its first week, because on September 12th, Omidiar made a promotional post on the newsgroupscellaneous. where he listed items that had already shown up on offer on auction web, as well as their current bids. So let's take a look at this list here.

It's sort of eclectic. We can already see a lot of the varied items that eBay would eventually become famous for. There was a Superman Metal Lunchbox from 1967 with the current bid of $22. There were autographed marking mark underwear. The current bid was $400. There was an autographed Elizabeth Taylor photo for 200, an autographed Michael Jackson poster with a current bid of 400. Already there's automotive stuff listed a Toyota Tricel from 1989 for 64,000 being the minimum bid,

but the current bid was only 3,200. There's an electronic audio stereo, AMFM, CD-ready, with a... 130-watt speakers with a current bit of $45. There's books and comics, Mattel Nintendo Power Glove, Genesis add-on system with 32 games, and a Chicago Health Club presidential premier gold membership with a current bid of $400 in the miscellaneous category.

Surely even Omidyar himself had to be a little bit surprised, by the immediate way that auction web took off. People seemed to have no problem trading their junk with complete strangers on the web. By the end of the year, auction web would have played host to more than 1,000 different auctions and had racked up more than 10,000 individual bids. Within a month, even, there was an entire Sun workstation listed for sale, and even a 35,000 square foot warehouse in Idaho,

where the bidding started at $325,000. But remember, at this point, Omidyar was still running auction web as a total after-hours hobby experiment. And he was operating it for free. But that couldn't last forever because the increase in data that he was using and bandwidth caused his ISP to contact him in February of 1996,

so only a few short months after launching, to tell him that they were jacking up his monthly fees to $250 from $30 a month, which was the rate of a commercial account. Omidyar protested that he wasn't actually running a commercial enterprise, but the ISP didn't buy that. So it was at this point that Omidyar figured that if he was being treated as a commercial enterprise, maybe he should just become a commercial enterprise. He remembered later, quote,

that's when I said, you know, this is kind of fun as a hobby, but $250 a month is a lot of money, end quote. So with calculations that were no more complicated than just checking his gut instinct, Amityar made two big changes to auction web. First, he decided that buyers would not have to pay him anything. Their only cost would be whatever they agreed to pay the seller for the item on auction. But second, though the seller would not have to pay to list the item, they would have to fork over a percentage of the final sales price to auction web. That percentage, again, based on no calculations or research, Omidyar set at 5% of the sale price for items listed below $25, and two and a half percent for items which sold for a price above $25.

$1 million. Omidyar had no idea if beginning to charge a fee would bring a quick end to his little experiment or not. Furthermore, he had no way of actually enforcing payment. He didn't have a credit card merchant account or a way to track percentages. But in keeping with his hippie libertarian ethos that I keep alluding to, he simply relied on sellers to be honest. And indeed, his faith in humanity was justified, because all of a sudden, envelopes started showing up on his doorstep with checks inside of them, or cash, or sometimes just coins taped to pieces of paper. By the end of that first month of February, when Amityar tallied up the envelopes, he found that he had made more than his $25, which he had needed to cover hosting.

And just like that, from almost its very beginning, eBay slash auction web became that rarest of things, perhaps the first ever profitable web company. And soon, auction web was not just nominally profitable. Very quickly, it became meaningfully profitable, especially for one man and his hobby. In the following month, March of 1996, revenues hit $1,000. Following month, April, $2,500. And in May, $5,000. Finally, revenues would double again, in June, surpassing $10,000 for the first time. It was at this point that Amidiar had a revelation. In his own words, quote,

I had a hobby that was making me more money than my day job, so I decided that it was time to quit my day job, end quote. The growth that Auction Web experienced came in spite of introducing a fee structure, but we can speculate that perhaps introducing fees was a good thing because it added a sheen of respectability to the whole enterprise. But the growth also came because Omidyar had stumbled upon that network effect that so many companies have found success with on the internet. You remember, Hotmail, for one, attracted users

because every email was sent with a Hotmail.com tagline at the bottom. The very act of using the Hotmail product promoted the Hotmail product. And you remember you found out about Facebook because your friend was on Facebook, and the more friends that showed up on Facebook, the more valuable Facebook became to you. It's the basic network effect law. Auction Web experienced a hybrid of these two models because early sellers, when they put something up for sale on auction web, well, it behooved them to tell other people that the item was for sale there. It was in their interest to promote their auction, much as in the way today it's in the interest of someone running a Kickstarter. to tell everyone they know about their Kickstarter campaign. This self-promotion tells the uninitiated about the campaign, but it also tells the uninitiated about Kickstarter,

and the same was true for auction web. Every auctioneer, by accident, ended up spreading the word about auction web. And once auction web became known as the place to buy and sell random things, buyers immediately began to think, you know, I wonder if that rare Michael Jackson poster that I'm looking for, is maybe for sale on auction web. The sellers went to where the buyers were, and the buyers went to where the sellers were,

and this was the virtuous cycle that auction web and eBay would ride throughout their entire life. A lot of auction web's early user growth obviously came from things like antiques and collectibles, although the large majority of items for sale early on were electronics and computer items. Unwittingly, though, Omidyar was also tapping into something

that the internet has been very good at from its earliest days, providing a platform for niche interests and niche communities. From the very first day, this is that things like news groups and email began, geeks had been trading and selling their rare Star Trek memorabilia and the like. If anything, auction web wasn't bringing classifieds online so much as it was moving the ad hoc swap meets that had always existed on places like, say, Usenet and other early online communities, into a centralized location. And importantly, it was adding the formal auction element that, again, hadn't been possible before. Auction Web's immediate success was also due in large part to Omidyar's early structural decisions

that would enable the site to scale successfully for the rest of its life. In short, Omidiar enabled Auction Web's community to organize itself. Early on, Omidyar had listed his personal email prominently on the website, Pierre at eBay.com. And so when buyers and sellers had a question or a dispute, they came directly to him. But Amityar knew he did not want to spend his days settling petty disputes. He just wanted to be the platform, not the hall monitor. And so again, his libertarian impulses told him that, really, people should be able to manage these sorts of things for themselves. oftentimes when a buyer would email him with a complaint about a seller, he would simply forward the email along to the seller with a note that read,

you two work it out. But he also took things a step further with two key early innovations. One was something he called the feedback forum. This was a public online message board where users were encouraged to leave feedback about other buyers or sellers. in addition to a numerical rating, plus one, minus one, or neutral. Once a user's rating on this feedback forum surpassed a negative four, they would be banned from the site with no recourse. This took the dispute resolution process out into the open and out of Omidyar's email inbox. And the second innovation was another online forum that Omidyar termed the bulletin board. This was intended to take the other sundry customer service issues that arose off of Amityar's plate

and put them to the users directly as well. The bulletin board was the place where users could ask questions like, how do I upload pictures? Or what do you think is the proper minimum bid I should set for this item? And other eBay users would then be able to chime in with their input. Very quickly, as often happens in online communities, a select group of users rose to prominence by stepping forward to become regular advice gurus. Later on, in fact, Auction Web would even formally hire some of these community leaders

to formally handle customer service issues just like this. It's really hard to blame Omidyar for wanting to take all of these issues off of his own plate. After all, at this point, he's still just one guy, and he was having a hard enough time keeping the site up and running. But by setting up the mechanisms that allowed auction web's community to function autonomously, Omidyar accidentally stumbled upon another of the longer-term factors that Auction Web and later eBay would find success with. It was that focus on community, on empowering the users and supporting them. That was absolutely the key.

auction web's users were the true lifeblood of Omidyar's experiment, after all. After all, what was auction web? What is eBay? It's just a platform for sales. The users themselves are the ones that are bringing all of the value to the platform, and it's the users themselves and their interactions that actually are the product. And so one of Omidyar's key innovations was to understand that servicing the auction web users, the buyers and sellers, what we would now call community, was the most important thing for

him to nurture. Oxenweb slash eBay would be one of the first web companies to really understand that all value came from its users and from their community. And as we'll see, never forgetting that important lesson was paramount in the company's mind as it grew. But obviously, even with these attempts to create a structure where the members police themselves and organize themselves to answer questions and handle customer service issues, auction Web was growing so quickly that it really was time to cease operating as a one-man show.

For one thing, Omidyar needed someone to open all the mail and collect the checks and loose change that people were sending in. And so, Chris Agarpao, the friend of a friend, was hired to come into Amityar's house twice a week and simply open the envelopes and make the deposits. his envelope duties would only increase over the coming months. But for another thing, Omidyar needed help building Auction Web into something more sophisticated than a hobby run out of his spare bedroom. He would later remember, quote, I had a vague idea of what I needed to do as an entrepreneur,

but I knew I wasn't going to be able to put together a business plan, end quote. In short, despite the fact that he actually was a startup veteran, Omidyar knew that he needed a quote-unquote business guy, a true partner that would help run the operations and someone who could be a co-founder in all but title. The person that Pierre Omidyar found to fill this role was Jeff Scholl. Someone that we've already spoken to, Dave Zinman of Fokalink, claims to have introduced Jeff Skull and Pierre Omidyar. I'll let him tell the story himself. So I went to college with Pierre Omidyar, who is generally considered the founder at eBay.

And he was in Silicon Valley at the time I was there at his after school. And he came to me and he had started Auction Web, which was the original name of the site. And it was just, it was very nascent, early trading days and had very little traffic. And he wanted to get a business plan together and go raise some money. and he was looking for somebody to help him do that and maybe someone to help him start the company. And I was in the middle of starting Focalink and, you know, we were already venture funded and growing. And so I, I didn't go and say, what I should have done is that I'll write that business plan for you.

But I introduced him to my roommate, Jeff Scholl, who I went to business school with. And so Jeff and Pierre got together and kind of the rest is history. those guys you know that company is an amazing story because they executed internally so well with so little resource and they they encountered this amazing consumer energy you know companies were being founded around ebay you know you could go and open up a shop on ebay and start selling your your junk or your treasure or whatever um and that thousands and thousands like hundreds of thousands of businesses were started by eBay. And they tapped into that energy and found a way to navigate through it and grow an amazing business. Jeff Scholl had originally graduated from the University of Toronto in 1987 with a degree in electrical engineering.

In the years after graduation, he founded two successful companies of his own, one, a consulting company helping clients set up inventory management systems and a company. another that rented computers. But he had broader entrepreneurial ambitions, and so he ended up at Stanford's Graduate School of Business. At the time, he eventually hooked up with Omidyar. Skoll was working at Knight Ritter, helping that newspaper chain develop an internet strategy. If you remember our episode about Knight Ritter and the early newspaper experiments on the web, It's episode 24, Big Media's Big Web Adventure. Knight Ritter was actually a leader and an innovator in the efforts to combine the web with the newspaper business.

But Skull, like just about everybody else, was skeptical of auction web at first. So Omidyar said, quote, I told Jeff there were people buying and selling on the internet who never see each other, but actually send money and stuff back and forth. He said, that's ridiculous, end quote. What changed Skull's mind was exactly the work that he was doing for Knight Ritter. The newspaper knew that the web was a threat to their classified advertising cash cow, and were hoping that people like Skoll would be able to help them defend against this new threat.

But in Auction Web, Skoll could see that the threat was already there. It had the advantages that the print classifieds could never compete with. For example, all the for-sale ads were in one place with a global reach, as opposed to separate newspaper silos in different towns and countries. And, of course, there was that unique auction model that Omidyar had stumbled upon that, again, without software, without the ability to do dynamic pricing, the newspapers could never compete with. So, instead of trying to beat the internet upstarts, Skull decided he would join one.

He started consulting with Auction Web in early 1996, and by August of that year, quit Night Ritter completely and joined Auction Web full-time. Skull's remit was to help Omidyar turn Auction Web from an amateur hobby into a professional business. He helped Omidyar find office space, first housing eBay in his house, which was actually larger at the time, then locating space inside a tech incubator housed inside NASA's Ames Technology Center, and then the pair finally landed space in an office park at 2005 Hamilton Avenue in Campbell, California. The space was tiny and seemingly had been designed to be a doctor's or dentist

office, but it was something. Skoll was the one who first started reaching out to the community leaders who had sprung up on the message boards and started formally paying them for their customer service and community relations work. And it was Skull who first convinced Omidyar to move auction web from the subdomain on the main eBay site. The Ebola site and the other subsites were removed and now auction web was housed at eBay.com. And it was also Skoll who recruited Mary Luce Song, who more than anyone else would be the key to developing and cultivating this community notion that would be so key to auction web's success. Song had a background in journalism, and she had recently minted a

master's degree in communications from Stanford. And like everyone else, she was seemingly dubious of auction web at first, and perhaps even more so when she showed up for her first day of work in October of 1996. She was given a card table for a desk and a folding chair to sit on. Her office was between Omidyars, who was seemingly busy always punching away at code to keep the site running, and Skoles, who was busily punching out a business plan. Outside Song's office in the main entrance area was good old Chris Agar Pau, who was at his own card table still busily plowing through the envelopes and the checks.

But whatever her initial impressions, Mary Lusong took immediately to her role as community organizer. She always referred to the users of Auction Web as the community, not as customers. She expanded on the hiring of community helpers, who, incidentally all worked remotely, usually from their home. no one else was working out of auction web's tiny offices for a long, long time. And she also enhanced and expanded the existing community guidelines and processes that Omidyar had laid the foundation for. It was Song who helped build out that key user feedback rating system that was becoming so important for auction web's buyers and sellers. If auction web had taken off because early adopters were fearless about interacting with strangers,

it was the feedback system that proved to be so crucial for making newer users comfortable dipping their toes into the online auction waters. A new user might be wary about buying something from a stranger online, of course. How could you know that they'd actually send you what you ordered after you paid for it? How would you know that it was in the condition you expected? But the buyer and seller ratings made new users feel just that bit more comfortable. If a seller was rated on the site and the higher that seller was rated, the more trustworthy they must be, right? The feedback scores eventually manifested themselves as actual numbers that got attached

to a user and their posts and the auctions on the site. So that knick-knack you wanted to buy, if the seller had a 48 rating, next to their name, that meant, well, 48 successful auctions with satisfied buyers. It really did give you a little bit of peace of mind. Plus, you knew that if you happened to have a bad experience with that seller, you had recourse. You could knock down that seller's rating a bit by going to the public board. And that was the key. The reputation that buyers and sellers developed on auction web was truly meaningful and important.

users jealously protected their reputations. Everyone on Auction Web had real incentive to give constructive feedback. A good reputation meant you could sell more and possibly sell for a better price. This focus on cultivating a strong reputation system that Omidyar had put in place and that song definitely built out grew to be the glue that helped hold the entire crazy experiment together. auction web was able to scale with its growing user base because it had let the users manage themselves to such a large degree. And part and parcel with that, reputation became the currency, the fuel that kept the engine running, and the grease that made sure it ran smoothly. Users became invested in

maintaining their reputations. So things like fraud and serious disputes between buyers and sellers, while never 100% absent from auction web, were kept to a manageable minority of auctions because, to a large degree, auction web's users police themselves. The reputation system incentivized auction web users to be honest and just to behave themselves. This is a key innovation that auction web slash eBay made,

which we should not overlook in a hurry, because in so many ways, over the last 20 years, the web and the internet have slowly trained all of us to get comfortable interacting with crowds and especially crowds of strangers. This is 1996, remember. This is a time when most people were wary of doing business with actual companies online.

So even more people were even more skeptical that what Auction Web was doing was even possible because doing business online with complete strangers, forget about it. Auction web slash eBay really was one of the first websites to show that a large autonomous community carefully constrained by a few small guidelines and regulations, but crucially, invested in a system of online reputation could actually work. It could actually make a large group of strangers function together efficiently and honestly. It could actually engender a system of

trust that worked for the most part. Notice that this key ingredient of ratings and reputation continues in technology companies like Yelp or TripAdvisor, and especially in things like Uber and TaskRabbit and Airbnb. It's hard to imagine that the current sharing economy that is currently being built out could even exist without learning the lesson of this crucial reputation and community template that auction web slash

eBay pioneered. Notice that I keep saying auction web slash eBay. At this point in the story, the site that Pierre Omidyar developed, his little auction experiment still calls itself auction web, but you went to it by typing in eBay.com. Confusing, right? When do they solve this confusion? How and why does eBay become the king of the auction websites? because there were definitely others out there.

And actually, eBay had plenty of competition all throughout the dot-com era, more than almost any other company we've profiled. Seemingly, everybody took a shot at eBay at some point, and yet eBay survived. The how and why of that survival will have to come in our next chapter episode.