Tech Brew Ride Home - (IHP) The eBay Story Part 2

Episode Date: July 8, 2022

Part 2 of the eBay story from the Internet History podcast. 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. Before we get in today's episode, which will be our long-delayed latest chapter episode,

finishing up on eBay, I wanted to take the time real briefly again to ask you to rate and review the podcast if you haven't already done so, especially on iTunes, but on Stitcher as well, or any other platform that you listen to this show on. Leaving a review is really the most effective way to help support this show, because the more reviews the show has, then the higher it shows up in the rankings every time I release a new episode. And when the show pops up in, say, the top 30 on iTunes, then a bunch of people notice it,

and we get new listeners, and we get that virtuous cycle going. So if you haven't done so already, please take a moment to leave a review of the podcast wherever podcasts are reviewed. Thanks. When we last left the story of eBay, it was still called Auction Web, not eBay, and it had only recently transitioned from being a side project and a hobby to something approximating a real business. But things were happening quite rapidly for the small team working on card table desks in the cramped quarters of a converted dentist's office in Campbell, California. when Mary Lusong had joined the company in October of 1996

and began making concerted efforts to reach out to and organize the growing auction web community of buyers and sellers, it hosted only about 28,000 auctions. But then came what would be known as the Great eBay Flood. In January of 1997, eBay slash auction web would host 200,000 auctions in that month alone. The site had only hosted 250,000 auctions in the entire previous calendar year. As they progressed deeper into the first quarter of the year, the auctionwebers realized that the site was on track to have a run rate total of $4.3 million for hosting all these new sales.

And auction web had only made about $350,000 in all of 1996. So again, they were on track for an assessment. astounding annual growth rate of 1,200%. There were several factors, of course, leading to this explosion in growth. For one thing, like every other early website, eBay was benefiting as mainstream users began coming onto the internet for the first time. If we'll recall, in early 1996, there were only an estimated 19 million people in North America using the internet.

But by the start of 1997, that number had risen to more than 50 million. And with all these new web surfers, eBay noticed that there was a serendipitous thing about January's. They came after the holidays, of course, and the holidays meant that there were millions of people with millions of unwanted gifts. So suddenly, eBay slash auction web presented itself as a platform for people to unload unwanted gifts at a profit. But eBay was also benefiting from a fundamental feature that had been inherent in the Internet from day one, the ability for niche audiences and niche interests to find each other and to commiserate. As we described earlier, the Internet was always a place where people of like interests, no matter how obscure or remote, could congregate on news groups, on message boards, on websites and the like.

suddenly auction web eBay was a central place where all of these disparate communities of interest could gather when they wanted to do that one fundamental act of hobbyists, which would be trading and collecting. And so imagine any interest, any hobby, ranging from, you know, baseball cards, Barbie dolls, postage stamps, buffalo nickels, quilts, antiques, especially of all stripes, anything collectible, really. Auction Web became overnight the universe's greatest flea market slash garage sale slash bizarre. For most of auction web's early life, the majority of the listings were for computer items and electronics. But at the beginning of 1997, antiques and collectibles suddenly became

over 80% of the listings. eBay would also benefit by piggybacking on the hottest fads in collectibles, of which there were quite a few in the late 1990. I'm thinking of things like Furbies and Tickle Me Elmo's and Tamigachi. But the greatest of these was the Beanie Baby craze of roughly 1996 through 1999, which exactly mirrors the rise of eBay. Beanie babies were stuffed animals manufactured by an independent toy manufacturer from suburban Chicago called Ty Incorporated. from initial animals like Flash the Dolphin, Patty the Platypus, and more,

Ty gradually ramped up its lineup of characters to encourage a habit of collectibility. But Ty also introduced a brilliant complication, artificial scarcity. Beanie babies were not sold at mass retailers like Walmart or Target, and characters were not distributed to retailers equally. So part of the fun of Beanie Baby collecting was hunting down obscure characters in order to complete your collection. And then, in 1996, Ty began retiring individual Beanie Baby models. This set off a buying frenzy. Once, say, Buzz the Bee was sold out, the only way collectors would be able to obtain discontinued beanie babies was on the secondary market.

just the sort of market that eBay auction web provided. By the way, there's actually a book that looks at the whole Beanie Baby fad and how it was engineered that came out just this year. It's called The Great Beanie Baby Bubble, Mass Delusion on the Dark Side of Cute by Zach Bissonette, if you're interested. When in April of 1997, listings of Beanie babies suddenly surged to 2,500 separate auctions, eBay decided to assign them their own category. And when rare and discontinued Beanie Babies suddenly started going for hundreds or even thousands of dollars at auction,

eBay reaped the attendant press attention. Within a month, that single category, the Beanie Baby category, was responsible for an astonishing 6.6% of the entire site's sales volume. eBay was not exactly the site that Beanie Babies made, but they certainly added fuel to the site's explosive growth. I should stop here now that we're talking about these fad collectibles, and note that after the last chapter episode, many of you wrote to me wondering why I didn't tell the story, the true story of eBay's founding, how Pierre Omidyar created the site so his girlfriend could expand her Pez dispensler collection. Plenty of early articles mentioned that this was eBay's creation myth, but that's just it. That story is, in fact, a myth. It was a story that Mary Lou Song came up with to get reporters interested in covering eBay.

As she later put it, quote, Nobody wants to hear about a 30-year-old genius who wanted to create a perfect market. They want to hear he did it for his fiancé, end quote. Omidyar himself signed off on the fiction, and sure enough, one of the first articles covering eBay was in the newspaper the very next day, complete with the Pez Dispenser fictional legend. Auction web slash eBay, with its auction model, were actually the perfect platform for aftermarket beanie baby sales.

Adam Cohen, in his book about eBay called The Perfect Store, which, again, a lot of this chapter has come from, actually describes eBay's perfect positioning better than I could, so I'm going to let him do it. Quoting from page 45, it turned out that Beanie Babies, which were gaining popularity just as auction web was, were the ideal product to sell through an online auction. The auction theory teaches that auctions are not, in fact, an efficient way of selling most goods. They're too labor-intensive and time-consuming for items that are likely to sell at a price the parties could have anticipated in advance. But auctions excel when they are called on to set prices for items whose value is inherently indeterminate.

End quote. Discontinued Beanie Babies had no value, of course, other than whatever the price was that a crazed collector would pay in order to complete their collection. auction web was tailor-made for collectibles in all sorts of other ways as well. By creating a centralized clearinghouse of hard-to-find items, it could eliminate so many inefficiencies that it really was coming close to creating the perfect marketplace. There are plenty of articles from this time period about hordes of e-bearers suddenly descending upon the tens of thousands of flea markets and antique shops all around the country and virtually scooping up everything on hand in hopes of finding higher prices online.

Some antique shop in South Carolina say might not know what it had on its hands with that $300 lunchbox from the 1950s, and they wouldn't know that they could suddenly fetch $5,000 for that same item on eBay because eBay allowed the perfect buyer to discover it without having to hunt around the country for it. And this very rapidly led to the phenomenon of people building true small businesses on top of eBay's auction platform. Most small sellers over the years on eBay have been what they've always been, hobbyists and part-timers who sold on eBay for a little supplemental income.

But over the course of the last 20 years, there have been perhaps tens of thousands of people who have come to make their entire livings on eBay. Some even creating businesses large enough to employ dozens of people or gross in the millions of dollars. eBay was suddenly creating not just the world's biggest virtual marketplace, but the first marketplace that could actually rival the real world. This was because just as the web was allowing people to connect to the entire world, eBay was allowing a person to sell to the entire world from their little tiny corner of it. There wasn't a steep learning curve with eBay.

You just had to navigate some categories and find your market sweet spot. You could have a listing up in a matter of minutes. It helped to know some rudimentary HTML code if you wanted to make your listing look slightly better than average, but that wasn't entirely necessary. eBay enjoyed another happy accident of timing, of course, because it was just around this time that the first digital cameras were coming on the market. all you had to do was snap some photos of the item you wanted to sell, upload them via eBay's simple forms,

and type out something in the way of a description. There was even the added entertainment of the auction and monitoring thereof to entertain you. All in all, your only investment was a little bit of time and a little bit of postage in shipping materials. Auction web eBay's success came fast and furious to a company that was still but a handful of people and a bit of strung-together pearl code. Quote, it was like holding back a hurricane, end quote.

That was Mary Lou Song, describing the sudden surge in users. And in response to this surge, and especially that great eBay flood of January of 1997, Omidyar, Skoll, and Song took an unusual approach. They tried to discourage people from using eBay so much. They started by attempting to implement a credit approval process that required users to register a credit card or make a $10 pre-payment. This did little to stem the tide, though. So then they tried to limit listings,

decreeing that only sellers with a feedback rating above 100 could list more than four items a day. But that led to complaints that this practice put new users at a competitive disadvantage. And so eBay resorted to brute force. Now, new listings could only go up for 10 minutes of every hour. Knowing that they needed the resources to stay on top of auction web's growth, Omidyar and Skoll decided that this was the time that they would begin to raise some capital finally. And actually, their first thought was that maybe they should just see.

sell the company entirely, thereby letting someone with deeper pockets take the auction experiment to the next level. As Skull himself would remember, quote, we were a company of less than 10 people with flaky technology, hugely worried some bigger entity would come in, end quote. So when representatives from the Times Mirror newspaper company began making inquiries, Skull slapped a $40 million price tag on the website. Even that tiny number, which, again, is for a company growing by double-digit percentage points each month, and with growth's margins above 80%, even that was too much for the old media company. Mark Delvecchio, one of the Times Mirror executives pushing for the deal,

maintained that his bosses simply couldn't wrap their mind around the very concept of what Auction Web was. Quote, they kept saying, they don't own anything. They don't have any buildings. They don't have any trucks, end quote. And so Times Mirror passed. Another newspaper chain sniffed around as well, but very quickly, Omidyar and Skull decided that maybe they didn't want to sell out after all.

Because it was at this point that Skoll had finally come out with his long gestating business plan. Skoll and Omidyar decided to try their luck shopping their company around to Silicon Valley and venture capital firms. At first, they met with the same old skepticism about whether or not people could actually buy and sell with strangers online, especially without any type of structure or supervision. But eBay had two aces up its sleeve, of course. As I mentioned, the growth was phenomenal. By mid-1997, when Skoll was sending his business plan around, auction listings had gone up nearly tenfold in six months.

and second, eBay could claim something that almost no other startup in the Valley could. It was profitable, and it had been so since day one. And so in June of 1997, benchmark capital paid $5 million for 21.5% of eBay, valuing the company at $23 million. This would go down in history as one of the greatest investment home runs of all time. benchmark's stake in eBay would eventually be worth $4 billion. And it really was eBay from this point forward because the name Auction Web would be officially retired on September 1st, 1997. With money in the bank, eBay could begin to focus on its biggest issue, building a company that could handle the incredible growth of its business.

In short order, people were brought on to scale the company, appropriately. Account managers were brought in to manage both customer service for the buyers, and more importantly, to handle the relationships with the seller community. Engineers were hired to help take Omidyar's jury-rigged code to a more robust level. Marketing and business development executives like Steve Wesley, who we spoke to in episode 60, were brought in to professionalize things. And more importantly, eBay now had money to tell the world its story. And now was just the time to spread the word.

Omidyar and Skull had tried to fly under the radar with Auction Web for as long as they could, in one part an attempt to stay on top of their organic growth, but also in an effort to stay off the radar of bigger fish like AOL or Microsoft. But by late 1997, word of online auctions was, leaking out beyond the hobbyist circles, and eBay was facing real competition for the first time. The first serious competitors came from the very company that had spurned eBay earlier in the year, the Times Mirror newspaper chain. Times Mirror had scooped up the number two person-to-person auction site,

which was called Auction Universe, for a mere $200,000. auction universe was now rebooted in eBay's image, complete with a feedback forum and user ratings. Another competitor was one that had actually been around for the entire time. Launched all the way back in May of 1995 by the well-known Silicon Valley entrepreneur Jerry Kaplan, the site on sale sold goods at auction, largely unsold or remandered computer products. On Sale had raised sizable venture funding thanks to Kaplan's track record, previously founding Go Corporation, and it had gotten tons of press. By 1997, it was a publicly traded company and could boast 400,000 registered users. But On Sale started with a model that was diametrically opposed to eBay's.

It didn't actually host auctions between third parties. it hosted auctions of merchandise that it would resale direct to its users. So when you want an auction at on sale, you were actually buying that item from on sale, or from its retail and manufacturing partners. And on sale actually delivered the products to you with all of the attendant warehousing and logistics that that required. By late 1997, though, eBay had proven that its model of loosely structured

self-policing auctions between complete strangers could work, and furthermore could grow to a scale that was larger than on-sales model of warehousing and selling unsold goods. So, on sale shifted gears, and on Halloween 1997 launched On-Sale Exchange, which was its own person-to-person auction framework. Since On-Sale had been in the online auction game, as long as eBay, at first Omidyar and Skoll were concerned that their oldest competitor had finally copied their secret sauce. And indeed for a time, they were probably right to worry, because OnSale began an aggressive campaign to poach auctions and sellers from eBay, and for a period of months, listings at On Sale steadily grew. But crucially, listings on eBay never actually dropped.

It turned out that sellers dabbled with other auction sites, but they always came back to eBay. For one thing, sellers had already invested so much in that great reputation system that eBay had pioneered, and so there was a considerable cost to switching to a new platform. If you couldn't pour it over your hard-earned seller ratings, and especially with Auction Universe, you couldn't, then moving to another auction site was like starting from scratch. And none of eBay's competitors had that same focus on community that eBay had. Since OnSale was selling its own goods, as well as the goods of its partners, right there alongside individual sellers, it seemed to sellers like OnSale was maybe competing with them,

whereas eBay was the honest broker. And for its part, Auction Web did. didn't even start out with those vaunted message boards. And so again, eBay's key insight was that its only valuable asset was its users. And so it catered to them. Just as Mary Lou's song had stressed from day one, eBay doubled down and focused on its community of buyers and sellers. Today we take for granted that things like social networking sites like Facebook and Twitter are merely platforms for our content. We, the users, generate all of the content for Facebook and for Facebook to use to advertise against.

Facebook itself doesn't actually generate anything. We all do it ourselves. And eBay was the first major web company to realize this quite miraculous business model. That model of letting your users make the product for you. eBay itself sold nothing. Sure, it provided the platform for others to sell things and to make money, but without those others, without those users, eBay itself was nothing. So keeping users happy, both buyers and sellers, was the one simple innovation that allowed eBay to see off all of its competitors. Because simple things like message boards really were a big deal for keeping the sellers especially happy.

I mean, if you were a buyer, if you wanted maybe a used CD player or something, then you would log in and make a purchase from a stranger, and that was it. But for the sellers who were logging on all day, every day, selling sometimes hundreds of items, often simultaneously, for those who saw eBay as their livelihood, this sense of community and support that the message boards provided was crucial. The message boards helped you learn how to sell better, how to make. more money. They were like a place for water cooler gossip and for trade association protection all at once. And just as AOL had discovered with online chat, just as sites like I Village would discover with their own message boards and community, and just as eBay had discovered by attracting hobbyists and those with niche interests, the web has always been the perfect place for complete

strangers to become friends. Those message boards became more than just hangouts. They were the heartbeat of the eBay community. They truly were eBay's secret sauce. What had started out as a necessary workaround by a Midiar in an attempt to fob off community policing efforts to the eBay community, became something far more important. As one early user told Adam Cohen in The Perfect Store, quote, people's cats would die.

Someone's baby would be sick. And they'd post on the board asking what they should do. Someone would post that her husband was in the hospital, and everyone would lend their support and their prayers. End quote. If you were a seller, why would you leave eBay? That was where your friends were, where your support system was. If all the sellers were on eBay, which they were because they were loyal, then all the auctions were on eBay. so buyers had no reason to go anywhere else either.

The virtuous cycle that this created was made possible by the focus on users and community. Time and again, we've seen and we'll see in the web era, it would prove to be that the quickest route to success for doing anything on the web, any kind of product, any sort of website, was to simply let people get online and commiserate with all of the potentially messy and complex and even other. ugly things that that entailed. Those early pioneers like Prodigy or Pathfinder who ignored this fact, or worse, actively tried to manage people's online messiness, they often failed. And those like

AOL and eBay, who embraced and facilitated this chaos, they were often the ones that ended up winning. If eBay was nimble in fending off direct rivals, they were also strategic in buying off larger potential rivals. Steve Wesley and his team fought hard to negotiate progressively larger deals with the bigger portals, with the likes of AOL. Internally, there were some who questioned the need to do deals with anyone, since clearly eBay was doing fine growing organically without any. outside help. But by becoming, say, AOL's official auctions partner, eBay could be assured that AOL would not come out with an auction product of its own. And in fact, in later deals that eBay would indeed make with AOL, it would be written into the contract that AOL would agree not to pursue an auction product for a fixed period of time. Simultaneously, it was obvious to almost everyone that

continued growth of auction web slash eBay, I'm sorry, it's now eBay, of course, would require more experienced hands. Both Omidyar and Skoll at this point were clear-sighted about their own limitations. With Omidyar even saying, quote, we were entrepreneurs, and that was good up to a certain stage, but we didn't have the experience to take the company to the next level, end quote. And so, it was at this point that the search for a long-term CEO began in the fall of 1997. The CEO that eBay ended up choosing might seem at first glance to be a non-obvious candidate. Because Meg Whitman had nothing in the way of a technical background. With a degree in economics from Princeton and an MBA from Harvard,

Whitman had worked as a consumer branding specialist at Procter & Gamble and a management consultant at Bain and Company. And then Whitman embarked on something of a grand tour of Fortune 500 American brands, with a stint at Disney in the Consumer Products Division, a presidency of both Stride Right Shoes and FTD, the Flower Company. And when eBay came calling, she was at that time the general manager of Hasbro's, pre-school division, in charge of, among other things, the Mr. Potato Head brand. And initially, in fact, Meg Whitman had no interest in joining a little, little-known e-commerce company. She barely even used email. But there was something about Whitman's low-key,

no-ego personality that would make her fit in well with eBay's only recently abandoned culture of card tables and folding beach chairs. What impressed Whitman's, Whitman, of course, was eBay's 30% month-to-month growth rate and gross margins of 85%. When Whitman pointed out to Amityar how unusual margins of that size were, Omidyar remembers he thought to himself, what are gross margins? Whitman would prove to be an excellent fit as eBay CEO very much because her past experience in a wide range of consumer industries would be exceedingly helpful. As long as competent people could be brought in to keep the back-end systems running smoothly,

a technical proficiency wasn't actually the most important thing for eBay's CEO, really. Whitman would provide expert guidance in what was eBay's true business, facilitating the successful marketing of a rainbow spectrum of consumer products and knick-knacks. And so Meg Whitman officially came on board as CEO of eBay on February 1st, 1998. By that point, the card tables and folding chairs were rapidly being replaced by proper cubicles and more office space. In fact, whenever new office space became available at the office park at 2005 Hamilton Avenue, eBay would snap it up quickly and eventually would cover five suites on three floors. eBay's headcount quickly jumped past 50 people, and Gary Benninger was brought on as eBay's first chief financial officer.

No more would the company's records be kept on QuickBooks. Beninger's first order of business, in fact, was to ready eBay for prime time and to prepare for an IPO by the end of the year. Again, in the present day, when we can look around at services like Facebook or WhatsApp, having hundreds of millions or even billions of users. When we look at user numbers for early web companies, they seem to look ridiculously small. At the time that Meg Whitman became CEO,

eBay only had half a million registered users. But those users were exchanging more than $100 million in goods in quarter one of 1998, and thereby generating $3 million in revenue for the company every single month. A mere one quarter later, though, in June of 1998, eBay could announce its one-millionth registered user. Paradoxically, of course, we now know that the law of large numbers also means that the largest growth rate comes at the very beginning. And so, as eBay readied for its IPO, it received serious partnership offers from both Yahoo and AOL. Yahoo, in fact, was interested in buying the whole company outright, but eBay was, at this point, more interested in trying its luck on the public markets, what with all that crazy growth rate. The eventual deal with AOL, however, was an extension of those auction presence partnerships that Steve Wesley was working on, and at this time, right before the IPO, it would fetch a rich $12 million for four years as AOL's premier auctions

partner. When eBay did eventually go public on September 21, 1998, its stock had that great pop, first-day pop, in this case of 197 percent on the offer price. eBay was suddenly valued at almost $2 billion. Ninety-eight was, of course, also the year that dot-com mania really struck Wall Street. And since eBay's IPO was relatively early in its growth rate, eBay became one of the true success stories in that era of day traders and first day pops. It would turn out that about two-thirds of the pre-IPO staff of eBay, about 75 people, give or take, became paper millionaires because of eBay. And by July of 1999, not even a calendar year after IPOing, Forbes would claim that Pierre

Midiar's eBay fortune was 10.1 billion. Jeff Skolls was 4.8 billion, and Meg Whitman's, about one billion. When we're talking of stock valuations and stock prices and the like, eBay is actually an interesting outlier from the time because it both was and wasn't a typical high flyer, especially among the likes of Yahoo, broadcast.com, Amazon, and others. For a long time, people were simply skeptical, as they always had been, of this whole online auction thing. In this case, it looked to many like some sort of a fad, when in fact it was really the only truly new way of doing business among the crowd of e-commerce companies that were popping up at the time.

What Wall Street ultimately couldn't argue with, of course, was eBay's consistent growth, and, more importantly, consistent profitability. A rare thing among dot-coms to be sure. In fact, if you look at a chart of eBay's long-term stock price and market cap, you'll notice that eBay would, in fact, record its greatest heights in terms of market cap and stock price after the dot-com bubble in the years 2003-2004. This is when other e-commerce high-flyers were suffering or, at this point, bankrupt. True eBay's stock dipped in the dot-com bust along with all the others, but unlike the others

who saw their advertising dollars and investment capital dry up, eBay's user growth and profitability never dipped. As we've said before in other episodes, and we'll explore at length at some point in the future, the key thing to remember about the dot-com bust is that people didn't suddenly stop using the internet. In fact, web and internet usage simply continued to grow in a number that would dwarf anything in the late 90s. eBay, with its financial independence and its financial security, was a beneficiary of all that. Of course, it wasn't all smooth sailing. As eBay became bigger and more mainstream, issues of auction fraud, which had previously been completely policed by the community, became more prominent and would require eBay

to take more of an active hand with. and eBay suffered from a high-profile AOL-style outage of its services in June of 1999 that lasted almost 22 hours. This service outage would end up costing the company $4 million because it had to refund all of the fees for any items at auction during the outage. The resulting press attention would shave more than $6 billion off of eBay's market cap, but what few at the time are, new was how close eBay actually might have come to oblivion. There was a time early on in the outage when eBay engineers feared that they might not be able to ever restore the system. Obviously, they could rebuild the system and eventually relaunch it, but how long would that take? Weeks, months? In the meantime, would the user stay loyal? What if all those years of user-seller and buyer

ratings were suddenly lost forever. Would people be willing to allow them to be rebuilt? For a brief moment, it looked like an engineering snafu could bring down the entire e-commerce giant. That thankfully didn't happen, but the concern was there because, again, eBay was facing major competition by 1999. And so, again, there were options if eBay were suddenly unavailable. Yahoo had launched an auction product by partnering with that long-time eBay rival on sale,

and Yahoo, with its 20 million users, was offering auctions without any fees whatsoever. It intended to make money on advertising alone. More threatening, though, was the competition from Amazon. All the way back when eBay was about to go public, Amazon had actually made an offer to acquire eBay. Meg Whitman and Pierre Omidyar had actually met with Jeff Bezos in Seattle, but as Whitman would remark to her team at the time, quote, they have all these warehouses and inventory that they're so proud of. I'm glad we don't have to deal with any of that, end quote.

But that's kind of the point, of course. If you'll remember Jeff Bezos's original vision for Amazon had been an everything store with completely frictionless commerce. In a way, eBay was the perfect embodiment of that vision. Hundreds of millions of dollars in goods were changing hands, and eBay itself never had to touch them. There was no warehouses, no trucks, just like the newspaper company was concerned about.

And so, Amazon would throw tons of money and resources at auctions in an attempt to unseat eBay as the auction king, And by doing so, it's hard not to imagine that Jeff Bezos was going after eBay out of some sort of jealousy at their more perfect business model. Of course, it would turn out that as it had done before, eBay saw off all commerce. As always, their commitment to their community proved to be more thorough and more sincere than any rival. And at this point, the size of eBay's community, the size of its network and its brand and its market platform meant that eBay had an insurmantable advantage over any upstarts. eBay was where most of the buyers were, so that was where most of the sellers went to sell their wares. And conversely, eBay was where the greatest number of goods were on sale, so that was the first place that buyers thought to go.

It's literally Metcalf's law of networks perfectly, perfectly illustrated. In fact, the only real challenge to eBay's eventual dominance of the entire online auction industry would come not from a competitor that went after eBay's auction model, but from a startup that would change the way that auctions happened on eBay. That startup was called PayPal, and it would change the way auctions and everything else were paid for online, eventually. But that is, of course, a story for another time

and another chapter episode sometime in the future. Thanks for listening.