View Full Version : As it turns 10, eBay's the national bazaar

07-26-2005, 06:07 AM
eBay: Company has profited since its 1995 launch

By Clint Swett -- Bee Staff Writer

When Mike Husa wanted to sell four billiard cues sitting unused in his Natomas home, his first impulse was to make the rounds of local pool halls.
His second was to try eBay.

Within a week of posting them on the online auction site, he pulled in nearly $3,000 for the sticks, including one custom-made model that fetched $1,200.

"I didn't think there would be that much of a market," said the Sacramento auto salesman.

He should have known better.

Since it was launched 10 years ago on Labor Day weekend, eBay has evolved from a modest experiment started in the founder's living room to a global bazaar and cultural phenomenon.

Its current roster of 147 million registered users worldwide exceeds the 2004 populations of all but six countries. More than $34 billion worth of products were sold on eBay in 2004, putting it in the same league as Sears, Safeway and Lowe's.

And during its brief lifetime, it has become imbedded in the U.S. consciousness as the place to sell just about anything - from a nacho cheese-flavored Dorito chip shaped like the pope's hat to a $4.9 million private jet.

"It's hard to remember life without eBay," said Robert Thompson, a professor of popular culture at Syracuse University. "It's one of those things like fast food or Disneyland. Once they make their appearance on the American landscape, they become part of the language."

The San Jose-based company opened up a worldwide shopping mall to bargain hunters and to seekers of the oddball and the obscure, Thompson said.

"Americans like stuff ... and we are nothing if not a nation of acquirers," he said. "eBay has allowed buyers to acquire stuff that's not available at the local mall."

That's certainly the case with Husa, who in addition to selling his pool sticks, has used eBay to buy everything from a Honda dirt bike to hard-to-find radio batteries. "I looked all over town for the batteries and couldn't find any," he said. "So I popped onto eBay and there were 40 of them."

State Sen. Debra Bowen, D-Marina del Rey, is another eBayniac, joking that she lives "in the house that eBay furnished."

Among the more than 800 items she said she's purchased are shoes, Reddy Kilowatt memorabilia and a rare cardboard chair designed by famed architect Frank Gehry.

In addition to the convenience of shopping online, Bowen says eBay gives her access to modern furniture that she would otherwise never see.

While it's best known as a global garage sale, eBay also has either spawned or aided thousands of other businesses. PayPal, for instance, got its biggest boost from the legions of eBay buyers and sellers who adopted it to pay for goods sold online. It proved so popular that eBay bought PayPal for $1.5 billion in 2002.

It has spawned a slew of franchisers such as iSold It and Snappy Auctions, which operate retail storefronts that help people sell their goods on eBay. There are small companies making gear to help eBay sellers - such as light boxes for photographing wares and computer software to help set up a virtual eBay store.

Today, more than 430,000 individuals in the United States earn all or most of their income from selling on eBay, according to company estimates.

Among them is Russ Wilson, a retired parole officer living in Arnold. An experienced antiques collector, he scours garage sales for goods ranging from furniture to fishing lures, which he sells on eBay, usually for a hefty profit.

Among his biggest surprises was an art deco-style neon clock featuring "two ugly swans" that he bought at a yard sale for $3. On eBay, he sold it for $400.

That kind of markup helped Wilson finance a vacation home in Baja, where he monitors his auctions via a laptop and Wi-Fi connection at a nearby cantina.

Not all sellers find it so lucrative. Marla Sullivan, who owns A7 Consignment on 10th Street in Sacramento, sells about 30 percent of her inventory via eBay but is still waiting to make the big bucks.

"It can be done, but it takes a lot of time," she said. Not only must she handle the sale for her clients, but she also must research the item's selling price. It's a time-consuming process, she said, but it hasn't stopped her from selling everything from a piano to the hood of a vintage auto for her customers.

Nor has it dimmed her optimism. "Baby boomers have a lot of stuff they will need to get rid of," she said.

While eBay sellers have had inconsistent results, the company has been on a steady roll, with net income of $778 million in 2004, compared with $442 million a year earlier.

In fact, eBay has been profitable since its launch, one of the rare dot-coms to sail unscathed through the tech bust early this decade.

"It was the perfect invention. It was simple to implement the technology, but it brought an old idea (auctions) into a new domain (the Internet)," said Andrew Hargadon, a professor of technology management and innovation at the UC Davis Graduate School of Management.

But he warns its dominance could end. Some sellers, unhappy with recent increases in eBay fees, are defecting to other sites such as Overstock.com and uBid.com. Others are taking advantage of falling prices for software and Internet connections to set up their own Web-based stores, hoping customers will find them through powerful search engines such as Google.

"What we're seeing now with eBay is an end to the monopoly," Hargadon said. "The company faces a serious challenge over the next 10 years."

Company spokesman Hani Durzy has heard the complaints and said eBay is trying to mend fences with its sellers, though it has no plans to roll back commission increases.

As with any huge marketplace, there's potential for abuse. People have tried to use eBay to sell everything from stolen pacemakers to fake art masterpieces. And sometimes buyers don't receive the goods they paid for.

Durzy, the eBay spokesman, acknowledges the problems but said they constitute a tiny fraction of the billions of annual transactions.

He said more than 1,000 eBay employees are assigned to combat fraud, and company policy bans any item that is illegal in the country where it's listed.

The company was born on Labor Day weekend in 1995 amid the go-go optimism of Silicon Valley when Pierre Omidyar, a software engineer, launched a free online marketplace called Auction Web on a computer in his San Jose apartment.

Six months later, he began charging modest fees to list items as a way to defray his $250 monthly Internet connection.

"The revenues came in at $500, and I thought, 'This is pretty good,' " said Omidyar, speaking at the recent eBay convention. A month later, when revenues "came in at $1,000, I said, 'This is a pretty neat trend,' " he said impishly.

By the middle of 1996, Omidyar quit his day job and began running the operation full time with Jeff Skoll, a recent Stanford MBA graduate.

In early 1998, they hired Hasbro Inc. executive Meg Whitman to head the company. (Omidyar retains the title of chairman while Skoll, a billionaire from his eBay stock holdings, is a Silicon Valley philanthropist.) Later that year, Whitman engineered a successful public offering, which saw eBay shares more than triple in the first day of trading, before closing above $47. (On Monday its shares closed on the Nasdaq at $40.88.)

Since its humble beginnings nearly 10 years ago, the company has rapidly grown in both size and global reach, expanding into 35 countries, most recently China.

"I think (eBay) is a tremendous marketplace, and it's not going away," said Dennis Prince of Rocklin, who's written or co-authored 11 books with advice for selling on eBay. "It's as ingrained now in our society as a toaster or a DVD player."

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