When did eBay start? How Does eBay Make Money?

When did eBay start? Over a Labor Day weekend in 1995, 28-year-old Pierre Omidyar began writing code for a website that would initially be called AuctionWeb. It was meant to offer an “honest and open marketplace” that would connect buyers to sellers directly. AuctionWeb went live on Sept. 3, 1995, with the first item purchased being Omidyar’s broken laser point for $14.83. Omidyar reached out to the buyer asking if he had accidentally purchased the defective item. He learned that the transaction was intentional because the buyer wanted the spare parts to build his own.

When did eBay start?

EBay, global online auction and trading company launched by American entrepreneur Pierre Omidyar in 1995. eBay was one of the first companies to create and market an Internet Web site to match buyers and sellers of goods and services. The company, which caters to individual sellers and small businesses, is a market leader in e-commerce worldwide. eBay is headquartered in San Jose, California.

Customers can participate in Web sites set up within their own country or use one of the company’s international sites. There are eBay Web sites for both the U.S. and Canadian markets, most European countries, and several countries in Asia. Latin American Web sites are operated in association with Mercado Libre, an e-commerce provider running similar operations. Although auctions constitute the bulk of eBay sales, fixed-price sales also constitute a significant share of transactions.

A key factor in eBay’s growth was its implementation of procedures to promote safe, transparent trading, accessible nearly anywhere to anyone. PayPal, the online automated clearinghouse for payments, has been a cornerstone of eBay’s transaction environment. In October 2002 eBay bought PayPal, but it was spun off as an independent company in 2015. Other major acquisitions in the 2000s included Skype (sold 2009), Shopping.com, Rent.com (sold 2012), and StubHub.

EBay relies on its users to self-regulate the trading community through a feedback system that allows buyers to rate sellers on transactions. (Formerly, sellers also could leave negative feedback on their buyers, but this feature was removed in 2008.) In theory, unscrupulous vendors are exposed and lose the trust enjoyed by reputable sellers.

In practice, some vendors received poor ratings through no fault of their own but because of, for example, problems with package deliveries, and other vendors garnered good ratings for a short period before setting up cybercrime scams to defraud customers. In response, the company made available educational resources for best-practice trading. Furthermore, eBay lists categories of potentially prohibited items; the company sanctions would-be traffickers in goods that may be illegal or offensive.

eBay start

The Founding of eBay: How It Happened

The timeline of the company starts with Pierre Omidyar. Pierre Morad Omidyar was born on June 21, 1967, in Paris, France, to Iranian immigrant parents, both of whom had been sent by his grandparents to attend university there. The family moved to the USA, Washington, D.C., and Pierre graduated with a degree in computer science from Tufts University in 1988. Shortly after, Omidyar went to work for Claris, an Apple Computer subsidiary, where he helped write the vector-based drawing application MacDraw.

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In 1991, Pierre started his career as an entrepreneur, co-founding Ink Development, a pen-based computing startup that was later rebranded as an e-commerce company and renamed eShop.

On Labor Day weekend in 1995, Pierre sat down in his living room in San Jose, California to write the original computer code for what eventually became an internet superbrand—the auction site eBay.

By 1996, the company was large enough to require the skills of a Stanford MBA in Jeffrey Skoll, who came aboard an already profitable ship. Meg Whitman, a Harvard graduate, soon followed as president and CEO, along with a strong business team under whose leadership the company grew rapidly, branching out from collectibles into nearly every type of market. eBay’s vision for success transitioned from one of e-commerce—buying and selling things—to one of connecting people around the world together.

With exponential growth and strong branding, eBay thrived, eclipsing many of the other upstart auction sites that dotted the dot-com bubble. By the time the company had gone public in 1998, both Omidyar and Skoll were billionaires.

In 2009, the net worth of the company reached $5.5 billion. Over one million people all over the world now rely on their online sales as part of their income.

eBay start

How Does eBay Make Money?

Browsing and bidding on auctions are free of charge, but sellers are charged two kinds of charges:

  • Insertion fees: Most sellers receive up to 250 listings with no insertion fees. After these are used up, insertion fees are typically $0.35 per listing or $20 for certain industrial and business items.
  • Final value fees: This fee is a percentage of the order plus $0.30. The percentage varies depending on the category and can be as low as 2.35% or as high as 15%.

Classified Ads and other services come with separate fees. eBay allows sellers to list houses, vehicles, and other large items for varying fees.

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Reportedly, eBay was simply a hobby for Omidyar until his Internet service provider informed him he would need to upgrade to a business account due to his high website traffic. The monthly price increase from $30 to $250 prompted him to start charging eBay users, who did not object. Chris Agarpao was eBay’s first additional employee to process mailed check payments.

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Jeffrey Skoll was hired as the first new president of the company in early 1996. In November 1996, the E-Commerce platform entered into its first third-party licensing deal, with a company called Electronic Travel Auction, to use SmartMarket Technology to sell plane tickets and other travel products. Growth was phenomenal: from 250,000 auctions during all of 1996 to 200,000 in January 1997 alone.

The company officially changed the name of its service from AuctionWeb to eBay in September 1997, after Echo Bay Technology Group, Omidyar’s consulting firm. The domain name echobay.com was already taken by a gold mining company, so Omidyar shortened it to eBay.com. In 1997 the company received $6.7 million in funding from the venture capital firm Benchmark Capital.

The frequently repeated story that eBay was founded to help Omidyar’s fiancée trade Pez candy dispensers was fabricated in 1997 by public relations manager Mary Lou Song to give the media a human-interest story more appealing than Omidyar’s original vision of a “perfect market”. The Pez dispenser myth generated enormous publicity and led to explosive early growth among toy collectors.

The leader in the toy category quickly became Beanie Babies manufactured by Ty, Inc., the most difficult toys to find in retail stores. As collectors internationally were trying to complete their collection of Beanie Babies, Ty set up the first business-to-consumer Web site, a secondary-market online trading post where people could trade their Beanie Babies.

However, it was overwhelmed with unsortable listings, creating an urgent demand for a more efficient online trading system. Beanie Babies quickly became the dominant product on eBay, accounting for 10% of all listings in 1997, as collectors thronged eBay’s user-friendly interface to search for specific Beanie Babies.

Meg Whitman was hired by the board as eBay president and CEO in March 1998. At the time, the company had 30 employees, half a million users and revenues of $4.7 million in the United States.

On September 21, 1998, eBay went public. In the risk factors section of the annual report filed with the US Securities and Exchange

Commission in 1998, Omidyar notes eBay’s dependence on the continued strength of the Beanie Babies market. After eBay went public, both Omidyar and Skoll became instant billionaires: eBay’s target of $18 per share was all but ignored as the price went to $53.50 on the first day of trading.

2000s

As the company expanded product categories beyond collectibles into almost any saleable item, business grew quickly. In 2000, eBay had 12 million registered users and a cyberinventory of more than 4.5 million items on sale on any given day. In 2001, eBay had the largest userbase of any e-commerce site. In February 2002 the company purchased iBazar, a similar European auction web site founded in 1998, and then bought PayPal on October 3, 2002.

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By early 2008 the company had expanded worldwide, counting hundreds of millions of registered users as well as 15,000 employees and revenues of almost $7.7 billion. After nearly ten years at eBay, Whitman decided to enter politics.

On January 23, 2008, the company announced that Whitman would step down on March 31, 2008, and John Donahoe was selected to become president and CEO. Whitman remained on the board of directors and continued to advise Donahoe through 2008. In late 2009 eBay completed the sale of Skype for $2.75 billion, but still owned 30% equity in the company.

2010s

In 2012, eBay was charged by the United States Department of Justice with entering into non-solicitation agreements with other technology companies involving their highly skilled employees.

On September 30, 2014, eBay announced it would spin off PayPal into a separate publicly traded company, a demand made nine months prior by activist hedge fund magnate Carl Icahn. The spinoff completed on July 18, 2015. eBay’s then chief executive, John Donahoe, stepped down from that role. Flipkart and eBay entered into a strategic partnership in 2017 under which eBay Inc acquired a 5.44% stake in Flipkart in exchange for its eBay India business for $211 Mn and a $514 Mn cash investment. As part of the partnership, Flipkart decided to use the eBay’s platform for global outsourcing.

On January 31, 2018, eBay announced that they would replace PayPal as its primary payments provider with Netherlands-based start-up Adyen. The transition was set to be completed by 2021, but PayPal would remain an acceptable payment option on the site until further notice.

On September 21, 2018, it was reported that eBay would install a security fence around the perimeter of its San Jose headquarters in response to the YouTube headquarters shooting earlier that year.

On July 31, 2019, the company acquired a 5.59 percent stake in Paytm Mall.

On September 25, 2019, it was announced that Devin Wenig would be stepping down as eBay’s CEO, and that Scott Schenkel, senior vice president and chief financial officer since 2015, had been appointed as the interim CEO.

2020s

On April 13, 2020, it was announced that Jamie Iannone would become the CEO on April 27. On June 15, 2020, eBay stated that that five employees were terminated in September after a law enforcement notification in August because of a possibly criminal case of harassment of journalists perpetrated by some of the terminated employees. Six former employees were charged with Aggressive Cyberstalking.

In July 2020, Adevinta announced to acquire eBay Classifieds Group. The deal closed on June 25.

eBay start

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