EBay

• 1. Introduction

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  eBay, the American e-commerce company, began with a broken laser pointer. One of the first items sold on its original site, AuctionWeb, went for $14.83. The founder, Pierre Omidyar, contacted the winning bidder to make sure the buyer understood the pointer was broken. The answer was short: "I'm a collector of broken laser pointers."

  That odd little transaction launched a company now based in San Jose, California, and active in 190 markets worldwide. In 2023 it reported 132 million annual active buyers and handled $73 billion in transactions.

  How did a side project run for extra money survive its own success? Why did a company that bought so many businesses end up selling so many of them again? And what happens when a marketplace is held to account for what strangers sell on it, and for the conduct of its own staff?

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• 2. Hobby to Public Company

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  On the 3rd of September 1995, the French-born Iranian-American programmer Pierre Omidyar put AuctionWeb online in California. He ran it as a hobby, hoping to earn a little extra money. By February 1996 traffic was so heavy that his internet service provider demanded a business account. His monthly bill jumped from $30 to $250, and he turned to his mother's family for support. Among them was his grandfather, General Mahmud Mir-Djalali, regarded as the father of Iran's Defense Industries. The site paid its own way quickly, earning $1,000 in its first month and $2,500 in its second.

  Chris Agarpao became the first employee, and his job was processing payments that arrived as mailed checks. Jeffrey Skoll was hired as the first president in early 1996. That November the company opened auctions for airline seats, hotel rooms and cruise berths, in partnership with Electronic Travel Auctions. By then the site had hosted more than 200,000 auctions in 14 months.

  The name arrived in September 1997. AuctionWeb became eBay, borrowing from Echo Bay Technology Group, Omidyar's consulting firm. The domain echobay.com already belonged to Echo Bay Mines, a gold mining company, so he clipped it down to eBay.com. That year Benchmark invested $6.7 million in venture capital.

  Beanie Babies made up 10% of all listings in 1997. The toys were famously hard to find in retail stores. Their maker, Ty, ran its own site for trading used Beanie Babies, but nobody could sort the listings there, and collectors drifted to eBay. In the 1998 annual report filed with the U.S. Securities and Exchange Commission, Omidyar admitted that eBay depended on the continued strength of that market.

  Meg Whitman was appointed president and CEO in March 1998. At that point the company had 30 employees, 500,000 users and revenues of $4.7 million in the United States. In September 1998, at the height of the dot-com bubble, eBay went public in an offering led by CFO Gary F. Bengier. Shares opened on NASDAQ at $18 and closed the first day at $53, giving the company a market value near $1.9 billion.

  By the end of 2000 the site counted 22.5 million registered users and 79.4 million auctions per quarter.

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• 3. A Decade of Deals

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  In June 2000, eBay paid $312 million in stock for Half.com. That same year it teamed up with Escrow.com to hold money in vehicle sales, a service later widened to other kinds of transactions.

  Overseas purchases followed. In January 2001 eBay took a majority stake in Internet Auction Co. Ltd, operator of the largest internet auction site in South Korea. In February 2002 it bought iBazar, a French auction site founded in 1998, for roughly $112 million in stock.

  The biggest early purchase came on the 3rd of October 2002, when eBay acquired PayPal for $1.4 billion. Its own payment service, Billpoint, was phased out in January 2003.

  In August 2004 eBay paid $32 million for 25% of Craigslist, buying from a former Craigslist executive, Phillip Knowlton. Rent.com cost $415 million that December. Classified ads became a theme. eBay launched Kijiji in March 2005, bought the British site Gumtree in May, and brought Kijiji to the United States in July 2007.

  Skype Technologies cost $2.6 billion in October 2005. Four years later eBay sold 70% of Skype to a consortium led by Silver Lake Partners and Marc Andreessen, at a valuation of $2.75 billion. The reason was that Skype had never fit into the online marketplace. eBay kept a 30% minority interest, and in May 2011 Microsoft bought the whole company for $8.5 billion.

  Not every product caught on. eBay Express, launched in April 2006, worked like a standard shopping site with fixed prices and no bidding. It opened with 10 million items listed and was shut down in October 2008. ProStores, a wizard-driven website builder acquired by the end of 2005, had its support end on the 1st of February 2015.

  StubHub, a ticket resale marketplace, cost $310 million in January 2007. In April 2009 eBay agreed to buy a controlling stake in the South Korean retailer G-Market for $413 million. Two years later came another large purchase: GSI Commerce, for $2.4 billion, renamed eBay Enterprise in June 2013.

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• 4. Setbacks in Asia

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  In February 2002, eBay left Japan, beaten by competition from Yahoo! Japan. The same year it began operations in Taiwan by buying NeoCom Technology for $9.5 million. In June 2006 it turned the Taiwan operations over to a joint venture partner.

  China was the larger gamble. In 2003 eBay acquired EachNet, the country's leading online auction platform, and reached an 85% market share. Within four years, the rise of Alibaba's Taobao had cut that share to 7.7%. eBay shut down its Chinese site in 2007.

  The exit took the form of a venture with a Chinese-based auction company, Tom Online Inc. eBay contributed $40 million for 49%. Tom Online put in $20 million for 51% and management control. eBay described the departure as an evolution of its strategy in China rather than a failure.

  The reasons were practical. eBay charged platform fees and listing fees, and the contest of free versus paid did not favor it with Chinese customers. Moving the technology platform from China to the US left the site slow and prone to crashes, which wore away trust. Taobao also offered chat and instant messaging, features Chinese users already knew and eBay lacked.

  In September, eBay tightened restrictions on Chinese sellers to cut fraud. Fraudulent vendors of pirated movies, books and software kept appearing anyway. Taobao.com was still considered the country's leading auction site when eBay stepped back.

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• 5. Cheats, Fakes and Lawsuits

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  Shill bidding is the best-known trick on auction sites. A seller, using a second account or an accomplice, bids on their own item to push the price up. eBay has been criticized for not doing enough to stop it. Sellers have also been accused of selling counterfeit goods and bootleg recordings, taking payment without shipping, and listing nonexistent goods. One example was a device claiming a battery capacity far beyond what its size could hold. Some hid steep return shipping costs behind cheap bulk shipping prices. Users developed techniques such as auction sniping to protect themselves.

  Buyers have their own repertoire. Friendly fraud means receiving an item and claiming it never arrived. Others return a different item from the one they received, or remove parts first and send back the shell for a refund. In a package redirection scam, the return box is filled with garbage and sent to the wrong address.

  In 2004, Tiffany & Co. sued eBay, claiming that over 70% of the Tiffany silver jewelry offered on the site was fake. On the 14th of July 2008, a Federal District Court judge ruled that eBay had no legal duty to monitor sellers of counterfeits. The Second Circuit affirmed that decision in 2010, in Tiffany (NJ) Inc. v. eBay Inc.

  French courts took a harder line. In June 2008, a court in Paris awarded LVMH €40 million over auctions of counterfeit bags, perfumes and other items sold by unauthorized retailers. It also permanently barred eBay auctions of LVMH perfumes, counterfeit or not, and eBay banned those items. That same month a court in Troyes ordered eBay to pay Hermès €20,000 over two counterfeit bags sold in 2006. The court also made eBay post the ruling on its French home page for three months.

  On the 28th of May 2003, a jury in the case of eBay Inc. v. MercExchange, L.L.C. found eBay guilty of willful patent infringement and ordered $35 million in damages. MercExchange had accused eBay of infringing three patents, one of them used in the Buy It Now feature. The Federal Circuit affirmed the willful infringement finding and ordered a permanent injunction. On the 15th of May 2006, the Supreme Court held that an injunction is neither required nor automatic in a patent case, and sent the matter back to the Virginia district court.

  In April 2008, eBay sued Craigslist, saying Craigslist had diluted eBay's stake by more than 10% and cost it a board seat. Craigslist countersued in May, alleging eBay used that seat to gain inside information. In September 2010, Delaware Judge William B. Chandler III found that Craigslist founders Jim Buckmaster and Craig Newmark had breached their fiduciary duty of loyalty. He restored eBay's stake to 28.4% from 24.85%. He dismissed eBay's objection to a staggered board provision, citing Craigslist's right to protect its trade secrets.

  In November 2012, the Department of Justice accused eBay of agreeing with other technology companies not to solicit one another's highly skilled employees. A settlement in May 2014 required eBay to end those practices. In 2021, eBay complied with a request from the estate of Dr. Seuss to ban the sale of six of his books over illustrations judged racially insensitive. The move drew backlash from followers of right-wing politics and a surge of interest in the discontinued books.

  In September 2023, the Department of Justice sued eBay under the Clean Air Act and other environmental laws. The complaint named devices that defeat automobile pollution controls, restricted-use pesticides, and paint removal products containing methylene chloride. The court dismissed the case, ruling that the Communications Decency Act shielded eBay from liability.

  In 2020, the developer Dan Nemec discovered that eBay was scanning its users' ports. The company used LexisNexis's ThreatMetrix product, running obfuscated JavaScript that tried WebSocket connections to localhost on ports common to remote access tools like VNC. Some cybersecurity experts guessed the aim was to spot compromised computers being used for fraudulent purchases.

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• 6. Auctions for Good

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  MissionFish served as the arbiter that let eBay sellers donate part of their auction proceeds to a charity of their choice. Charity auctions also carried discounted fees.

  The most famous lot was a lunch for eight with the investor Warren Buffett at the Smith & Wollensky restaurant in New York City. All proceeds went to the Glide Foundation. The auction ran annually across 21 years between 2000 and 2022, skipping 2020 and 2021 because of the COVID-19 pandemic. Winning bids ranged from $2 million to as high as $19 million for the final auction in 2022. In total the lunches raised $53.2 million.

  A political letter also went under the virtual hammer. Senator Harry Reid and forty other Democratic senators had written to Mark P. Mays, CEO of Clear Channel Communications, complaining about comments by the conservative talk show host Rush Limbaugh. The letter sold for $2,100,100, and Limbaugh matched the winning bid. Every dollar went to the Marine Corps-Law Enforcement Foundation, which supports the education of children of military members who have died serving.

  In May 2024, a charity auction for lunch with Marc Benioff, CEO of Salesforce, raised $200,000, plus an additional $1.5 million donation for the Glide Foundation. Over the course of 2024, eBay reportedly raised more than $192 million for charity.

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• 7. Harassment Scandal

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  In June 2020, five eBay employees, executives among them, were fired and charged with cyberstalking. Their targets were Ina and David Steiner, editors and publishers of EcommerceBytes, a newsletter that eBay executives saw as critical of the company.

  The campaign went well beyond harassing messages and doxing. The defendants ordered anonymous, disturbing deliveries to the couple's home. These included a preserved fetal pig, a bloody pig Halloween mask, a funeral wreath, a book on surviving the loss of a spouse, and pornography. They also vandalized the couple's home in Natick, Massachusetts. The conspirators pleaded guilty, and most received prison sentences.

  Devin Wenig was CEO during the campaign, and the newsletter frequently targeted him. Investigators found he had no knowledge of the harassment, and he was not charged. He left the company with a $57 million severance package.

  Steve Wymer, the chief communication officer, had ties with local politicians. He was fired for cause over alleged involvement but was never charged. He was later hired by the local chapter of the Boys & Girls Clubs of America.

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• 8. Breakups and Bids

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  The 30th of September 2014 brought an announcement that eBay would spin off PayPal as a separate public company. Activist hedge fund magnate Carl Icahn had demanded the move nine months earlier. The spinoff was completed on the 18th of July 2015. On the 31st of January 2018, eBay named Adyen, a start-up based in the Netherlands, to replace PayPal as its primary payments provider. It promised lower costs and more control over merchants.

  In June 2015, eBay sold its Craigslist stake back to the company, ending the litigation. Two months later it sold a portion of its stake in Snapdeal. That September, Propay and Skrill were dropped as payment methods because few people used them.

  In July 2017, eBay took a 5.44% stake in India's Flipkart. It paid with its India business unit, valued at $211 million, plus $514 million in cash. In May 2018 it sold that stake to Walmart and relaunched its own operations in India, after reporting a $167 million gain on the earlier sale of its India unit. Also in 2018 it bought the Japanese platform Qoo10 for $573 million.

  Investors pushed hard. In March 2019, eBay paid its first dividend. In September 2019, activist shareholder Elliott Investment Management pressed for change, and Devin Wenig resigned as CEO. Scott Schenkel, chief financial officer since 2015, became interim CEO. That November eBay agreed to sell StubHub to Viagogo for $4.05 billion in cash. The sale closed in February 2020.

  Jamie Iannone became CEO in April 2020. In July 2020, eBay sold its classifieds business to Adevinta for $2.5 billion in cash plus 540 million Adevinta shares. Gumtree had to be divested to win regulatory approval. eBay sold its Adevinta shares in 2023, when private equity firms acquired that company. In September 2020 Pierre Omidyar resigned from the board, five years after stepping down as chairman. In November 2021, eBay sold its South Korean business to Emart for $3 billion.

  The company then bought into collectibles. In May 2022 it took a stake in Funko and became its preferred secondary marketplace. June 2022 brought KnownOrigin, a marketplace for non-fungible tokens. In October 2022 it paid about $295 million for TCGPlayer, a marketplace for collectible card games. Certiligo, a provider of AI-powered digital IDs for apparel authentication, followed in July 2023. In January 2024, eBay announced plans to lay off 9% of its workforce after hiring outpaced growth projections.

  On the 3rd of May 2026, the video game retailer GameStop proposed buying eBay for about $56 billion in cash and stock. eBay rejected the bid outright, calling it "neither credible nor attractive". The rejected offer leaves GameStop, with its existing 5% stake, as a shareholder in the company it tried to buy.

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