eBay: the Rise and Fall of the E-commerce Giant

We as a civilization have reached a
point where we can order almost anything we want from almost anywhere on Earth
with the reasonable expectation of having it delivered to us within two
weeks. It could be an expensive BBQ set, a very expensive Swiss Army Knife or
just regular Canadian flip flops for one cent. Chances are if it’s legal,
you can probably buy it online. To honor the wonder that is modern e-commerce
this week on Behind the Business we’ll take a look at eBay, one of the
industry’s founding fathers. eBay was founded in 1995 by a 28-year-old
Iranian-American who was born in France. His name is Pierre Omidyar and he has
your usual tech pioneer background: he graduated Tufts University in 1988
with a degree in computer science and was soon thereafter hired as a developer
by an Apple subsidiary. In 1991 he co-founded Ink Development, an early
e-commerce company. While working there Pierre came up with a lot of ideas about how
a modern online marketplace would work, but his other partners would never seem
to agree with him. The reason for that is that Ink Development’s model was
what you would call business-to-consumer, which was pretty much the standard back
in the day. Pierre’s ideas didn’t really fit that
model though. What he was envisioning was a consumer-to-consumer platform,
something that was completely unheard of at the time. To make his dream a reality Pierre left Ink Development in 1994 and he got a job as a developer at General Magic
to pay the bills while he was developing his idea. That company’s engineering
team, by the way, was the 1990s tech equivalent of the Avengers,
but that’s a story for another time. One year later in 1995 Pierre had finally finished writing the code to his platform, and he released it on
September 3 under the name of AuctionWeb. It looked pretty bad, but let’s be honest,
most websites from that era looked bad. Despite its poor design people liked this
new platform very much. Its simplicity and lack of regulations
made it a strong competitor to the large e-commerce sites of the time. The very
first item listed on AuctionWeb was Pierre’s broken laser pointer, which was
sold to a collector of broken laser pointers for the generous price of
$14.83 AuctionWeb was hosted on ebay.com,
which was Pierre’s personal domain. Pierre’s first domain choice was EchoBay,
but that was already taken by a commodities hedge fund, so he shortened it to eBay. Among other things the site also hosted
a page for his wife’s biotech startup, a discussion group for Tufts University
alumni, and an informational page for the Ebola virus. It was a pretty random website, but
the AuctionWeb section lifted it out of obscurity pretty fast. By February 1996 the website was
generating so much traffic that Pierre had to upgrade his personal internet
connection to a business one. This sudden jump in costs drove him to start
charging commissions on every auction. These fees remain the company’s main
monetization model to this day. In June 1996 Pierre quit his job
at General Magic and he hired a programmer friend of his to expand the
platform’s functionality. One month later they made their first
successful business deal by negotiating a licensing agreement to sell airline
tickets directly on the site. It was growing rapidly and by the end of
the year over 250,000 auctions were being hosted on AuctionWeb. Just six
months later in June 1997 that number had increased
to over 800,000. That same month he renamed the site eBay, and he started
sharing his business plan to venture capitalists around Silicon Valley. One
particular firm called Benchmark Capital gave Pierre $4.5 million in exchange
for a 22% stake in the company. Benchmark also promised to find a suitable CEO to
help run the company and in March 1998 they made good on their promise by
hiring Margaret Whitman, a former Hasbro executive. She was a pretty big name in the
business world, having also served as an executive at Disney, DreamWorks and
Procter & Gamble. She turned the ragtag eBay into a
structured corporation pretty fast. In order to make it more appealing to
investors she removed the drugs and firearms sections, and to better spread
the word she created a whole new marketing division. She was feeling pretty confident and so
in September 1998 eBay went public under her guidance with a listing on the
NASDAQ for $18 per share Margaret’s confidence was justified
because on its very first day of trading, the stock’s price went all the way up to
$53. Less than four months later eBay shares were trading a
$300 a piece and Pierre had become an instant billionaire. The company at the time had barely 30
employees, half a million registered users, and annual revenue of $5 million.
Although originally eBay was mostly a marketplace for collectible items, it
rapidly expanded its assortment until it covered pretty much every legal item that you
could sell. At this point I feel that we should settle the age-old debate of
whether you should sell your stuff on eBay or Amazon. I’ve purposefully not mentioned Amazon so
far since it deserves a whole video all on its own, but this question is too popular
not to discuss. If you’re selling regular everyday stuff that you could easily
classify, like hardware, clothes, books, or games, Amazon is the place for you. Their site
is bigger, better organized, and streamlined exactly for this purpose. If, however, you’re selling something more
special or unique, you’re better off on eBay. Unusual listings on eBay have
become so popular that they even have their own Wikipedia page. Among some of the weird stuff that have
been listed are a city in California that was sold twice in the span of four years,
a seaworthy Brazilian aircraft carrier, and two undiscovered species of animals. EBay has seen historical listings like
one of the machines that dug out the tunnel beneath the English Channel or a silent movie
of Marilyn Monroe smoking pot. There have also been quite a few absurd
ones though, like when a DJ’s angry wife sold his sports car for £0.50 or when a
grilled cheese sandwich with the image of the Virgin Mary sold for $28,000. EBay, being the major Internet
corporation that it is, was pretty eager to acquire other tech companies. It has made over 50 acquisitions in its
short lifespan, the most notable ones being PayPal in 2002 and Skype in 2005.
EBay also on StumbleUpon and Magento, but they didn’t like each other very much. In
2008 Margaret resigned to run for Governor of California, a race which she
eventually lost, and the mantle of CEO was passed down to John Donahoe. By that
point eBay was a massive company with over 15,000 employees and annual
revenues of nearly $8 billion. Despite its size though, eBay was already
on the decline. Amazon was making more than twice as
much money, and eBay’s performance had been lackluster for three years in a row. Donahoe tried to focus on eBay’s core
e-commerce business by getting rid of most of the company’s stake in Skype in
2009. They got less than $3 billion
for it, but just two years later Microsoft bought it for the price tag of
$8.5 billion. It was pretty clear the Donoho wasn’t
doing a good job: he failed to restore eBay’s position in
China against Alibaba and in the early January of 2014 he got in trouble with
Carl Icahn. Now, if you’ve never heard of Carl Icahn, well, you should have. He’s a very successful contrarian
investor and one of the most famous corporate raiders in history. His trademark strategy is to acquire a
large stake in a struggling public company, and then to force its management
to enact radical changes. His argument was that eBay’s declining e-commerce
business was dragging down the otherwise successful PayPal, which if you remember
they’re acquired in 2002. Carl Icahn wanted the two companies to split. John Donahoe was, of course, totally opposed to
the idea, and a very heated public relations battle ensued. Eventually Carl Icahn succeeded and on July 18, 2015 PayPal was spun off as a separate
company. Icahn immediately converted his 46 million eBay shares into shares of PayPal, and John Donahoe promptly resigned in defeat. Ever since the split eBay has been
struggling to find its place in the world. With Amazon stronger than ever, eBay’s
attempts at pushing their own version of a global online marketplace have been
shaky at best. PayPal, in comparison, have been doing
great and in just one year they’ve outperformed eBay by 13%. eBay is stuck in the difficult position of
slowly becoming the Myspace of e-commerce, and the bad news is that
there probably isn’t an easy way to fix this. The e-commerce industry in general is a
prime example of Demand-Side Economies of Scale, what you would normally call the
Network Effect. Each new user of a given platform increases that platform’s
value to future users, and if you compare the growth of Amazon’s user base to that
of eBay, you’ll quickly see where things are going. EBay is definitely in a tough spot and
they will need to come up with something truly innovative if they want to stay
around for long. I hope you enjoyed the story of eBay. If
you did hit that like button, subscribe, and check out my other videos for the
stories of more cool companies. Tell me in the comments below which
company you’d like me to feature next, and as always: stay smart.

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100 thoughts on “eBay: the Rise and Fall of the E-commerce Giant

  1. You seriously painted Latin america as Latin america, and Europe + North america as Western ? Al of those areas as Western lands. They all were colonized by Europe.

  2. I still use ebay and it has its place on the internet. When you want to find some old toy or movie or book that you randomly thought of. Amazon isn't always cheaper and they usually don't have it either. So ebay is still a go to. But yes, the amount of users and items for sale on there has definitely declined. I remember 10 years ago you can almost find anything for many pages worth of the same product. Now if you get one page worth of the same stuff that's a good day. Yeah definitely not used as much. But I wouldn't say its fallen. It just isn't what it used to be because Amazon is so much more massive. Its still good for what it is and I still go to it all the time without any problem doing so. If you want a laserdisc or some old VHS movie or that stuffed animal you remember as a kid.. forget Amazon.. ebay is the only place to go for it.

  3. well, the reason they have slowed down is because of their own greed!.. their commision is 10% plus 4% paypal, this is too much for high value items, so people don’t go posting them as before.. back in the original days of their speedy growth it was 3-4%

  4. Amazon isn’t an Australian thing, so I don’t really care lol, eBay is the only one worth buying anything from.

  5. How's about you offer full refunds for scammed people, not just for paypal payment but also wiretransfer? Or ban wiretransfer all together

    Got scammed by indians selling in EU with stollen identity, ebay didn't even bother answering my complaint. They told me to wait and give negative feedback.
    The scammers ended up converting the money to Bitcoin and that was it.
    F u ebay, hope you die.

  6. It's way more easier to set up a business on Ebay than Amazon they both are great but Amazon you got to get a trademark-branding.

  7. the downfall is due to the fact that all the abay buyers know by now that they can scam sellers and always get away with it

  8. The excellent video left out some extremely important facts about eBay's demise. eBay's executives failed to accept that eBay's success came from being an auction site. eBay's attempt at being another Amazon was doomed from the start. eBay's executives failed to understand that long-term success comes from customer satisfaction. eBay has the dubious reputation of treating more customers worse than any other company ever.

  9. I use ebay but not being able to leave negative feedback for a buyer who doesn't pay is wrong. Why can't I leave negative feedback when they don't pay??? As soon as someone comes up with a better online venue for me to sell collectibles please message me!

  10. I find eBay easier to buy gone products like old video games or foreign movies. Plus, some clothes are easier or rarer to buy than in Amazon since they’re from smaller retailers from around the world, like leather jackets from India and Mexico.

    Also, since public opinions on Amazon is going sour since almost no one want the HQ2, and that their warehouses are criticized, I’m opting for eBay and others like Letgo, KSL, and OfferUp.

  11. This is my third year selling on Ebay. Yes, there have been some changes, and I have have had to make adjustments in my selling plans. But altogether, I am very appreciative of this opportunity to sell online, and have a positive experience with selling on Ebay. Yes, shipping is going up–but is this the fault of Ebay? I no longer sell heavy items–I look for lightweight, more expensive items where I can get more profit with less shipping costs. I have to swallow hard once or twice when someone returns an item because it "doesn't fit." Even though I provided detailed measurements! And I have to pay the return shipping, now, sometimes that hurts.But I get mostly great feedback with happy customers, and this makes me feel great about selling on Ebay. It still works for me, and am happy to be an Ebay seller. I hope it goes on forever!

  12. ebay is constantly increasing its fees and forcing people to use paypal. not surprised they go down.

  13. I liked eBay until I started trying to sell stuff on it. My account kept getting shut down, citing coprright infringement reasons. However, other, much larger accounts selling the exact same products were left alone. BS site for sellers.

  14. Ebay fucked themselves!!! Their fees are a fucking rip off. They insist you use paypal for payment and no other method of payment. They rip you off when they do they conversion into different currencies. Now you only find junk on eBay. I very rarely use it now. I hope they go broke.

  15. The reason Ebay failed is because they took a one sided approach to buyers, which buyers greatly abused to the detriment of seller. "the not as described" claim giving buyer instant refund became a number one favorite to scam sellers, as was "innacurate description" sellers also stopped posting rare collectibles because of an army of scammers started using Ebay to obtain free merchandise, these same scammers would also misuse Ebay feedback policy, sometimes blackmailing seller with negative feedback threat. Because Ebay never addressed these issues seriously, the reputable sellers left and went to Amazon, Etsy and elsewhere and Ebay began to crumble like a mountain of wet clay. They tried suing Amazon for copying their platform, but it was too late. The sellers never came back to the thiefdom of Ebay. And that was the end of Ebay. The buyer isn't always right.

  16. I just sold something on ebay for the first time. I covered shipping and also had to pay 30% of the product's value!? Taking a % is greedy.


  18. Of course i knew it, im an ebay phone agent. It hurts hearing everyday irrate dudes complaining because of terrible ebay system. Let me find some new job before you call me somehow.

  19. Ebay make regulation, But Ebay Officer in Philippines do not follow regulation eBay make and seller lost like hell to scam buyer, Even if seller win dispute, there will be a second court on Paypal, if you are a smart scammer, Ebay is the best place to scam those honest seller until they close down business

  20. I used to buy things from EBay all the time until about 7 years ago .
    I liked the choice of being able to buy with a money order . Then they banned that and only let you pay thru f-ing Paypal

  21. I have made over 300 purchases on ebay with almost perfect results. The platform is easy and understandable. Most of my purchases were coins and bullion and about half were at auction. Amazon is way behind in the coin market and since that is what I have an interest in, I avoid even looking at them when searching for an item.

  22. u cannot sell on Amazon if Amazon doesn't exist in your country but u can sell on eBay frm anywhere u are aslong as u av PayPal…

  23. eBay has become far too greedy.
    With their fees and PayPal fees sellers lose a significant amount to the point where they make next to nothing on an item!

  24. I love EBay I don't know what "fall" you're talking about..I use both, I find Amazon annoying so I use EBay more.

  25. Pierre still owns 8% of eBay and so far made $12 billion. Present CEO of eBay, Devin Wenig made so far $52.8 million what isn't so bad. Right, eBay cannot be compared with Amazon. People sell stuff what they bought on Amazon when the warranty has expired.

  26. Ebay has descended into the pit because it was ruined by incompetency and mediocrity.

    Look at taobao/alibaba, the company is full of creativity and new product launches, full of excitement, where else ebay is pool of death water

  27. Ebay isnt struggling. Its just not bringing in revenue like Amazon who is the WALMART of online compared to the TARGET of online aka Ebay. The producers of this vid are probably running a scheme to publicly devalue stock prices to help their short positions. EBAY IS JUST FINE.

  28. Amazon is too shady to buy stuff on, eBay keeps more seller more honest. And if you want a used
    , higher value item like cameras or something…eBay is the spot.

  29. that is what happens when you let greedy large investors force you to divest your best asset Paypal. almost all companies that fell to pressure from large shareholders to divest some of their assets were weakened.

  30. You talk too fast and run your words together – no periods or pauses… Just a bunch of words mashing together…

  31. As a buyer I hate Amazon. Always use EBay. But reading these comments and hearing that they treat sellers so harshly is gonna leave them without business

  32. I will not use eBay to buy expensive products or items such are car parts that require a quality guarantee. So eBay to me is only good to buy Chinese stull that cost so little could not care less if it gets lost in transit. Same situation with the current amazon. both sites have become rubbish.

  33. I like Ebay better than Amazon, Amazon really pushes prime service, I have a Costco membership the all I'm willing to pay to shop online or at a brick mortem store

  34. I use E-bay mostly I hate Amazon they say free postage on stuff but want you to join there prime thing and pay a monthly fee to use it as I do not buy stuff every month why would I want to pay them money for nothing.

  35. to me, eBay is a joke you can't get items with C.O.D. and you need a credit card i is hard for me to get money when you are a public trustee

  36. It baffles me how people use amazon – I just spent a while ( and this is about the 5th time I've tried to sus out this site ) trying to find something to buy – here's what i encountered. Filter by price is only on some searches. There's no way to filter by item location. Of the 10 or 20 items I opened only about half of them showed a delivery date. Also many of the items I opened seemed to have multiple sellers or something ( that I still dont understand ) I don't really like ebay that much and I'd switch if I could but all these things ebay just does effortlessly … it seems like amazon just wants me to buy the thing and not worry about details about when i get it or where it comes from. I don't get how people can use this thing.

  37. ebay sellers are my heroes. Sadly a lot of the best sellers have long since abandoned the platform.

    Would I sell on ebay? I'd rather sandpaper my testicles off.

    I cleared out my basement, which was full of outgrown baby clothes. I filled my triaxle curtainsider trailer up with them (it will hold 10 pallets loaded up 8ft high with space to spare). No single item had been worn more than three times, about 15% of the load was still sealed in it's retail packaging (over enthusiastic relatives).

    Had ebay been a suitable seller platform I could've made four figures selling it all at 50p per item, ebay being the way it is, they could've ended up reimbursing half the buyers at my expense and it could've cost me four figures.

    It'd cost me three figures just to haul the trailer to the nearest charity shop, maybe double if the car broke down (it's flat fronted and even when empty, the wind resistance is equivalent to about a 2 ton load by itself). Then if a traffic warden gives me a ticket while unloading, I'm half way to a four figure cost.

    What did I do? Well my nearest neighbour was quarter of a mile away, so I had a big bonfire. Kinda scary how well a giant pile of baby clothes went up, scorched the grass upto 20ft away!

  38. Two times I bought ip cameras on eBay and the delivery was promised in 40 days but I have never got them, the sellers were gone from eBay. I could not ask eBay for help because there's a only 30 days limit to claim.

  39. The problem is atleast with amzon you know what condition your item is going to arrive in where with ebay your lucky if it comes in a box

  40. eBay has problems with losing customers……their solution? LETS RISE OUR FEES AND ALSO CHARGE ILLEGAL FEES ON SHIPPING, AND ALSO CHARGE FEES IF THERE IS A RETURN…………..I wonder if this CEOs go to university to become stupid, or what?

  41. ebay still has its place but this video fails to mention why exactly ebay is failing. seller fees are way too high, and no attention to this greed is being made?

  42. almost a million views hey eBay if your algorithmic robots are skimming thru comments skim this REDUCE YOUR INDIAN CUSTOMER REPS; get rid of the motto " oh i understand your frustration as a seller but unfortunately there is nothing we can do for you" actually do something with us if we are having a problem with fraudulent buyers. why do we get penalized if a buyer makes bogus claim. especially the buyer knows if he claims an iPhone is fake the ebay guidelines are he gets his money and keeps the product. that's the best guideline for buyers buy a real item of any kind which stretches across the board report it as a fake and you don't even need to send it back.

  43. Am ii the only person in the world who still prefers to go to a store/garage sale/auction/artisan…etc? I want to see and handle or try on the thing I am purchasing, and I like to pay with money. It is very simple, if I have the money in my wallet, and I like the quality and condition of the item…I can have it. If I don’t have the ready cash, I can either put a deposit and pick it up next week, or with a few payments I know I can cover. If that is not an option, I simply accept that I cannot purchase the item at this time…and if it is meant for me to have, it will be there when I return with the appropriate amount of money.

    By purchasing this way, I make contacts who will alert me if they come across an item they think I will want, and build trusting relationships with these sellers. I do not rack up credit card debt where I will pay interest to a third party, and give anyone who is interested enough to look for it how much I spend on what. I do not suffer buyer’s remorse when I find the item does not live up to expectations or does not fit properly…or is made of inferior materials.
    I help to keep brick and mortar stores, single owner companies, and artists stay in business by paying the money directly to them. I even help to introduce others to the really good sellers in my area by telling them when asked, “where did you get that? I love it!”

    I and my Husband have recently celebrated owning and operating a brick and mortar store in Toronto for 40 years, we currently employ 6 staff beyond ourselves, and have begun to place more responsibility on, (and annual wage increases to) those employees). We know our customers, and in numerous cases find we are dealing with the Grandchildren, and great grandchildren of many of our initial customers…we even personalize or customize our products for loyal clients who desire this.
    We wholesale to those offering our goods to resale through their own businesses. We will ship to customers who seek that service, and will custom design and create original pieces for those seeking specific symbols or sayings on their item.

    Many of our products are created in-house by our well trained staff. What we must order in, is purchased by us visiting our source companies or artists directly, and carefully examining the quality for inclusion in our stock.
    We DO accept credit cards and debit cards, as many people prefer not to carry cash on their persons while out shopping. We seek ways to allow our customers to have the buying experience THEY want to have, not one WE enforce upon them.

    We incorporated as a business before the advent of the PC in everyone’s home, (and now in their hands 24/7), before bar coding was common practice, before The days one size fits all, allowing those who shop with us the privilege of doing so in alignment with their OWN style of transaction. When we opened our doors to the public, there WAS no internet.

    We have never spent a dollar on advertising, have no website, (although we CAN be found with a little internet browsing. Most who come for one specific item will find other things they purchase because they saw and handled it in our store. One of the products we sell is jewelry in keeping with our business specialty, made in our studio on sight, in the metals and gemstones they prefer or specify. We also create original one-of-a-kind pieces in close consultation with the client, ensuring they are well satisfied with the finished article…signed by the artist.

    In just over 40 years, we have seen many businesses , operating in our areas of expertise come and go (usually in fairly short order), yet our business continues to grow, through 6 moves to different premises, (either for size of space requirements), or rising rents and/or taxes in certain locations. Our clients follow us, as we have signs saying when and where we will be moving, and because wee opt to. Keep our original phone number.

    We had discussed the pros and cons of creating a web presence, but determined it would not be worth the time and money required to create such a thing (with our diverse collection of products), and determined that creating a website with point-off-sale capability, and keeping it updated…and orders filled and sent in a timely fashion would not likely generate enough new business to cover the cost of website development, registration of domain name…and the ongoing expense of retaining exclusivity of that domain name, and the minimum of two dedicated employees to only that aspect of our sales.

    We are in the process of gradually retiring from directly working in the shop, and training the staff to handle most situations and decisions they will face (derived from our first few years of both working 7 days a week). At the beginning, we didn’t make enough to afford extra staff, but began too hire and train as soon as the numbers were there. We started. The business in 1979, with the loan of $3000.00 from an. Old friend, and paid him back within the first two months.

    We wanted to purchase commercial property, properly zoned for our needs, and approached banks, who laughed at us and showed us the door. When we were able to purchase the property after a year and a half (without any bank’s help…they. Suddenly wanted to give us HUGE credit card limits, lines of credit, and loans for whatever we appeared To want. Needless to say, we didn’t need their debt driven economy to be a component of our business.
    We have expanded and increased income each time we moved, and have rarely taken a fly on a total failure in terms of the product making enough sales to pay for itself within a two month period.

    We could, {as a society), find yet another way to avoid meeting and communicating face -to-face with other human beings who live in our area…an idea that disturbs me at the most basic of levels, we are isolating ourselves, breeding a fear of “the OTHER” that ubiquitous THEM we always hear so much about. Truth? We are THEM.

    One single, huge solar flare and its accompanying EMP, and we will have to be able to count back change, and gain an understanding of the trade value of many things. Everyone messes up, including writers of code…so our current overwhelming embrace of trusting computers more than people seems to be somewhat fragile at best, and foolhardy at the extreme.

    I’m not a conspiracy theorist, or this post would rival “War and Peace” for word count…but do I think we may have gone TOO far TOO fast? Yes…yes I do. We

    wouldn’t be the first civilization to make that mistake…let’s hope we are not the last.

    I am a bit of a dinosaur, but I remember the Korean War, the Vietnam war, the genocides of Rwanda, Kosovo, and Kuwait (among others). I remember the fears and nihilistic thinking of the “Cold War. I remember when a common question at school was “What did your Dad do in the War?” (WWII), and kids whose Dad’s weren’t in the War were embarrassed. I remember the Gulf War, and too many covert actions that destabilized other countries than I want to remember.

    I have been part of protests regarding things that stood to have deleterious effects on much of the World and it’s inhabitants. Something as simple as on-line purchasing is one more of these. How many jobs can be deleted by computerized practices before we can acknowledge that we trusted a fairly new technology too much?

    I encourage those (who are physically able) to spend one month buying from local stores, directly…in cash. Keep an account book of cash flow, (money in/money out)…and, at the end of that month compare those figures to your most recent previous bank statement.
    Look also, at where you LIKE to shop, does the retailer recognize you…and are they happy to see you? Do you feel, in general, less alone in the world…and less lonely? One thing you WILL discover, is where your money is going. How much principle is getting paid off on your credit cards and your mortgage? How much MORE will you have to pay at that rate to clear the debt…and what will your online credit card purchase ACTUALLY end up costing you on top of its ticket price.

    Just a THIRD point of view.???

  44. Ih also people do not forget amazon now uses third party seller…which is actually amazon using Ebay's sellers…amazon offers them their distro network….so amazon does absolutely nothing but charge you more money for the same product…yet when theres an issue amazon tells you to basically get off

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