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

100 Comments

  • 525Lines

    They've made it so easy to rip off sellers that eBay is a quagmire. eBay makes money PayPal makes money. Sellers have no protection. They don't protect their sellers and you WILL get ripped off.

  • Harp Rae

    EBAY HAS THE BIGGEST ASSHOLES WORKING FOR THEM, THE FBI THINKS A EBAY WORKER PULLED AND INSIDE JOB BY REFUNDING A BUYER 26000 AGAINST MY WILL AND THE BUYER NEVER SENT BACK THE ROLEX!!!!! WATCH OUT FOR fresh-threads 4 U on Ebay he stole 26000 dollars and the Rolex EBAY AND PAYPAL COULD NOT GIVE A FUCK!!!!!!!!!!! WAS SENT TO 4304 AVE M IN BROOKLYN NY SHOAIB QUERESHI THE FEDS ARE ON IT!!!!!!!!

  • Mayank Gupta

    eBay had shit sellers in India so no wonder they flopped.. No security check
    Amazon had best customer support

  • Gabriele Nitti

    I just hate multiple listings on ebay that are all the sam and not well categorized listings that don't let u take advantage of search filters. It's just a pain to find deals on used goods

  • JECC WRS

    I’m sorry, I bailed from e bay due to the fraud committed by sellers and buyers! I bought a car cover, it came in and I put it on my car and it lasted less than one day. It got wet and shredded into thousands of pieces! I sent a message to the seller and he said , oh well, your loss! Then I had to do some type of mediation? I’m sorry, but this is fraud , he sold a defective product and was doing this daily! I never received a refund! Then I sold a brand new camcorder and almost instantly, all Foriegn bidders with phony bids were trying to buy the camcorder, but said to contact them outside of e bay? No, that’s not e bays fault, but like any business that attracts low life people, it drives people away! And Amazon has been not perfect, but damn near!

  • 69johndz

    What killed it for me was when it seemed like EBay stopped focusing on auctions and just became another marketplace where sellers can advertise their wares at full price.

  • Sean Carroll

    I can think of many reasons why Amazon is better then eBay but many reasons my eBay is better than Amazon like unbranded items cables/components/used equipment etc. I think ebay needs to be streamlined but let me know what you think

  • Sleeve Of Wizard

    I used to sell stuff on eBay. They Rob its Merchants blind. If you sell something for $100 they want $33. It's not like that exactly but it's pretty dang close. Now I just purchase things from there and it seems like lately more and more sellers are trying to get a 1-up type of scam on you. eBay is becoming more like flea markets very unregulated no one wants to stand behind their products. More and more folks like myself will continue to withdraw their dollars and then you will see these people crying more and more.

  • D D

    Problem with Tech Companies are gathered in one shithole called San Francisco, libtards Elitist always destroying their company.

  • प्रियदर्शी

    I miss eBay for the sole fact that it was the only site in my country that sold old computer parts, retro consoles and niche stuff that I couldn't find on others. And then they closed down here as well.

    Oh well.

  • Jason Voigt

    eBay has been replaced not only by Amazon, but by social media sites…most notably Facebook. I could probably include Craigslist as far as local deals. But a lot of other sites as well have taken over as "the online garage sale". I'll give you an example: if a record/music collector wanted to buy an old record – or maybe a hard-to-find record they were looking for, they would use Discogs. Discogs is where I usually check to see the value of my music collection.

  • Apache Sakai

    Ebay have move the Calling Center to Philippines, Ebay will be ruins on Pinoy hand, because The Pinoy officer cannot make decision, Ebay have become a heaven for Scammers Buyer

  • qyahb

    Years of incompetency of Ebay is simply astonishing, ebay is nothing compare the new comer Alibaba who does a whole lot of work, vertical integration..the management of Ebay should fire themselves

  • Emil Phoryew

    eBay acts like a bully, demanding bitch and spoiled child today. This is why sellers are leaving them by the droves. Until they respect their sellers, give us full rights equal to buyers and allow us to sell what we want we're just going to continue to abandon them. eBay deserves their ruin and bankruptcy.

  • Harlock2day

    It never appeared to me eBay was struggling and in fact I don’t believe it. eBay is the first place I think of if I want to sell something online, not Amazon. eBay will always be associated with Auction but maybe it needs to become a proper shopping site. The solution ? Create a sister site, call it eBay Pro a start selling like Amazon e Alibaba. It is true Amazon has an auction side to it but it’s confusing compared to eBay. Either way competition is good with other sites like Wish, Joom and Zalando entering the market. I never liked the idea the entire world shopping from one company. I do not like Corporation, they become too powerful to the point they can influence politics, especially in a heavily lobbied country like the US,

  • Stefan L

    Ebay is great! I buy tons of stuff on ebay. Ebay is the place to go for hard to find niche items. There's stuff you can find on Ebay, that you'd never be able to find anywhere else. If you're buying normal everyday stuff, sure you can probably buy it anywhere else, including Amazon. However, if you are looking for something rare or eclectic, often times Ebay is the only place you'll find it.

  • Michael

    This video seems out of touch. Ebay's customer and seller base is distinct from Amazon's in that most things on Ebay are used.

  • Kaede

    for quite sometime ebay still beats amazon in deals on everything I buy.Also ebay is the #1 place to buy and sell anything used amazon can't even compare I don't get the hype towards amazon really!

  • Polikarpov Mosca

    I actually only find spares and parts for my old laptop on eBay… I don't know why, but Amazon rarely has them. Same with motorcycle parts

  • Angelo C

    The problem of ebay is that they want to charge much money and have no work. I have been cheated on ebay, both as a seller and as a buyer, and it's extremely frustrating to changing e-mails with an automatic machine, that keeps on sending threatening email, demanding information that you have already provided. When you try to contact by phone, then you have to a very expensive international call and stay in a line, for almost 1h.

    I changed from ebay to amazon because the service is bad and I recomend everyone to do the same.

  • AirSoftMaverick3232

    I use ebay far more than Amazon. most of the things I buy online are less than $10 for cheap stuff, like a passport holder or laser pointer or other small stuff. so I don't care if it takes a few weeks to come from overseas – the prices are much lower than Amazon for these sorts of small things. if I'm buying a more expensive commercially available item and I want to read reviews, I'll go to Amazon.

  • Paulo Constantino

    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.

  • RogersRoyal

    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.

  • cromagxx

    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%

  • Steven Lay

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

  • Poli Tehnist

    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.

  • M. Upshaw

    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.

  • balukkful

    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

  • Corey Chambers

    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.

  • Steven Moreno

    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!

  • Nelhuiliztli

    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.

  • Lois Wells

    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!

  • mysteryman2024

    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.

  • carlo fraiia

    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.

  • Charles Sykes

    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.

  • Nom

    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.

  • britney smith

    I'll save you 8 minutes. EBAY: RUN BY SCAMMERS FOR SCAMMERS. SAME WITH AMAZON. BOTH $HITHOLE VENUES WILL HIDE YOUR LISTINGS, THEN LIE ABOUT IT, AND THEY'LL ALWAYS SIDE WITH A SCAMMING BUYER OVER AN HONEST SELLER 100% OF THE TIME. BOTH ARE CORRUPT, INCOMPETENT, AND ARROGANT. AND AMAZON ARBITRARILY PUTS YOU THROUGH A TON OF HOOPS TO JUMP THROUGH BEFORE YOU CAN EVEN SELL THERE, ESPECIALLY IN MANY OF THEIR RIGGED CATEGORIES. BOTH COMPANIES ARE TOTAL FRAUDS BUT MAKE "CONTRIBUTIONS" TO POLITICIANS, SO BOTH VENUES ARE UNTOUCHABLE.

  • Gemma Gutierrez

    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.

  • Apache Sakai

    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

  • Linda Easley

    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

  • Gary Geiser

    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.

  • vulture tribe

    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…

  • Bob Marshall

    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!

  • Baked Beanie Sigel

    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.

  • lenny108

    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.

  • qyahb

    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

  • Jerry Rose

    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.

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