Ebay's history - know your roots!

March 24, 2008 - 8:22pm | author: sergiu23 | |

eBay Inc. is an American Internet company that manages eBay.com, an online auction and shopping website in which people and businesses buy and sell goods and services worldwide. In addition to its original U.S. website, eBay has established localized websites in thirty other countries. eBay Inc also owns PayPal, Skype, and other businesses.

Origins and early history

The online auction web site was founded in San Jose, California on September 3, 1995 by French-born Iranian computer programmer Pierre Omidyar as AuctionWeb, part of a larger personal site that included, among other things, Omidyar's own tongue-in-cheek tribute to the Ebola virus.

The very first item sold on eBay was a broken laser pointer for $14.83. Astonished, Omidyar contacted the winning bidder and asked if he understood that the laser pointer was broken. In his responding email, the buyer explained: "I'm a collector of broken laser pointers." The frequently repeated story that eBay was founded to help Omidyar's fiancée trade PEZ Candy dispensers was fabricated by a public relations manager in 1997 to interest the media. This was revealed in Adam Cohen's 2002 book and confirmed by eBay.

Chris Agarpao was hired as eBay's first employee and Jeffrey Skoll was hired as the first president of the company in 1996. In November 1996, eBay 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. The company officially changed the name of its service from AuctionWeb to eBay in September 1997. Originally, the site belonged to Echo Bay Technology Group, Omidyar's consulting firm. Omidyar had tried to register the domain name echobay.com (the domain has recently been put up for sale) but found it already taken by the Echo Bay Mines, a gold mining company, so he shortened it to his second choice, eBay.com.

eBay went public on September 21, 1998, and both Omidyar and Skoll became instant billionaires. The company purchased PayPal on October 14, 2002.

Items and services

Millions of collectibles, appliances, computers, furniture, equipment, vehicles, and other miscellaneous items are listed, bought, and sold daily. In 2005, eBay launched its Business & Industrial category, breaking into the industrial surplus business. Some items are rare and valuable, while many others are dusty gizmos that would have been discarded if not for the thousands of eager bidders worldwide. Anything can be sold as long as it is not illegal or does not violate the eBay Prohibited and Restricted Items policy. Services and intangibles can be sold, too. Large international companies, such as IBM, sell their newest products and offer services on eBay using competitive auctions and fixed-priced storefronts. Regional searches of the database make shipping slightly faster and cheaper. Separate eBay sites such as eBay US and eBay UK allow the users to trade using the local currency as an additional option to PayPal. Software developers can create applications that integrate with eBay through the eBay API by joining the eBay Developers Program. As of June 2005, there were over 15,000 members in the eBay Developers Program, comprising a broad range of companies creating software applications to support eBay buyers and sellers as well as eBay Affiliates.

Controversy has arisen over certain items put up for bid. For instance, in late 1999 a man offered one of his kidneys for auction on eBay, attempting to profit from the potentially lucrative (and, in the United States, illegal) market for transplantable human organs. On other occasions, people and even entire towns have been listed, often as a joke or to garner free publicity. In general, the company removes auctions that violate its terms of service agreement within a short time after hearing of the auction from an outsider; the company's policy is to not pre-approve transactions. eBay is also an easy place for unscrupulous sellers to market counterfeit merchandise, which can be difficult for novice buyers to distinguish without careful studying of the auction description.

eBay's Latin American partner is MercadoLibre. eBay's rivals include Amazon.com

PayPal-only categories

Beginning in August, 2007, eBay required listing in "Video Games" and "Health & Beauty" to accept its payment system PayPal and sellers could only accept PayPal for payments in the category "Video Games: Consoles". Starting January 10, 2007, eBay says sellers can only accept PayPal as payment for the categories "Computing > Software", "Consumer Electronics > MP3 Players", "Wholesale & Job Lots > Mobile & Home Phones", and "Business, Office & Industrial > Industrial Supply / MRO". eBay announced that started in March 2008, eBay had added to this requirement that all sellers with less than 100 feedback must offer PayPal and no merchant account may be used as an alternative.

eBay Express

In April of 2006, eBay opened its new eBay Express site, which is designed to work like a standard Internet shopping site to consumers with United States addresses (eBay Express). Selected eBay items are mirrored on eBay Express where buyers shop using a shopping cart to purchase from multiple sellers. The UK version was launched to eBay members in mid October 2006 but on 29 January 2008 eBay announced their intention to close the site. The German version was also opened in 2006 (eBay Express Germany).

eBay Specialty Sites

In June of 2006, eBay added an eBay Community Wiki and eBay Blogs to its Community Content which also includes the Discussion Boards, Groups, Answer Center, Chat Rooms, and Reviews & Guides. Ebay has a robust mobile offering, including SMS alerts, a WAP site, and J2ME clients, available in certain markets.

eBay Matchups is a fun website created that allows users to put two items head-to-head and allow visitors to vote on their favorite item.

Best of eBay is a new specialty site to find the most unusual and unique items on the eBay site. Users can also vote on and nominate listings that they find.

eBay Pulse provides information about popular search terms, trends and most watched items. Holiday Hot List 2007 is a comprehensive list of products that are in demand for the Christmas season.

Auction types

eBay offers several types of auctions.

* Auction-style listings allow the seller to offer one or more items for sale for a specified number of days. The seller can establish a reserve price.

* Fixed Price format allows the seller to offer one or more items for sale at a Buy It Now price. Buyers who agree to pay that price win the auction immediately without submitting a bid.

* Dutch Auctions allow the seller to offer two or more identical items in the same auction. Bidders can bid for any number from one item up to the total number offered.


For Auction-style listings, the first bid must be at least the amount of the minimum bid set by the seller. Regardless of the amount the first bidder actually bids, until a second bid is made, eBay will then display the auction's minimum bid as the current high bid. After the first bid is made, each subsequent bid must be equal to at least the current highest bid displayed plus one bidding increment. The bidding increment is established by eBay based on the size of the current highest displayed bid. For example, when the current highest bid is less than or equal to $0.99, the bidding increment is $0.05; when the current highest bid is at least $1.00 but less than or equal to $4.99, the bidding increment is $0.25. Regardless of the amount each subsequent bidder bids, eBay will display the lesser of the bidder's actual bid and the amount equal to the previous highest bidder's actual bid plus one bidding increment. For example, suppose the current second-highest bid is $2.05 and the highest bid is $2.40. eBay will display the highest bid as $2.30, which equals the second-highest bid ($2.05) plus the bidding increment ($0.25). In this case, eBay will require the next bid to be at least $2.55, which equals the highest displayed bid ($2.30) plus one bidding increment ($0.25). The next bid will display as the actual amount bid or $2.65, whichever is less. The figure of $2.65 in this case comes from the then-second-highest actual bid of $2.40 plus the bidding increment of $0.25. The winning bidder pays the bid that eBay displays, not the amount actually bid. Following this example, if the next bidder is the final bidder, and bids $2.55, the winner pays $2.55, even though it is less than the second-highest bid ($2.40) plus one bidding increment ($0.25). However, if the next bidder is the final bidder and bids an arbitrarily large amount, for example $10.00 or even more, the winner pays $2.65, which equals the second-highest bid plus one bidding increment.

For Dutch Auctions, which are auctions of two or more identical items sold in one auction, each bidder enters both a bid and the number of items desired. Until the total number of items desired by all bidders equals the total number of items offered, bidders can bid any amount greater than or equal to the minimum bid. Once the total numbers of items desired by all bidders is greater than or equal to the total number offered, each bidder is required to bid one full bidding increment above the currently-displayed winning bid. All winning bidders pay the same lowest winning bid.

eBay has established detailed rules about bidding, retraction of bids, shill bidding (collusion to drive up the price), and other aspects of bidding. These rules can be viewed on the help pages.

In 2007, ebay began using detailed seller ratings of one to five stars on feedback. eBay labels the detailed seller ratings when filling out feedback as 5 being very reasonable and 4 being resonable, however sellers with any detailed ratings of 4.3 and below are penalized and less visible in its search listings and having all 4.5 DSR rating is required to be a power seller, making the rating of 4 as unreasonable.

Profit and transactions

eBay generates revenue from a number of fees. The eBay fee system is quite complex; there are fees to list a product and fees when the product sells, plus several optional fees, all based on various factors and scales. The U.S.-based ebay.com takes $0.20 to $80 per listing and 5.25% or less of the final price (as of 2007). The Mexican ebay "mercado libre" takes 1% (price of the article × number of articles to be sold), and 4.99% of the final price if there is a successful trade. The UK based ebay.co.uk (ebay.co.uk offices) takes from GBP £0.15 to a maximum rate of GBP £3 per £100 for an ordinary listing and from 0.75% to 5.25% of the final price. In addition, eBay now owns the PayPal payment system which has fees of its own.

Under current U.S. law, a state cannot require sellers located outside the state to collect a sales tax, making deals more attractive to buyers. Although state laws require purchasers to pay sales tax to their own states on out-of-state purchases, most non-professional sellers ignore this requirement. However, most sellers that operate as a full time business do follow state tax regulations on their eBay transactions.[citation needed] However for the tax called Value added tax (VAT), eBay requires sellers to include the VAT fees in their listing price and not as an add-on and thus eBay profits by collecting fees based on what governments tax for VAT.

The company's current business strategy includes increasing revenue by increasing international trade within the eBay system. eBay has already expanded to over two dozen countries including China and India. The only places where expansion failed were Taiwan and Japan, where Yahoo! had a head start and also New Zealand where TradeMe, owned by the Fairfax media group is the dominant online auction website.

Acquisitions and investments

* In July 1998, eBay acquired Cincinnati, Ohio based online auction site Up4Sale.com.

* In May 1999, eBay acquired the online payment service Billpoint, an unsuccessful competitor to PayPal, which they closed following the 2002 acquisition of the latter.

* In 1999 eBay acquired the auction house Butterfield & Butterfield, which it sold in 2002 to Bonhams.

* In 1999 eBay acquired the auction house Alando for $43 million, which changed then to eBay Germany.

* In June 2000 eBay acquired Half.com for $318 million, which was later integrated with the eBay Marketplace.

* In December 2000 eBay acquired the Precision Buying Service portion of Deja.com.

* In August, 2001, eBay acquired Mercado Libre and Lokau, Latin American auction sites. eBay also acquired iBazar, a French auction site.

* In July, 2002 eBay acquired PayPal, for $1.5 billion in stock.

* On January 31, 2003, eBay acquired CARad.com, an auction management service for car dealers.

* On July 11, 2003 eBay Inc. acquired EachNet, a leading ecommerce company in China, paying approximately $150 million in cash.

* On June 22, 2004, eBay acquired all outstanding shares of Baazee.com, an Indian auction site for approximately $50 million in US cash, plus acquisition costs. Baazee.com subsequently became eBay India.

* On August 13, 2004, eBay took a 25% stake in Craigslist by buying out an existing shareholder who was once a Craigslist employee.

* In September 2004, eBay moved forward on its acquisition of Korean rival Internet Auction Co. (IAC), buying nearly 3 million shares of the Korean online trading company for 125,000 Korean won (about US$125) per share.

* In November 2004, eBay acquired Marktplaats.nl for €225 million. This was a Dutch competitor which had an 80% market share in the Netherlands, by concentrating more on small ads than actual auctions. Marktplaats is the Dutch word for Marketplace.

* On December 16, 2004, eBay acquired Rent.com for $415 million in cash (original deal was for $385 million of the amount in eBay stock plus $30 million in cash).

* In May 2005, eBay acquired Gumtree, a network of UK local city classifieds sites.

* On May 18, 2005, eBay acquired the Spanish classifieds site Loquo.

* In June 2005, eBay acquired Shopping.com, an online comparison site for $635 million.

* At the end of June 2005, eBay acquired the German language classifieds site Opus Forum.

* In September 2005, eBay bought Skype, a VoIP company, for $2.6 billion in stock and cash.

* In April 2006, eBay invested $2 million in the Meetup.com social networking site.

* In April 2006, eBay acquired Tradera, Sweden's leading online auction-style marketplace for $48 Million.

* In August 2006, eBay announced international cooperation with Google. Financial details have not been disclosed by either party.

* In February 2007, eBay acquired online ticket marketplace StubHub for $307 million.

* In May 2007, eBay acquired a minority stake in GittiGidiyor.

* In May 2007, eBay acquired the website StumbleUpon for approximately $75 million.

* In October 2007 eBay wrote off $1.43 billion of its investment in Skype, admitting that it "drastically overpaid" for the company.


One mechanism eBay uses to combat fraud is its feedback system. Before eBay's January 29th, 2008 policy change announcement, at the end of every transaction, both the buyer and seller had the option of rating each other. Both parties had the ability to rate each other and the experience as a "positive", "negative", or "neutral" rating and leave a comment no longer than 80 characters. As of incoming CEO's John Donahoe's announcement however, the option for sellers to leave anything other than positive feedback to buyers was removed.

Weaknesses of the feedback system include:

* Small and large transactions carry the same weight in the feedback summary. It is therefore easy for a dishonest user to initially build up a deceptive positive rating by buying or selling a number of very low value items, such as e-books, recipes, etc., then subsequently switching to fraud.

* A user may be reluctant to leave honest feedback out of fear of negative retaliatory feedback (including "negative" in retaliation for "neutral").

* Users and generators of feedback may have different ideas about what it means. eBay offers virtually no guidelines.

* Feedback and responses to feedback are allotted only 80 characters each. This can prevent users from being able to fully list valid complaints.

* Although eBay protects sellers from getting a negative feedback from a deadbeat buyer when the deadbeat buyer/bidder did not respond to Unpaid Item dispute, they do not offer the same protection for a buyer who gets a deadbeat seller. eBay acknowledges weaknesses in its feedback system on its own policy pages, noting several of the above points.

When a user feels that a seller or buyer has been dishonest, a dispute can be filed with eBay. An eBay account (whether seller, buyer or both) may be suspended if there are too many complaints against the account holder.

Originally, feedback could be left for a seller or buyer whether or not it involved a transaction and could be left multiple times by the same person. While one upside is it allowed people to offset feedback in case of fortune reversals (as feedback can never be edited or retracted once it is left) and has even allowed people to leave feedback for a seller or buyer simply for answering a question, the downside of this more than offset it as it allowed people to flame others or try to ruin credibility (as every feedback also counted towards one's rating, no matter what). Eventually, one could only leave feedback if they won an auction, and only one feedback message could be left per transaction.

EBay allows Mystery Box and Mystery Envelope auctions, however these are almost all fraudulent auctions because the seller can manipulate the box contents to make sure it is never a good deal for the buyer.Mystery Envelope auctions offer cash prizes of an undisclosed amount to auction winners. The auction winner usually receives from 10% to 30% of the money they paid for the auction back in 'winnings'. Mystery Envelope auctions are considered by many to be illegal lotteries. This was also the case with auctions for "repackaging" of collectible card game cards (such as Magic: The Gathering or Pokemon) with the promise that one of the repackages has an expensive rare card.

Professional scammers target new members to take advantage of their unfamiliarity with how eBay or PayPal work.New members can be easily tricked into thinking there is a special website they should make payments through (which is in fact a fake site setup by a scammer) or they may be tricked more easily into using a fake escrow company.

Many complaints have been made about eBay's system of dealing with fraud, leading to its being featured on the British consumer rights television program Watchdog. It is also regularly featured in The Daily Mirror's Consumer Awareness page. The complaints are generally that eBay sometimes fails to respond when a claim is made. Since eBay makes its money on commissions from listings and sales, it may not be in eBay's interest to take action against large sellers.

Frauds that can be committed by sellers include:

* Receiving payment and not shipping merchandise

* Shipping items other than those described

* Giving a deliberately misleading description

* Knowingly and deliberately shipping faulty merchandise

* Counterfeit or bootleg merchandise

* Knowingly selling stolen goods

* Inflating total bid amounts by bidding on their own auction with "shill" account(s), either the seller under an alternate account or another person in collusion with the seller. Shill bidding is prohibited by eBay and, in at least one high-profile case involving Kenneth Walton (and his accomplices Kenneth Fetterman and Scott Beach) has been prosecuted by the federal government as criminal fraud. * Misrepresenting the cost of shipping, or shipping at a slower service than that paid for.

Frauds committed by buyers include:

* PayPal fraud: Filing false shipping damage claim with the shipping company and with PayPal.

* Credit card fraud, in the form of both stolen credit cards and fraudulent chargebacks.

* Receiving merchandise and claiming otherwise

* Returning items other than received

* The buyer sends a forged payment-service e-mail which states that the buyer has made a payment to the seller's account. An unsuspecting seller may ship the item before realizing the e-mail was forged.

Combatting fraud:

* Third party businesses, such as CheckMEND, are compiling lists of stolen goods from local authorities and businesses so eBay consumers can check to see whether the goods they are buying are stolen.

* Third party software is available which will alert users if they are tricked into going to a spoof website such as the MyLittleMole Toolbar which is free.Use of such software could potentially eliminate eBay account hijacking.

Other controversial practices of users

* Sellers of inexpensive items may benefit from inflating the shipping cost while lowering the starting price for their auctions, because some buyers overlook the shipping cost when calculating the amount they are willing to spend. Since eBay charges their fees based on final sales price without including shipping, this allows sellers to reduce the amount they pay eBay in fees (and also allows buyers to reduce or avoid import fees and sales taxes). This is called "fee avoidance", and is prohibited by eBay policy,as are excessive shipping and handling charges. A danger to the buyer in such cases is that in the event of defective merchandise, the seller may claim to have met his refund obligations by returning only the minimal purchase price and not the shipping costs.

* Sellers sometimes charge fees for use of PayPal as well to cover the fees that PayPal charges them. Although this is officially banned by eBay and PayPal (except in the UK) and is against some local laws as well as violating merchant agreements with Visa, MasterCard, and Discover (again, except in the UK), eBay does sometimes police for this and will suspend auctions where the seller requests an additional fee for taking PayPal. This could lead inexperienced users to pay these illegal and unenforceable fees.

* Auction sniping is the process of watching a timed online auction, and placing a winning bid at the last possible moment (often literally seconds before the end of the auction), giving the other bidders no time to outbid the sniper. Some bidders do this manually, and others use online services and software designed for the purpose. While disliked by many eBay users, sniping is not against eBay rules as users are expected to put in their maximum bid from the start and the system will automatically bid up on their behalf.

* Burying shipping charges or undesirable terms in a large amount of text.

Prohibited or restricted Items

In its earliest days, eBay was essentially unregulated. However, as the sitegrew, it became necessary to restrict or forbid auctions for various items. Note that some of the restrictions relate to eBay.com (the US site), while other restrictions apply to specific European sites (such as Nazi paraphernalia). Regional laws and regulations may apply to the seller or the buyer. Among the hundred or so banned or restricted categories:

* Tobacco (tobacco-related items and collectibles are accepted.)

* Alcohol (alcohol-related collectibles, including sealed containers, as well as some wine sales by licensed sellers are allowed)

* Drugs and drug paraphernalia

* Nazi paraphernalia

* Bootleg recordings

* Firearms and ammunition, including any parts that could be used to assemble a firearm as well as (as of July 30, 2007) any firearm part that is required for the firing of a gun, including bullet tips, brass casings and shells, barrels, slides, cylinders, magazines, firing pins, trigger assemblies, etc. Crossbows and various types of knives are also forbidden

* Used underwear  and dirty used clothing

* Teachers' editions of textbooks including homeschool teacher's editions.

* Human parts and remains

* Live animals (with certain exceptions)

* Certain copyrighted works or trademarked items.

* Lock-picking tools, accessories, and practice locks fall into the category of burglar tools.

* Lottery tickets, sweepstakes tickets, or any other gambling items.

* Military hardware such as working weapons or explosives.

* Virtual items from massively multiplayer online games.

* Many other items are either wholly prohibited or restricted in some manner. One major example includes several eBay members auctioning debris from the Space Shuttle Columbia following its February 1, 2003 breakup over Texas and Louisiana on re-entry from space. These auctions were removed immediately by eBay. In addition, there are some items that can be temporarily prohibited or restricted following a notable current event, such as World Trade Center memorabilia, whose auctions were temporarily suspended following the 9/11 attacks.

Unusual sale items

* In June 2005, the wife of Tim Shaw, a British radio DJ on Kerrang! 105.2, sold Tim's Lotus Esprit sports car with a Buy It Now price of 50 pence after she heard him flirting with model Jodie Marsh on air. The car was sold within 5 minutes, and it was requested that the buyer pick it up the same day.

* In May 2005, a Volkswagen Golf that had previously been registered to Joseph Cardinal Ratzinger (who had been elected Pope Benedict XVI) was sold on eBay's German site for €188,938.88 ($277,171.12 USD). The winning bid was made by the GoldenPalace.com online casino, known for their outrageous eBay purchases.

* A seaworthy 16,000 ton aircraft carrier, formerly the British HMS Vengeance, was listed early in 2004. The auction was removed when eBay determined that the vessel qualified as ordnance, even though all weapons systems had been removed.

* Water that was said to have been left in a cup Elvis Presley once drank from was sold for $455. The few tablespoons came from a plastic cup Presley sipped at a concert in North Carolina in 1977.

* A Coventry University student got £1.20 for a single cornflake.

* A man from Brisbane, Australia attempted to sell New Zealand at a starting price of $.01AUD. The price had risen to $3,000 before eBay closed the auction.

* One of the tunnel boring machines involved in the construction of the Channel Tunnel was auctioned on eBay in 2004.

* A group of four men from Australia auctioned themselves to spend the weekend with the promise of "beers, snacks, good conversation and a hell of a lot of laughs" for AU$1,300

* Disney sold a retired Monorail Red (Mark IV Monorail) for $20,000

* The German Language Association sold the German language to call attention for the growing influence of Pidgin-English in modern German.

* In late November 2005, the original Hollywood Sign was sold on eBay for $450,400.

* In January 2007, a cooked but uneaten Brussel Sprout was sold on eBay, finishing at over £15,000 ($29,000).

* In February 2007, after Britney Spears shaved all of her hair off in a Los Angeles salon, it was listed on eBay for $1million USD before it was taken down after some considerable controversy.

* Bridgeville, California (pop. 25) was the first town to be sold on eBay in 2002, and has been up for sale 3 times since.

* Boston Red Sox left fielder Manny Ramírez attempted to sell his neighbor's JENN-AIR Gas Grill on eBay. The auction started at $3,000 and the price escalated to an astounding $99,999,999, the maximum amount allowed by eBay. The auction was later closed by eBay because of the promise of an autographed baseball going to the winner as well as the grill; it is a violation of eBay policy to include items other than those advertised.

* In April 2004, American entrepreneur Matt Rouse sold the right to choose a new middle name for him. After receiving an $8,000 "Buy It Now" bid, the Utah courts refused to allow the name change. He currently still has his original middle name "Jean".

* In 2004, a partially eaten, 10-year-old grilled cheese sandwich said to bear the image of the Virgin Mary sold on eBay for $28,000.

Charity auctions


Using MissionFish as an arbiter, eBay allows sellers to donate a portion of their auction proceeds to a charity of the seller's choice. Some high profile charity auctions have been advertised on the eBay home page, and have raised large amounts of money in a short time. For example, a furniture manufacturer raised over $35,000 for Ronald McDonald House by auctioning off beds that had been signed by celebrities.

To date, the highest successful bid for a single item for charity was a letter sent to the owner of Clear Channel by Harry Reid and forty other Democratic senators to have a talk with conservative talk show host Rush Limbaugh. The winning bid was $2,100,100, with 100% of the proceeds going to the Marine Corps-Law Enforcement Foundation, benefiting the education of children of men and women who have died serving in the armed forces. The winning bid was matched by Limbaugh in his largest charity donation to date.

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