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2. PIERRE OMIDYAR—FOUNDER OF EBAY
Pierre Omidyar is the founder and chairman of eBay.com, the world’s largest online auction site, with more than 22 million registered users and roughly 8,000 product categories. As chairman, Omidyar is responsible for planning the company’s future direction and growth, as well as developing its business model and the Internet site itself. He holds a 27 percent stake in eBay.
After earning an undergraduate degree in computer science from Tufts University, Omidyar co-founded eShop, an online shopping forerunner eventually bought out by Microsoft Corp. He also worked as a software developer for Apple Computer’s Claris and communications software maker General Magic Inc. The idea for eBay.com emerged in 1995 when Omidyar’s girlfriend Pamela, an avid collector of Pez candy dispensers, expressed her desire to interact with other collectors in their area. Recognizing that the Internet could help make this possible, the 31-year-old Omidyar created Auction Web, a rudimentary online auction site which simply allowed sellers to post items for sale by describing the merchandise, setting a minimum bid, and choosing the length of the auction, which could range anywhere from three to ten days. Buyers could then bid on an object, and the highest bidder at the end of the auction was able to purchase the object for the bid price. Payment and delivery were handled by the buyer and seller. At the time, the site offered no search engine, no guarantees of any type regarding the merchandise sold, and no dispute resolution services. Omidyar’s marketing efforts consisted of simply listing Auction Web on a “What’s Cool” site operated by the National Center for Supercomputing Applications.Marketing Research and Data Analysis
The following year, as site traffic grew well beyond his expectations, Omidyar quit his job at General Magic and began focusing on Auction Web full time. Omidyar worked on improving the technology, while his partner, Jeff Skoll, drew up a business plan. Auction Web began charging a small fee, including a commission based on the final price, for each item listed for sale. With overhead costs at a minimum since the entire auctioning process was automated, Omidyar’s business became profitable very quickly, setting it apart from other Internet ventures. By the middle of 1996, the site had roughly 5,000 users who expressed their likes and dislikes about Auction Web on message boards. Their main complaint had to do with the anonymity of the process, which made it easy for sellers to mislead buyers about an object. Buyers also had no recourse once they paid for an object, even if they never received it from the seller. Based on this user feedback, Omidyar created the Feedback Forum, which allowed buyers and sellers to rate one another.
In September 1997, Omidyar changed his site’s named to eBay. Revenues for that year neared $6 million, and traffic continued to grow exponentially. Realizing that he needed help managing what was becoming one of the most highly trafficked sites on the World Wide Web, Omidyar sold a 22 percent stake in eBay to Benchmark Capital for $4.5 million. Benchmark began recruiting an experienced management team, eventually hiring Margaret Whitman as CEO.
To prepare the firm for its initial public offering, she began increasing its advertising efforts. For example, Whitman oversaw eBay’s $12 million, three-year marketing agreement with America Online Inc. (AOL), who agreed to list Ebay as the preferred provider of person-to-person auction services. On September 24th, Omidyar and Whitman took eBay public, watching its shares jump from $18 apiece to $50 apiece in a matter of minutes. Within two months, share prices reached $100. The number of registered users climbed by the end of 1998 to 1.2 million. Sales soared 724 percent to $47.4 million.
In 1999, Whitman and Omidyar began expanding eBay by launching sites in the United Kingdom and Canada. They also spearheaded efforts to begin selling more expensive merchandise on site. To this end, they launched several regional sites, which they believed would facilitate trading of larger items, such as vehicles and musical instruments that were difficult and expensive to ship. By year’s end, the number of registered users reached ten million, with daily visitors averaging nearly two million. eBay listed more than three million items for sale. Despite competition from the likes of Yahoo! and Amazon.com, who launched their own auction sites, eBay continued to thrive in late 2000 and early 2001. According to a May 2001 article in BusinessWeek Online, this was because “in the world of Pez dispensers, critical mass counts. If you want to sell something, you want to go to the place where you’ll find the most buyers. Because eBay built its storefront first, it quickly achieved critical mass. Even when Yahoo! offered sellers commission-free auctions and Amazon offered buyers quality guarantees on merchandise purchased through its auctions, the crowds failed to come. eBay had already won the war.
1. Do you learn anything from the way eBay originated?
2. Describe Pierre Omidyar’s initial marketing efforts? As the company grew, what marketing strategy was put in place by Meg Whitman?
3. Do you see any difference(s) in the way Jeff Bezos and Pierre Omidyar went about writing their business plans?
4. What two steps did Pierre Omidyar take to raise money for his young company?
5. What do you learn about assembling a management team or recruiting top talent for a startup from this story?
6. Did eBay experience any competition and what enabled it to deal with the competition successfully?
Source: Famous Entrepreneurs http://www.evancarmichael.com/EvanAbout.html