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The Perfect Store: Inside eBay
With Adam Cohen
Author and Journalist
Wednesday, July 10, 2002; 1 p.m. EDT
For many entrepreneurs since the mid-1990's, the Internet has been the Pandora's Box for the online start-up culture's boom and bust. In "The Perfect Store: Inside eBay," journalist Adam Cohen goes "behind the scenes at eBay to give the first all-access account of the rise of the most successful Internet company in history." He examines the community of users that made eBay a success -- among them, a Kansas City convention collecting antique clothing irons, a down-on-his-luck Rochester journalist who started a booming business selling a stash of old Playboys and Hustlers found at a used-furniture store to a pickle bottle that sold for $44,100.
Author and journalist Adam Cohen was online Wednesday, July 10 at 1 p.m. EDT to discuss the history and the future of eBay.
Cohen is on the editorial board of the New York Times. Previously, he was chief technology writer for Time magazine. He is the co-author of "American Pharoah," an acclaimed biography of Chicago Mayor Richard J. Daley.
The transcript follows.
Editor's Note: Washingtonpost.com moderators retain editorial control
over Live Online discussions and choose the most relevant questions for guests and hosts; guests and hosts can decline to answer questions.
Adam Cohen: Hello everyone. Thanks for joining us today. I'm looking forward to chatting with you about eBay.
Omaha, Neb.:
With postal rates continuing to go up, how much pressure will this put on the eBay community. I am willing to buy a VHS movies so long as my total cost isn't more than $5.00. In the past many sellers had higher prices but free shipping. Others had very affordable shipping. It seems like once shipping gets too expensive a large amount of the business on eBay may be too cost prohibitive. What are your thoughts about the impacts of postal rate increases on eBay's trading?
Adam Cohen: You're right that rising postal prices could have an effect on eBay. What eBay has on its side, though, is that the prices of the goods themselves are often so low. When eBay first considered starting eBay Motors a few years ago, skeptics within the company said that the cost of shipping would be too high to make buying cars online worthwhile. It turned out that used car prices on eBay are so low that buyers are finding it makes sense to buy on eBay--even if shipping adds another $500. So, eBay can deal with higher postal prices as long as prices remain tempting.
Alexandria, Va.:
Did the Paypal acquisition surprise you?
Adam Cohen: No. There have long been rumors that eBay was planning to buy PayPal. The reason: eBay was having such a hard time competing with its own payment system, Billpoint (later eBay Payments). One of the secrets of eBay's sucess is that it has been very careful about its purchases--it did not go on the kind of dot-com buying spree Amazon did. But it has made some good, strategic buys that fit in with its core business (notably Half.com). eBay stock went down quite a bit on the PayPal news, probably because of the high price tag, but it does look like a shrewd move on eBay's part.
Bethesda, Md.:
You've obviously written widely on technology and IT firms. From a corporate culture standpoint, what made eBay different from the other Calif. start-ups?
Adam Cohen: eBay really did have a different culture. A lot of it was due to eBay's founder, Pierre Omidyar, a little-known but pretty amazing guy. Pierre wanted to build a website that empowered individuals--he did not want to just be a corporation cramming products down people's throats, as he said. That led him to create a site that lets users be the sellers and the buyers--a brilliant move, as it turned out. Pierre also wanted eBay to be a warm and friendly community--again, something that proved to be a competitive advantage. At the management level, eBay avoided two key excesses of the dot-com era. It didn't spend wildly--in fact, the company was always very cheap (the headquarters are still pretty bare-bones). And it stuck to its core, profitable business model. A very solid corporate culture all around.
Falls Church, Va.:
What was the most difficult challenge you faced in writing this book?
Adam Cohen: The book was really about two sides of eBay--the company, and the large community of users. I got a lot of cooperation from eBay, so getting the company part of the story was not too hard. What was tough--and I was working on a short deadline--was tracking down all of the quirky buyers and sellers out there who embody what eBay is about. Just by word of mouth, though, I kept hearing about all kinds of unusual folks--the Bubble Wrap Lady (an Indiana woman who has a huge business just selling bubble wrap on eBay), the Iowa fine arts student who sold all of his possessions on eBay, the man who lives in the wilds or rural Northern California who invented "sniping software," which helps bidders to win auctions in the final seconds. These folks were hard to find, but meeting up with them was the best part of working on the book.
Washington, D.C.:
What role does Omidyar play currently at eBay?
Adam Cohen: Pierre is not really involved with eBay on a day-to-day basis. While I was at eBay headquarters reporting on the book, they officially took away his cubicle--a landmark in eBay history. But he is still a well-respected figure at the company--as well as being the largest shareholder--so his opinions carry weight. But he's moved on to other things--a baby daughter, philanthropy, dabbling in some tech entrepreneurial stuff.
Reston, Va.:
Is eBay planning to sell-out completely to the big merchants, or are they committed to serving vendors of all sizes?
Adam Cohen: This is the big tension in the world of eBay right now. The company is under huge pressure to bring in big sellers--to please Wall Street, which wants to see high volume on the site, and high ASPs--average sales prices. At the same time, the mom & pops remain the heart of eBay--and account for a lot of the listing volume. So eBay is trying hard to please both camps right now. It is doing more than it ever has to cultivate large, corporate sellers. But it also just held eBay Live, its first-ever user convention, in Anaheim, California last month--5,500 small users mingling with eBay staff. It will be doing more of these--good, grassroots bullding events--in the days ahead.
Harrisburg, Pa.:
I have read and enjoyed your book on Mayor Daley. I look forward to your new book. Did your opinion of Richard Daley change much during researching your book? If there were some lessons you believe we should learn from his life and career, what are those?
Adam Cohen: Completely off topic--but what author could resist someone who's read their first book? (American Pharaoh--a book about Mayor Richard J. Daley and the making of modern Chicago.) Briefly, my view of Daley did change while writing it. I had heard only the bad about him, but saw things more from his perspective as I worked on the book--and realized that for all of the things he did that I don't agree with, his actions may have saved the city of Chicago.
Omaha, Neb.:
As an eBay buyer and seller, I am greatly concerned that they may get too strong and stiffle other competitors.
For example, when they purchased half.com they were able to eliminate the second most common person to person method of e-commerce by brining it under the eBay umbrella. Likewise with this week's announcement of the PayPal acquisition, I see a great potential for the abuse seen in any monopoly enterprise. The only reason PayPal and eBay payments by Billpoint have had such reasonable fees in the past is the competition that they have had with each other.
There is no incentive for other vendors to endure the large start up costs to challenge the new behemoth in the online payment processing industry.
What do you see as the future of the trading community with such strong armed market manipulation possible? washingtonpost.com:
EBay Buying PayPal for $1.3B in Stock (AP, July 8)
Adam Cohen: There's no question eBay is the 800 lb. gorilla. Part of the reason is that we're learning that technology may lend itself to market dominance (even monopolies). With eBay, buyers go to it because that's where the sellers are, and sellers go because that is where all the buyers are. It makes it hard for other auction sites to compete--who wants to list on a site where fewer buyers will bid on your stuff? There are folks who agree with you, who are trying to inject more competition into the auction world. You might want to check out something called The Auction Guild, and subscribe (free) to an email newsletter called TAG Notes (search for it on Google--you'll find it) to hook up with others who agree with you on this.
Arlington, Va.:
How long did it take you to write this book? And when did you decide that eBay was a company you wanted to devote so much study to?
Adam Cohen: My contract was for 12 months--so that meant some pretty quick reporting and writing. All the publishers I spoke to were worried things on the Internet were changing so quickly that it would be a mistake to take longer. eBay was sort of an unlikely topic for me--I was not a user when I began all of this. But when I was working for Time magazine, I was assigned to do a story on eBay, they sent me to Paris to interview eBay founder Pierre Omidyar and to San Jose to see the headquarters, and I was really taken with the company. I liked the fact that it was on the cutting edge of technology--it really was a glimpse of the future--but it was ultimately a story about real people.
Washington, D.C.:
What's the biggest challenge to eBay -- technology or competition?
Adam Cohen: Both, really. eBay has done a great job of holding off competitors over the years, and there have been some big ones--Yahoo, Amazon, even Microsoft. But the history of the technology business is that big leads can disappear fast. eBay has always looked over its shoulder to see who is gaining, and it will keep doing that. eBay has had a hard time with technology over the years--in the summer of 1999, the company was almost destroyed when the system went down for nearly 24 hours. eBay has gotten a lot better at site stability. But the more it becomes a truly worldwide market, the more technology challenges it will face. Also, as the Internet grows, the online experience will become richer--faster, more 3-D, and so forth--and eBay will need to keep up with that.
washingtonpost.com:
Post article: EBay to Buy PayPal in $1.5 Billion Deal (Post, July 9)
Baltimore, Md.:
Weren't there rumors that Yahoo was going to buy eBay or vice-versa? Did you find out anything about that?
Adam Cohen: Yeah, there were serious negotiations about Yahoo buying eBay. (It's described in the book.)Amazingly, one of the main sticking points appears to have been that Yahoo did not want eBay CEO to report directly to its CEO. (The Yahoo management who insisted on that are gone now.) Of course, the best thing eBay did was remain independent. Now, if those companies were in talks, it would be eBay that would do the buying.
Reston, Va.:
How difficult was it for Whitman to fit in at eBay?
Adam Cohen: Meg Whitman had a little trouble fitting into eBay at first. She was completely Old Economy--when she interviewed at eBay, she was working on Mr. Potato Head at Hasbro. And she had not used the Internet much. But the reason eBay hired her was that she completely got what eBay was about. She injected some traditional business culture into eBay (it was only when she arrived that eBay began to have scheduled staff meetings!). But she also met the Internet more than halfway. When I asked her what the biggest difference was about working in a dot-com, she said it was how close you were to your customers. When a project she was working on at Disney was not well received, it took months to find out. At eBay, if she made a change the users didn't like, her mailbox filled up within seconds.
Vienna, Va.:
I look forward to reading you book. Transaction data has value these days (many supermarkets require cards now for people who want to take advantage of discounts).
As eBay collects transaction info on people, do they sell that info to third parties?
Adam Cohen: No. eBay has been a very good citizen about keeping its data private. It's an important issue these days, since the Internet allows corporations (and the government) to know so much about us. I don't think eBay will change on this--its users would have an open revolt.
Charlottesville, Va.:
I've been selling 19th century prints on eBay for 4 years now as a hobby (25 listings a week). What I love is that eBay seems to be something that nearly everyone participates in. I've sold to two sitting US Senators, a network news person, and have shipped to 50+ foreign countries (including Latvia, Nepal, and the UAE). My items are inexpensive (starting in the $3-$5 range), but I am able to sell prints that I could never sell locally. Not much of a market for 1850 engravings of Hyderabad or of Kansas City here in Central VA!
Adam Cohen: That's a great story. Good luck with it!
Harrisburg, Pa.:
One of my favorite lines of David Letterman was when ebay suddenly shut down. Letterman stated that economists estimated that the economic loss was "millions of dollars of crap."
What is the average daily monetary value of items sold through ebay (and I presume much of it is really nice stuff)?
Adam Cohen: Good letterman line. Yeah, people also call eBay "FleaBay." (And when the dot-com bubble burst, Jay Leno said things had gotten so bad that eBay was up for sale on eBay.)I don't have the daily sales figures at my finger tips, but there are seven million auctions going on at any given moment--so it's huge. Ironically, more of the stuff listed on the site is "practicals"--everyday items--which has many eBay users longing for the days when it was more heavily weighted to the--well, not crap, but more unusual items.
Arlington, Va:
Any insights on changes at traditional auction houses thanks to eBay?
Adam Cohen: They're certainly trying to keep up. eBay bought out one of them--Butterfield & Butterfield, a San Francisco institution. And it just formed a new alliance with Sotheby's. But thing we've learned from the eBay story is that the high end of auctions may not gravitate to the Internet. eBay has had a tough time selling premium antiques online--it seems that people still want to see these things in person, and have the live auction experience. So, those old guys may be around for awhile to come.
Somewhere, USA:
Did you address the bad sellers on ebay in your book, and how sometimes people get ripped off? I've had almost a 100% good experience with ebay, save for one incident. Will there be harsher penalities for fraudulent sellers in the future?
Adam Cohen: Yeah, I talk about some of the scams--phony sellers who take the money and run, "shill bidding" rings of people who bid on their own items to drive up the prices. In the end, those cases usually get referred to local or federal law enforcement, who decide how to deal with them. When e-commerce began, a lot of people thought it would be mainly scam artists--particularly online auctions, where strangers deal with strangers. One of the most amazing parts of the eBay story is how small a percentage of users turned out to be dishonest (though when you are ripped off, that doesn't make you feel much better).
Washington, D.C.:
When buying through eBay, I've been quite impressed with the accuracy of the sellers' descriptions. If an item is described as being in mint condition, it generally is. Was there concern at first that eBay might be vulnerable to con artists misrepresenting what they were selling, or even not delivering the goods at all? What steps does eBay take to avoid that? (Have the sellers just tended to be honest?)
Adam Cohen: There was that concern. In the early, early days, when people were unhappy the just emailed the founder, Pierre Omidyar, personally to complain--his email address, Pierre@eBay.com, was right on the site. Pierre did not want to referee all of these disputes. One of the main things he did was to invent something called the "Feedback Forum," which lets people rate each other after every trade. So if you don't like the condition of something you get, you can give the seller a negative, and explain why. Pierre's idea--and it seems largely to have worked--was that this would keep people honest, by giving them reputations, the way they have in a small town.
Arlington, Va.:
Isn't a basic problem that what is promised isn't necessarily what's delivered and when it's isn't, it's apparently impossible to get the money back or to give the item back?
Adam Cohen: eBay has strongly defended its position as being "only a venue." That means it does not guarantee the goods sold on the site. That's the only way eBay could work--with 7 million items being auctioned at any time, it really could not verify that every vase was authentic, or that every Palm Pilot worked perfectly. That said, eBay has always been under a lot of pressure from the community to do more to make the site a safe place to shop. Over the years, eBay has instituted insurance, and it has a large group of investigators who look into bad sales.
Washington, D.C.:
When I was living in rural central Virginia, eBay was a godsend. So many things I couldn't find lacally I could have shipped right to my door. I've been on eBay since 1997 (or was it 1998), and while my total transactions is only about 75, I love it. I sold used Liberty University footballs jerseys once as a fundraiser for a local kids team (they had donated the jerseys as practice jerseys, and I convinced the coach that selling them on eBay would be better for the team). I raised over $200 for them, and they still had enough practice jerseys to go around. And anytime I need something eclectic, I find it there. EBay rocks!
Adam Cohen: Yeah, eBay particularly rocks for people like you were--far from big cities, who can feel cut off from a lot of traditional commerce. One of the first eBay users I interviewed was a woman in rural South Dakota who had a thriving business on eBay, selling to folks as far away as Japan and the Middle East. (She sold a tractor to a priest in upstate New York.) It allowed her to sell at a volume--and at prices--that would not have been possible in her small town.
Washington, D.C.:
Is ebay a dot.com or a company? Why has it not folded like the other dot.coms?
Adam Cohen: Technically, of course, eBay is a dot come, since its business is based on the website www.eBay.com. But it has a business model that is far superior to other dot-coms. A company like Amazon takes possession of goods, stores them, ships them out, takes returns--all very expensive. eBay is just the middleman--connecting buyers and sellers--which means its costs are extremely low, and its profit margins very high. eBay was profitable from the first day it started charging--in February of 1996, and has been profitable ever since. Not the typical dot-com!
Washington, D.C.:
What's the best way to score some good deals on ebay without getting scammed?
Adam Cohen: Just go on the site and look for things you like. (And I'd say start with small purchases.) If you're uncertain about something, email the seller to find out more--and to get a sense of what he or she is like. Some of the best things on eBay are still very cheap. I came across an amazing black & white photo from the 1930s, of a rural river crossing in Alabama that I used to spend some time at, that I picked up for $5.99. I got it framed (for a lot more), and it looks great. I never would have found that photo without eBay.
Adam Cohen: Thanks for participating. There's lots more about all of this (of course) in the book. Cheers.
washingtonpost.com:
That wraps up today's show. Thanks to everyone who joined the
discussion.
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