eBay Inc. is an American multinational Internet consumer-to-consumer corporation, headquartered in San Jose, California. It was founded by Pierre Omidyar in 1995, and it became a notable success story of the dot-com bubble; it is now a multi-billion dollar business with operations localized in over thirty countries. The company manages eBay.com, an online auction and shopping website in which people and businesses buy and sell a broad variety of goods and services worldwide. In addition to its auction-style sellings, the website has since expanded to include "Buy It Now" standard shopping; shopping by UPC, ISBN, or other kind of SKU (via Half.com); online classified advertisements (via Kijiji or eBay Classifieds); online event ticket trading (via StubHub); online money transfers (via PayPal) and other services.

History

AuctionWeb was founded in San Jose, California, on September 3, 1995, by French-born Iranian-American computer programmer Pierre Omidyar (born June 21, 1967) as part of a larger personal site that included, among other things, Omidyar's own tongue-in-cheek tribute to the Ebola virus.[8] One of the first items sold on AuctionWeb was a broken laser pointer for $14.83. Astonished, Omidyar contacted the winning bidder to ask if he understood that the laser pointer was broken. In his responding email, the buyer explained: "I'm a collector of broken laser pointers."[9] 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, which were not interested in the company's previous explanation about wanting to create a "perfect market". This was revealed in Adam Cohen's book, The Perfect Store (2002), and confirmed by eBay.

Reportedly, eBay was simply a side hobby for Omidyar until his Internet service provider informed him he would need to upgrade to a business account due to the high volume of traffic to his website. The resulting price increase (from $30/month to $250) forced him to start charging those who used eBay, and was not met with any animosity. In fact it resulted in the hiring of Chris Agarpao as eBay's first employee to handle the number of cheques coming in for fees.

Pierre Omidyar, founder and chairman of eBay

Jeffrey Skoll was hired as the first president of the company in early 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. Growth was phenomenal; in January 1997 the site hosted 2,000,000 auctions, compared with 250,000 during the whole of 1996. 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, but found it already taken by the Echo Bay Mines, a gold mining company, so he shortened it to his second choice, eBay.com.

In 1997, the company received $6.7 million in funding from the venture capital firm Benchmark Capital.

Meg Whitman was hired as eBay President and CEO in March 1998. At the time, the company had 30 employees, half a million users and revenues of $4.7 million in the United States. eBay went public on September 21, 1998, and both Omidyar and Skoll became instant billionaires. eBay's target share price of $18 was all but ignored as the price went to $53.50 on the first day of trading.

Items

Millions of collectibles, decor, appliances, computers, furnishings, equipment, domain names,[55] vehicles, and other miscellaneous items are listed, bought, or sold daily on eBay. In 2006, eBay launched its Business & Industrial category, breaking into the industrial surplus business. Generally, anything can be auctioned on the site as long as it is not illegal and does not violate the eBay Prohibited and Restricted Items policy.[56] 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. Separate eBay sites such as eBay US and eBay UK allow the users to trade using the local currency. Software developers can create applications that integrate with eBay through the eBay API by joining the eBay Developers Program.[57] In June 2005, there were more than 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[citation needed]. On other occasions, people and even entire towns have been listed, often as a joke or to garner free publicity.[citation needed] In general, the company removes auctions that violate its terms of service agreement.

eBay North First Street satellite office campus (home to PayPal)

Beginning in August 2007, eBay required listings 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".[58] Starting January 10, 2008, eBay said 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".[59] eBay announced that starting in March 2008, eBay had added to this requirement that all sellers with fewer than 100 feedbacks must offer PayPal and no merchant account may be used as an alternative.[60][61] This is in addition to the requirement that all sellers from the United Kingdom have to offer PayPal.

Further, and as noted below, it was a requirement to offer PayPal on all listings in Australia and the UK. In response to concerns expressed by the Australian Competition and Consumer Commission, however, eBay has since removed the policy on the ebay.com.au website requiring sellers to offer PayPal as a payment option.[63]

eBay Express logo

eBay Office in Toronto

In April 2006, eBay opened its new eBay Express site, which was designed to work like a standard Internet shopping site for consumers with United States addresses. It closed in 2008. Selected eBay items were mirrored on eBay Express, where buyers shopped using a shopping cart to purchase from multiple sellers. The UK version was launched to eBay members in mid-October 2006 but on January 29, 2008 eBay announced its intention to close the site.[64] The German version, eBay Express Germany,[65] was also opened in 2006 and closed in 2008.

At the 2008 eBay Developer's Conference, eBay announced the Selling Manager Applications program (SM Apps).[66] The program allows approved developers to integrate their applications directly into the eBay.com interface.[67] The applications created by developers are available for subscription by eBay members who also subscribe to Selling Manager.

eBay maintains a number of specialty sites including the discussion boards, groups, answer center, chat rooms, and reviews and guides. eBay's mobile offerings include SMS alerts, a WAP site, Java ME clients, and mobile applications for Windows Phone, Android OS and Apple iPhone.

The initiative Choice in eCommerce was founded on May 8, 2013 by several online retailers in Berlin, Germany.[68][69][70][71][72][73][74][75][76] The cause was, in the view of the initiative, sales bans and online restrictions by individual manufacturers. The dealers felt cut off from their main sales channel and thus deprived them the opportunity to use online platforms like Amazon, eBay or Rakuten in a competitive market for the benefit of their customers.

Unusual items

Main article: Unusual eBay listings

Many unusual items have been placed for sale on eBay, including at least two previously undiscovered species, including the Coelopleurus exquisitus sea urchin.

Prohibited or restricted items

In its earliest days, eBay was nearly unregulated. However, as the site grew, it became necessary to restrict or forbid auctions for various items. Note that some of the restrictions relate to eBay.com (the U.S. 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. Generally, if the sale or ownership of an item is regulated or prohibited by one or more states, eBay will not permit its listing. 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, some sites such as ebay.com.au allow licensed liquor sales)[80] (eBay announced September 21, 2012, it will begin removing listings for beer and liquor from its site after a story was aired on ABC series 20/20.)

Drugs and drug paraphernalia

Nazi paraphernalia

Bootleg recordings

Firearms and ammunition (as of January 1, 1999),[85] 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 slugs, brass casings and shells, slides, cylinders, magazines, firing pins, trigger assemblies, etc. Various types of knives are also forbidden.

Police and emergency service vehicular warning equipment such as red or blue lights and sirens (antique or collectible items are exempt)

Intentionally soiled underwear (see Panty fetishism) and dirty used clothing

Forged, illegal, stolen, or confidential documents, which include passports, social security cards, drivers licenses, voter registration cards, birth certificates, school documents, medical records, financial information, government license plates, or government classified information documents. Any item that is used to modify documents is also restricted.[87]

Human body parts, organs, and remains (with an exception for skeletons and skulls for scientific study, provided they are not Native American in origin)[88]

Live animals (with certain exceptions)

Certain copyrighted works or trademarked items

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

Military hardware such as working weapons or explosives with the exception of demilitarized vehicles.

Any object of Iranian, Cuban, or North Korean origin.

Enriched uranium, plutonium, and other fissile material.

Certain categories of sexually oriented material, which must be listed in the "Adult Only" category,[92] notwithstanding certain items prohibited:[92]

Child pornography

Materials deemed obscene, including bestiality, necrophilia, rape, coprophilia, and incest

Used sex toys

Services including any sexual activity

Links to sites that contain prohibited items

Adult products that are delivered digitally

Virtual items from massively multiplayer online games, restrictions that vary by country[93][94]

Ivory products

Knives, other than some cutlery, are prohibited in the UK following the criminal importation into the UK (by BBC Watchdog researchers) of several knives that were already illegal to own or import under existing UK legislation. The ban also includes empty leather knife scabbards if they are listed under the category of "knives" on one of the eBay sites[95]

Fortune-telling and witchcraft-related services[96]

Souls, ghosts, and other "items whose existence cannot be verified" are prohibited.[97][98][99]

Many other items are either wholly prohibited or restricted in some manner.[100]

Bidding[edit]

Auction-style listings

Bidding on eBay (old or new)'s auction-style listing is called proxy bidding and is essentially equivalent to a Vickrey auction, with the following exceptions.

The winning bidder pays the second-highest bid plus one bid increment amount (that is, some small predefined amount relative to the bid size), instead of simply the highest bid. However, since the bid increment amounts are relatively insignificant compared to the bid size, they are not considered from a strategic standpoint.

The highest bidder's bid is sealed, as in a Vickrey auction, but the current winning bid (second highest plus one increment) is displayed throughout the auction to allow price discovery.[102]

Seller ratings

In 2008, eBay began using detailed seller ratings with four different categories. When leaving feedback, buyers are asked to rate the seller in each of these categories with a score of one to five stars, with five being the highest rating and one, the lowest. Unlike the overall feedback rating, these ratings are anonymous; neither sellers nor other users learn how individual buyers rated the seller. The listings of sellers with a rating of 4.3 or below in any into the four rating categories appear lower in search results. Power Sellers are required to have scores in each category above 4.5.

In a reversal of roles, on January 24, 2010 Auctionbytes.com held an open survey in which sellers could effectively rate eBay itself, as well as competing auction and marketplace sites. In the survey, users were asked to rank 15 sites based on five criteria:

Profitability

Customer Service

Communication

Ease of Use

Recommendation

After the results were published, eBay had finished 13th overall,[109] edged out by established sites such as Amazon and Craigslist, as well as lesser-known selling sites like Atomic Mall, eCRATER, and Ruby Lane. In individual category rankings, eBay was rated the worst of all the 15 sites on Customer Service and Communication, and average on Ease of Use. A number of respondents said they would have given eBay a rating of ten 3 to 5 years ago. eBay was rated twelfth out of fifteen in the Recommended Selling Venue category.

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. The program is called eBay Giving Works in the US, and eBay for Charity[110] in the UK. eBay provides a partial refund of seller fees for items sold through charity auctions.[111] As of March 4, 2010, $154 million has been raised for U.S. nonprofits by the eBay Community since eBay Giving Works began in 2003.

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.[citation needed]

To date the highest successful bid on a single item for charity was for the annual "Power Lunch" with investor Warren Buffett at the famous Smith & Wollensky Steakhouse in New York. The winning bid was $2.63 million with all of the proceeds going to the Glide Foundation. At the time of writing, the winning bidder is still not publicly known, but they will be able to bring up to seven friends to the lunch.

The previous highest successful bid on a single item for charity was for a letter[114] sent to Mark P. Mays, CEO of Clear Channel (parent company of Premiere Radio Networks the production company that produces The Rush Limbaugh Show and Glenn Beck Program) by Senator Harry Reid and forty other Democratic senators, complaining about comments made by conservative talk show host Rush Limbaugh. The winning bid was $2,100,100, with all 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.

In 2007; eBay Canada partnered with Montreal-based digital branding agency CloudRaker to develop a campaign to raise money for Sainte-Justine children's hospital in Montreal. They aligned themselves with Internet phenomenon Têtes à claques to create an eBay auction based on popular T-A-C character Uncle Tom, an infomercial host who pitches absurd products. eBay and CloudRaker reproduced Uncle Tom's imaginary products, The Body Toner Fly Swatter, The Willi Waller Potato Peeler, and the LCD Shovel and sold them online. In 6 weeks, they raised $15,000 for Hôpital St-Justine with one fly swatter, one potato peeler, and one shovel, a world record. The Body Toner Fly Swatter sold for $8,600, the Willi Waller Potato Peeler sold for $3,550, and the LCD Shovel sold for $2,146.21.

Shipping

Before an auction, eBay lets sellers choose which shipping options to offer — regular mail, express mail, or courier service. The website lets buyers choose which option to accept.

Since 2012, eBay has also allowed US sellers to opt into its Global Shipping Program. The program works as follows: Each seller decides whether or not to opt into the program. If a seller opts in, and a non-US buyer buys an item from the seller, then the buyer pays an additional fee to Pitney Bowes. The seller ships the item to a Pitney Bowes facility in the US. After receiving the item, Pitney Bowes forwards it to the buyer. The program enhances the selection available to buyers,[116] but can considerably increase buyers' costs on low-value items.

Controversy and criticism

Main article: Criticism of eBay

eBay has its share of controversy, including cases of fraud, its policy of requiring sellers to use PayPal, and concerns over forgeries and intellectual property violations in auction items. There are also issues of how negative feedback after an auction can offset the benefits of using eBay as a trading platform. eBay has also been criticised for not paying its share of UK tax: the Sunday Times reported in October 2012 that eBay pays only £1.2m in tax on sales of over £800m.[117]

2014 Security Breach

On May 21, 2014 the company revealed that the consumer database of usernames, passwords, phone numbers, and physical addresses had been breached. Users were advised to change their passwords; in order to expedite this a "change password" feature was added to profiles of users who had not yet done so. The Syrian Electronic Army took responsibility for the attack. The SEA said that even though the hack revealed millions of user's banking details to them, they would not misuse the data. They had replaced the front pages of the websites with their own logo, called "Defacing" in technical terms. The hack put eBay's stock share in the market rapidly in down trend. The eBay stock value crashed through intra-day trade as a result of the breach of security.

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