Meg Whitman - The Driving Force Behind eBay

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Case Details:

Case Code : LDEN024
Case Length : 18 Pages
Period : 2003
Pub Date : 2003
Teaching Note :Not Available
Organization : eBay
Industry : Online Auction
Countries : USA

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This case study was compiled from published sources, and is intended to be used as a basis for class discussion. It is not intended to illustrate either effective or ineffective handling of a management situation. Nor is it a primary information source.

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Background Note

eBay

In September 1995, Pierre Omidyar (Omidyar), a software programmer in his early 20s, founded eBay as Auction Web (the site's domain name was ebay.com). The idea reportedly originated from the difficulty that Omidyar's fiancee faced when trying to collect Pez dispensers² from the San Francisco Bay area. Auction Web enabled people to trade through auctions on Internet.

Omidyar aimed at leveraging the vast potential of the Internet by developing an online marketplace that allowed person-to-person trading in the auction format.

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He created a simple business model which allowed buyers and sellers to decide the value of items and connect with others, for a small commission for every item placed and sold on the site.³ Using this model, Auction Web soon became one of the leading online sites in the world. Omidyar wanted the power of the market to stay with individuals and not with companies. He felt that it was important to let users take responsibility for building the eBay community. Omidyar encouraged users to communicate directly with him through email so that he could incorporate their suggestions and fix the problems they faced on the site. This type of customer focus reportedly gave users a sense of ownership and participation.

In 1996, Omidyar introduced the Feedback Forum, a sort of credit reporting system, to eliminate the problems caused by anonymity and the physical distance between buyers and sellers, viz, fraud and cheating. Under this system, buyers and sellers were encouraged to rate each transaction positive, negative or neutral, thus offering their perception of the credibility of the buyer or seller. These ratings helped users determine whether a buyer or seller was trustworthy. Commenting on this, Peter Kollock, sociology professor, University of California, Los Angeles (UCLA) said, "As high tech as eBay is, the closest analogue to what they have created is the original small-town market. It is a market that relies on identity and reputation for risk management"⁴...

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2] Plastic dessert holders bearing pictures of cartoon characters such as Spiderman and Snoopy.

3] Under eBay's business model, a seller placed an item on eBay, set a minimum bid, and specified the duration of the auction (last date for ending the auction). eBay charged a listing fee and a final fee (specific percentage of the item's sale price) when the listed item was sold.

4] "Meg Muscles eBay uptown," www.pathfinder.com, June 05, 1999.