EBay

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This article is about the online auction site. For the eBay song by "Weird Al" Yankovic, see Poodle Hat.

eBay Inc.
Type	Public (NASDAQ: EBAY)
Founded	San Jose, California, USA (September 4, 1995)
Headquarters	San Jose, California, USA
Key people	Meg Whitman, CEO & President Pierre Omidyar, Founder and Chairman John Donahoe, Chief of eBay Marketplace
Industry	Auctions
Products	Online auction hosting, Electronic commerce, Shopping mall PayPal, Skype, Gumtree
Revenue	$4.55 billion USD (2005)
Employees	11,600 (Q1 2006)
Slogan	The World's Online Marketplace
Website	www.ebay.com

eBay Inc. (NASDAQ: EBAY) manages an online auction and shopping website, where people buy and sell goods and services worldwide.

Contents 1 Origins and early history 2 Items and services 2.1 eBay Stores 2.2 eBay Express 2.3 eBay Blogs and the eBay Community Wiki 3 Profit and transactions 4 Acquisitions & investments 5 Controversy 5.1 Fraud 5.2 Other controversial practices of users 5.3 Other eBay controversies 6 Prohibited items 7 Unusual sale items 8 See also 9 References 10 Further reading 11 External links

[edit] Origins and early history

The online auction site was founded in San Jose, California on September 4, 1995 by computer programmer Pierre Omidyar as AuctionWeb,^[1] part of a larger personal site that included, among other things, Omidyar's own tongue-in-cheek tribute to the Ebola virus.

One of the early items sold on eBay was Omidyar's broken laser pointer for $13.83. Astonished, he 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^[2] and confirmed by eBay.

Chris Agarpao was hired as eBay's first employee and Jeff Skoll was hired as the company's first president 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 but found it already taken by the Echo Bay Mines, a gold mining company, so he shortened it to his second choice, eBay.com.

[edit] Items and services

Millions of collectibles, appliances, computers, furniture, equipment, vehicles, and other miscellaneous items are listed, bought, and sold daily. In 2004, 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.^[3] 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. Software developers can create applications that integrate with eBay through the eBay API by joining the eBay Developers Program.^[4] 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 study of the auction description.

eBay's Latin American partner is MercadoLibre.

eBay's rivals include Amazon.com Marketplace, PriceGrabber.com Storefronts, Yahoo! Auctions and Overstock Auctions.

[edit] eBay Stores

Opening in 2002 eBay Stores have opened up ecommerce for eBay sellers and a way to access to over 200 million shoppers worldwide.

eBay stores can be set up in just a few minutes with subscription fees ranging from $15.95 for the basic store to $49.95 for a features store to $499.95 for an anchor store. The stores can be customized by the owner in various ways and sellers can showcase their items in the eBay store and sell at a fixed “buy it now” price.

eBay stores also offers several tools for promotion such as a newsletter, search engine keyword management, listing fees and a referral credit for external links coming in to the eBay store.

It is also possible for users to customize the look and feel of the eBay Stores to use their own HTML and images to better brand their eBay Store.

[edit] 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 (eBay Express UK), and differs from the US version by only offering brand new items from pre-vetted business sellers. The German version is currently live for select sellers.

[edit] eBay Blogs and the eBay Community Wiki

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.

[edit] 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 US-based ebay.com takes $0.20 to $80 per listing and 2-8% of the final price (as of 2006). The Swiss 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.

The company's current business strategy includes increasing revenue by increasing international trade within the eBay system. eBay has already expanded to almost two dozen countries including China and India. The only places where expansion failed were Taiwan, Japan, and Hong Kong where Yahoo! had a head start.

[edit] Acquisitions & investments

• In July 1998, eBay acquired Cincinnati, OH based online auction site Up4Sale.com.
• In May 1999, eBay acquired the online payment service Billpoint, which it shut down after acquiring PayPal.
• 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.
• ebay aqcuired kruse auctions
• In June 2000 eBay acquired Half.com for $318 million, which was later integrated with the eBay Marketplace.
• In August, 2001, eBay acquired Mercado Libre, Lokau and iBazar, Latin American auction sites.
• 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 US $50 million in cash, plus acquisition costs.
• 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$109) 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.
• 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 social networking site.^[5]
• In April 2006, eBay acquired Tradera.com, 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. ^[6]

[edit] Controversy

eBay has its share of controversy, ranging from its privacy policy (eBay typically turns over user information to law enforcement without a subpoena)^{[citation needed]} to well-publicized seller fraud. eBay claims that their data show that less than .01% of all transactions result in a confirmed case of fraud.

[edit] Fraud

The major fraud prevention mechanism for eBay users is its feedback system. After every transaction both the buyer and seller have the option of rating each other. They can give a "positive", "negative", or "neutral" rating and leave a short comment. So if a buyer has problems, he or she can rate the seller "negative" and leave a comment such as "never received product". Learning the system and examining a seller's feedback history is a buyer's best protection.

Weaknesses of the feedback system include:

• Small and large transactions carry the same weight in the feedback summary.
• A user may be reluctant to leave honest feedback out of fear of negative retaliatory feedback (including "negative" in retaliation for "neutral").
• Feedback and responses to feedback are allotted only 80 characters each. This can prevent users from being able to fully list valid complaints.

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.

Many complaints have been made about eBay's system of dealing with fraud, leading to it 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, and since eBay makes its money on commissions from listings and sales it is not 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
• Shipping faulty merchandise
• Counterfeit or bootleg merchandise
• Selling stolen goods
• Inflating total bid amounts by bidding on their own auction with a "shill" account, either the seller under an alternate account or another person in collusion with the seller. Shill bidding is strictly prohibited by eBay and, in at least one high-profile case involving Kenneth Walton and two accomplices, has been prosecuted by the federal government as criminal fraud.

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 email which states that the buyer has made a payment to the seller's account. An unsuspecting seller may ship the item before realizing the email was forged.

[edit] Other controversial practices of users

• Sellers of inexpensive items may benefit from inflating the shipping cost while lowering the starting price for their auctions,^[7] 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,^[8] as are excessive shipping and handling charges.^[9] 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 often charge fees for use of paypal as well. Although this officially banned by eBay and paypal and is against some local laws as well as violating merchant agreements with Visa, Mastercard and Discover, eBay does not police for this and will only look at it if the auction is reported. Therefore inexperienced users often wind up paying these illegal and unenforceable fees.

[edit] Other eBay controversies

Other notable controversies involving eBay include:

• In May 2000, eBay seller Kenneth Walton auctioned an oil painting on eBay for $135,805, due to speculation that the piece might be the work of California modernist Richard Diebenkorn. Walton pretended to know nothing about art and claimed to be surprised by the price the painting fetched, and the auction attracted international media attention. In several New York Times investigative reports, it was revealed that Walton was in fact an experienced eBay art dealer with several unhappy customers, and that Walton and two other eBay sellers had been colluding to bid up each other's auctions. The Times described this as a "shill bidding ring".^[10] Walton and his cohorts were banned from eBay and eventually convicted of fraud by the federal government in the first ever prosecution for shill bidding on eBay.

• On 28 May 2003, a US District Court federal jury found eBay guilty of willful patent infringement and ordered the company to pay US$35 million in damages. The jury found for plaintiff MercExchange, which had accused eBay in 2001 of infringing on three patents (two of which are used in eBay's "Buy It Now" feature for fixed-price sales). The decision was appealed to the US Court of Appeals for the Federal Circuit (CAFC). The CAFC not only affirmed the judgment of willful infringement, but they also reversed the lower court and granted a permanent injunction. eBay appealed to the grant of the permanent injunction to the US Supreme Court. On May 15, 2006 the U.S. Supreme Court unanimously reversed the CAFC's grant of an injunction and sent the case back to the district court for further consideration (see EBay v. MercExchange ^[11]) This case has been particularly controversial since the patents involved are considered to be business method patents. (see also Software patent debate)

• On 28 July 2003, eBay and its subsidiary PayPal agreed to pay a $10 million fine to settle allegations that they aided illegal offshore and online gambling. According to the settlement, PayPal between mid-2000 and November 2002 transmitted money in violation of various US federal and state online gambling laws.^[12] eBay's announcement of its acquisition of PayPal in early July said that PayPal would begin the process of exiting this market, and was already doing so when the ruling occurred.^[13] These offenses occurred prior to eBay's purchase of PayPal.

• In June 2004 the jeweler Tiffany & Co. sued eBay claiming that eBay profits from the sale of counterfeit Tiffany products.^[14] As of July 2006, a trial date has not been set.^[15]

• On 17 December 2004, Avnish Bajaj, CEO of eBay's Indian subsidiary Baazee.com, was arrested after a video clip showing oral sex between two Indian students was sold online. The company denied knowing the content of what they were selling (because it is a venue, not a retailer) and removed the offensive material as soon as they became aware of it. The Indian government attempted to make the case that Bajaj violated India's IT Act, which forbids "publishing, transmitting or causing to publish" obscene material, even though the actual material was never published on Baazee's servers.^[16] eBay supported Baazee's defense.^[17]

• On 14 June 2005, eBay removed auction listings for originally free tickets to the Live 8 charity auction amid hundreds of complaints about such auctions.^[18] Normally, selling of charity tickets is legal under United Kingdom law.^{[citation needed]}

• In 2005, the Australian National Rugby League tried unsuccessfully to persuade eBay to prevent scalpers from selling Grand Final tickets online.^[19]

• Some manufacturers have abused eBay's VeRo program, through which copyright and trademark owners can quickly protect their rights, by seeking to prevent all sales of their products on eBay.^{[citation needed]}

• Some have criticized the emphasis eBay places on its subsidiary PayPal as a method of accepting payments.^{[citation needed]} eBay discourages sellers from using independent money-wiring companies such as Western Union, and MoneyGram (Moneybookers is now allowed instead), stating that it prohibits or discourages certain forms of payment in order to reduce fraud.^[20] On the U.S. eBay, while sellers may accept such payments, they are prohibited from advertising them as a payment option. A similar policy applies to mailing cash as a payment option. Certain non-U.S. branches of eBay allow sellers to advertise wire transfers or mailed cash as payment options, provided such methods are not the only payment options the seller accepts.^[21][22]

[edit] Prohibited items

eBay in its earliest days was essentially unregulated. But as eBay grew, it found it 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 allowed) [1]
• Alcohol (alcohol-related collectibles, including sealed containers, as well as wine sales by licensed sellers are allowed) [2]
• Drugs and drug paraphernalia [3]
• Nazi paraphernalia [4]
• Bootleg recordings [5]
• Firearms and ammunition [6]
• Used underwear and dirty used clothing [7]
• Teachers editions of textbooks including homeschool teachers editions. [8] [9]
• Human parts and remains [10]
• Live animals (with certain exceptions) [11]
• Certain copyrighted works or trademarked items. [12]
• Lottery tickets, sweepstake tickets, or any other gambling items.

Many other items are either wholly prohibited or restricted in some manner. [13]

[edit] Unusual sale items

• In June 2005, the wife of Tim Shaw, a British radio DJ on Kerrang! 105.2 sold Tim's Lotus sports car with a Buy It Now price of 50 pence. This was after she heard him flirting with model Jodie Marsh on air. The car was sold within 5 minutes.^[23]
• 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. The winning bid was made by the GoldenPalace.com online casino, known for their outrageous eBay purchases.^[24]
• In September 2004, the owner of MagicGoat.com sold the contents of his trash can to a middle school language arts teacher, who intended to have her students write essays about the trash before it was cleared away by a well-meaning janitor.^[25]
• 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. [14]
• A Coventry University student got £1.20 for a single cornflake. [15]
• 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. [16]
• One of the tunnel boring machines involved in the construction of the Channel Tunnel was auctioned on eBay in 2004.^[26]
• A man from Arizona somehow managed to sell an air guitar on eBay for $5.50 [17].
• A group of 4 men from Australia auctioned themselves to spend the weekend with the promise of "beers, snags, good conversation and a hell of a lot of laughs" for $1,300[18]
• Disney sold a retired Monorail Red (Mark IV Monorail) for $20,000[19]

[edit] See also

• Online auction business model
• Electronic commerce
• Shopping mall

[edit] References

[edit] Further reading

• Belbin, David (2004). The eBay Book: Essential tips for buying and selling on eBay.co.uk. Harriman House Publishing. ISBN 1-897597-43-6.
• Walton, Kenneth (2006). FAKE: Forgery, Lies, & eBay. Simon Spotlight Entertainment. ISBN 1-4169-0711-4.
• Cihlar, Christopher (2006). The Grilled Cheese Madonna and 99 Other of the Weirdest, Wackiest, Most Famous eBay Auctions Ever. Random House. ISBN 0-7679-2374-X.
• Cohen, Adam (2002). The Perfect Store: Inside eBay. Little, Brown & Company. ISBN 0-316-15048-7. (Hardcover, 336 pages)
• Collier, Marsha (2004). eBay For Dummies,publisher=John Wiley. ISBN 0-7645-5654-1.(Softcover 408 pages)
• Eric M. Jackson (2004). The PayPal Wars: Battles with eBay, the Media, the Mafia, and the Rest of Planet Earth. World Ahead Publishing. ISBN 0-9746701-0-3. (Hardcover, 360 pages)
• Nissanoff, Daniel (2006). FutureShop: How the New Auction Culture Will Revolutionize the Way We Buy, Sell and Get the Things We Really Want. The Penguin Press. ISBN 1-59420-077-7. (Hardcover, 246 pages)
• Spencer, Christopher Matthew (2006). The eBay Entrepreneur. Kaplan Publishing. ISBN 1-4195-8328-X. (Softcover 320 pages)

[edit] External links

• eBay