the

eBay - How It Started

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gosh we all know eBay there are fortune

500 company worth billions of dollars

when I say the words online auction I

can't imagine anything else comes to

your mind and we can't forget the Weird

Al classic song titled eBay when Weird

Al makes a song about it that's the

ultimate level of success but also their

billions of dollars in revenue and

billions and profits each year in most

years all things I'd like to talk about

one day but for today I found the start

of this company particularly interesting

and I think you'll see why the man

behind it is named Pierre Omidyar he was

a computer genius from a very young age

in the seventh grade he would ditch his

PE class and sneak into one of the

school's computers where he would teach

himself how to code in high school the

library hired him six dollars an hour to

make a computerized version of their

card catalog he graduated from college

with a degree in computer science went

on to co-found an e-commerce site called

a shop that was eventually bought by

Microsoft and became a full-time

software developer for a company called

general magic while designing web pages

on the side can we agree this guy know

about computers I'm becoming fascinated

with how this website came to be the

motivation behind it is one of the most

confusing and unclear stories I've

encountered to this day and definitely

throughout the last 20 plus years the

story you hear it depends on the source

and they all sound so convincing since

they're all delivering it with such

confidence

most of them conflict with each other

and then there's this whole subset of

reports talking about how the other

reports are untrue some of which

conflict with each other I've heard a

lot of them and I think I have a grasp

on the situation so let me do my best to

lay it all out for you first I'll tell

you a commonly reported story that

everyone seems to want to be the truth

do you know those Pez dispensers you

tilt their giant heads back and they

give you candy they have a dedicated

group of collectors and in 1995 piers

fiance Pam was one of those dedicated

collectors well Pierre and Pam were new

to Silicon Valley as a programmer that's

where his career took him it recently

moved from Boston and

ham was having trouble connecting with

the Pez collecting community out there

Pierre took it upon himself to create an

online auction service that would make

it easy for like-minded people to

connect with each other do you see what

I mean she could post one of her

dispensers on there for sale and other

collectors would start bidding on it the

bidding was done through emails by the

way so it was an easy way to start

conversations and over time they would

build a community of people buying and

selling and trading and communicating

which is exactly what Pam was looking

for Pierre created this website as a

means for his fiancee to connect with

other Pez collectors and I guess it

attracted more people than he expected

so at that point he started taking it

more seriously that's basically the

story that's been reported by multiple

reputable sources such as time in 2015 I

can see why this origin story is the one

that we all want to hear it involves

toys and candy plus it depicts Pierre is

being motivated by love and kindness

Pierre has actually called this the

romantic version of eBay's origin and I

don't really believe any of it is true

straight from the eBay website a story

is circulated that Pierre created eBay

to help his wife collect Pez candy

dispensers later it's revealed that the

story was a fabricated one it was that

was part of the inspiration but frankly

it was a small part of it for me here's

what really happened when eBay was in

its early stages in the 1990s one of

their employees who worked in public

relations made up the story or at least

greatly exaggerated that aspect of it

her name was Mary Lou song and she felt

the reporters wouldn't be interested in

the real stories so she made up

something that she felt was more

attractive and would help the emerging

site get some free publicity and then in

2003 she came forward with the truth and

admitted everything the funny thing to

me is I find the real story to be much

more interesting and inspirational that

whole Pez thing sounds kind of phony

anyway doesn't it alright enough of all

the nonsense let me do my best to

explain what really happened Pierre saw

what he viewed as imperfections in the

market he first took note of it in the

stock market when he tried to be part of

an IPO but the first lower price shares

went to some favored buyers and he

wasn't able to buy his shares until the

price had already gone off he saw

similar imperfections elsewhere and

envisioned what's commonly referred to

as a perfect marketplace he thought an

auction model would result in

fair market price and you know what I

can't say it any better than Pierre

himself instead of posting a classified

ad saying I have this object for sale

give me $100 you post it and say here's

a minimum price if there's more than one

person interested let them fight it out

the seller would by definition get the

market price for that item whatever that

might be on a particular day it makes

sense to me and let me just say this guy

amazes me he had all these ideas

floating around in his head and

obviously the coding knowledge of how to

implement them so he figured Labor Day

is coming up that'll be a three-day

weekend

I guess I'll make use of it and create

eBay I'm sure he wasn't that laid-back

about it but the fact is over that

three-day Labor Day weekend he created

the site that would later become eBay

initially he named it auction web you

know even the source of the name eBay

has conflicting reports being in Silicon

Valley I think some would assume it has

something to do with the Bay Area but

actually a Pierre already had a side

business where he did web consulting

that business was called eco Bay a name

he came up with for no real reason other

than the fact that he liked the way it

sounded so he was just going to call

this new site echo Bay calm which

believe it or not was already taken

because echo Bay is an area in Nevada

and there was a mining company over

there that had already taken the name so

he's simply shortened it to ebay.com

think about that if not for a mining

company operating in Nevada in the mid

90s we know them as echo Bay where site

wrecked again but that's sort of the

intention of this video to talk about

the amazing beginnings of this company

that are commonly misreported when he

first launched auction web I don't fully

believe he knew what he was doing or

quite honestly I don't think he expected

much from it and I have two reasons for

saying that for one to test it out he

personally posted the first item ever

sold on eBay if it were me I'd be

posting some pretty sweet stuff to

attract some bidders but Pierre was

unwilling to put up anything of value

that first item was a broken laser

pointer that he had bought for $30.00

two weeks earlier for personal use the

initial listing was for $1 and amazingly

it attracted so much interest that there

was actually a bidding war that brought

the final sale price up to 1483 the guy

who bought it

was mark Fraser he felt he could repair

it and that'd be cheaper than buying a

new one but come on almost $15 for a

used $30 laser pointer that didn't work

after witnessing this happened Pierre

was starting to see the potential for

this website but he was still viewing it

as a hobby just an idea that I had and I

started it as an experiment as a side

hobby basically the second reason I say

this is he initially offered the service

for free but the amount of traffic that

the site was attracting caused his

internet provider to raise his bill they

said that this is too much traffic for a

private account we're going to start

charging you the commercial rate he

dispute that saying it wasn't actually a

business it was just a hobby I think we

all know it's hard to win fights with

your internet provider so they gave him

the commercial rate again he wasn't

willing to invest much in this project

so he decided to start charging the

users as a means to cover that bill the

initial charges were 5% of the sale

price for items that sold for less than

$25 and 2.5 percent of it sold for more

in its first month the site made $1,000

which is not a huge revenue but

considering his biggest cost was at two

hundred and fifty dollar Internet bill

we can say it was profitable from the

start

soon after this is when he started

taking it seriously and the business

just started blowing up in less than a

year they were listing millions of

dollars worth of goods revenues were

doubling every month

remember how he created it on Labor Day

of 1995 for 1996

their revenue was almost four hundred

thousand dollars and over five million

in 1997 just what amazing growth I just

thought this was a funny statement that

corresponds with all this from the very

first annual report it says that their

1996 numbers include results of

operations from the first few months it

existed in 1995 and that there were no

revenues and insignificant expenses

during that year it's essentially saying

yeah eBay existed before this year but

it didn't have anything going on

financially just a good expression of

how fast they grew in early 1997 in an

attempt to raise money and attract some

management talent pierre sold 22% of the

company to a venture capital firm for

five million dollars it's almost exactly

what you see happen on every episode of

shark tank just a pretty big scale here

after they changed their name to eBay

redesign the website and just put that

money to good use in other ways like

advertising I want to mention this too

also in 1997 beanie babies that's when

the feds started taking off and over the

next few years they became a significant

part of their business beanie babies and

eBay are such a perfect match for each

other we can say that eBay helped fuel

the fad and then return the fad help

grow this emerging website they're

actually singled out along with the toys

in one of their product headings and at

one point accounted for 10 percent of

their total sales and the story

continues in 1998 they had a very

successful 63 million dollar public

offering followed by skyrocketing stock

prices and another public offering the

following year they started making

acquisitions left and right around this

time they go on to acquire PayPal Skype

StubHub and seemingly countless others

but I'll leave that for a different

video until then let me know in the

comments what you think about the start

of eBay a lot of misinformation out

there a lot of conflicting stories so I

did my best to weed out the truth and

deliver to you what I found to be an

amazing story one person who treated

auction web like a side project and for

lack of a better word accidentally

created one of the biggest Internet

companies ever to exist I think the

lesson here is try to recognize

opportunity this guy may be a genius in

many aspects but I refuse to believe

that he saw the potential for his

creation until it was right in front of

his face selling a broken laser pointer

and he didn't start charging sellers

because he thought it was the best

decision for the business he did it

because he was unwilling to pay that two

hundred and fifty dollars a month this

guy was a millionaire by the way he made

a ton of money when he sold his company

he shop to Microsoft one year earlier

now it all worked out for him but I

think we can agree these are pretty

unusual circumstances I imagine if most

of us were that blind to an opportunity

it would have passed us up so you have

to be mindful as I said this story

continues I hardly talked about anything

that's happened with eBay over the past

20 years which is a lot so let me know

if you want me to follow up with a video

about all of that I'd like to hear what

you have to say thank you for watching

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