When Did eBay Start?

When Did eBay Start: Pierre Omidyar‘s Experiment in Online Auctions

In 1995, 28-year old software programmer Pierre Omidyar launched AuctionWeb, an experiment to test the viability of consumer-to-consumer sales mediated through the internet. Hosted on his personal web server and coded in Perl, the first iteration was simple even by mid-90s standards. But that simplicity allowed the site to load efficiently on the dial-up connections common in that era.

Omidyar set up a handful of his own auctions to seed the site with some initial product listings. The very first item sold on AuctionWeb was a broken laser pointer that fetched $14.83 from a collector. It wasn’t much, but it validated Omidyar’s belief that the internet could enable a new way for people to buy and sell goods peer-to-peer.

Word quickly spread in the early internet forums and chat rooms. AuctionWeb was soon hosting thousands of listings spanning collectibles, computer hardware, CDs and more. By the end of 1995, the fledgling site was generating $7,000 per month.

Omidyar upgraded his internet connection to a T1 line and brought on his first employee, Jeffrey Skoll to help manage the site’s growth. But as auctions and listings ballooned to over 250,000 per month in 1997, even the T1 line struggled to handle the traffic. This forced Omidyar to take drastic measures…

eBay’s Homegrown Infrastructure

With AuctionWeb hosting hundreds of thousands of auctions each month on a single personal server, Omidyar realized he needed more robust infrastructure.

He leased server space from internet service provider Internet MCI and cobbled together his own network hardware solution. This consisted of four Pentium Pro servers running Linux and Apache, storing data on Distributed File System (DFS). Omidyar customized the Apache and DFS code himself to enhance performance.

This hybrid hardware/software system could handle over two million page views per day. For the late 90s, this classified as serious scale, allowing AuctionWeb to increase its listings volume by 500% in 1997 alone.

In addition to beefing up its infrastructure, the company officially changed its name from AuctionWeb to eBay in September 1997. This set the stage for continued growth into a household name.

eBay‘s Architectural Transformation

In the early 2000s, eBay made major investments to transition away from its homegrown infrastructure to enterprise-grade architectures. This involved adopting higher capacity data warehouses as well as shifting many systems over to parallel computing frameworks to distribute load.

Some key technical milestones:

• In 2003, eBay moved its core platform and product databases into a Teradata data warehouse cluster providing 50 terabytes of storage. This supported exponential growth in sellers, listings and product categories.

• MapReduce and Hadoop frameworks were leveraged from 2008 onwards to run computationally-intensive algorithms for search optimization, personalization and fraud detection. Running these algorithms in parallel across clusters significantly reduced processing time.

• By 2010, eBay had migrated the majority of its web and application servers to the public cloud. This added flexibility to scale capacity up and down as needed.

• Today eBay’s platforms run on a complex technical architecture involving thousands of application servers and petabytes of storage hosted in data centers and public cloud. The system handles several billion requests and messages per day for its users.

This willingness to rebuild and optimize the architecture as eBay’s needs changed is why it could scale from a single personal server to become one of the world’s highest traffic sites.

eBay‘s Era of Hypergrowth: IPO and Global Expansion

eBay was clearly on to something big in the early days with its online auction model. The site was doubling in size every three to four months. By 1997, it already hosted over 250,000 auctions a month and brought in $4.7 million in revenue with just 30 employees.

Investment bankers took notice of eBay’s tremendous growth. In 1998, eBay decided to test the public markets with an initial public offering (IPO). The company offered shares on NASDAQ exchange under the ticker EBAY on September 24, 1998.

The IPO raised over $63 million and gave eBay an impressive market capitalization of $700 million right out the gate. This valued the 3 year old company at over 23 times yearly revenue – extremely rare for profitable internet firms at that time.

Flush with cash from the IPO, eBay looked to expand globally. After launching initial sites in Canada and the UK, eBay went on an international domain rollout. Over the next several years, ebays sites targeting Germany, Australia, Austria, Ireland, Italy, Korea, Netherlands, New Zealand, Philippines Switzerland and Spain went live.

This worldwide expansion brought eBay’s registered user count to over 16 million by 1999. Despite the dot-com crash wiping out speculatory internet startups, eBay continued its meteoric rise throughout the early 2000s:

• 1999 Revenue: $224.7 million
• 2000 Revenue: $431.4 million
• 2001 Revenue: $748.8 million
• 2002 Revenue: $1.2 billion

Much of this growth came from eBay’s savvy user trust and safety practices…

Building Trust to Facilitate Transactions

A major challenge facing the pioneers of person-to-person online commerce was trust between strangers. After all, sending money and personal information to a random eBay user posed risks.

To overcome this hurdle, eBay implemented several mechanisms:

User feedback ratings – After each transaction, the buyer and seller can rate each other positively, negatively or neutrally plus leave comments. This public feedback score enabled users to gauge trustworthiness.

Verified IDs – eBay verified user identities by addresses and phone numbers to prevent fraudsters.

Escrow services – eBay offered escrow protections (temporarily holding funds until goods delivered) through third parties to protect high-value transactions.

Insurance – Partnerships with insurance firms protected sellers in case of issues with shipments or damages.

Buyer protection programs – Refund policies and other protections ensured buyers received what was promised.

These facilities grew user confidence in dealing with unknown trading partners. By 2003, over 43 million users were registered on eBay generating $2 billion in yearly revenue. But this was just the start…

Key Acquisitions Fuel eBay‘s Commerce Ecosystem

Between 1999 and 2011, eBay made over 40 strategic acquisitions to expand its capabilities in payments, shipping, mobile and other key commerce areas including:

PayPal (2002) – In October 2002, eBay acquired PayPal for $1.5 billion to handle payments processing. This gave buyers and sellers an easy way to exchange funds online. PayPal‘s revenues got a massive boost from eBay‘s user base.

StubHub (2007) – By acquiring StubHub for $310 million, eBay gained a major stake in the event tickets resale market. StubHub added capabilities around inventory pooling and delivery logistics of its tickets vertical.

GittiGidiyor (2011) – As part of expanding overseas, eBay purchased GittiGidiyor – Turkey’s most popular shopping destination for $216 million. This allowed eBay to gain share in markets like Turkey.

Shutl (2013) – Shutl‘s logistics network and courier service was purchased to enable eBay sellers to ship items quickly and easily within hours. Shutl eventually got rebranded as eBay Plus in 2015.

Sellbrite (2020) – This acquisition allowed eBay to integrate multi-channel listing capabilities natively into its Managed Payments experience. Sellbrite brought key functionalities around inventory management and channel visibility.

These strategic deals assembled an integrated commerce ecosystem under the eBay umbrella. Sellers could easily run online stores, process payments, fulfill orders and ship items leveraging eBay‘s technologies and partners.

On the buyer side, purchasers enjoyed seamless checkout, speedy shipping and access to eBay‘s enormous secondary market for new and used goods. By 2011, eBay‘s footprint had reaches 25 million sellers listing over 2 billion items annually.

eBay‘s Current Strategic Focus Areas

Now 27 years from its founding inside a personal computer in Silicon Valley, eBay looks quite different despite retaining its core auction marketplace. Some key stats on eBay today:

• 162 million global active buyers as of Q2 2022
• 1.6 billion live listings offered at any point
• $2.4 billion in revenue generated just in Q2 2022

Under its CEO Jamie Iannone, eBay currently focuses strategic investments into three priority areas:

Tech and AI – With recent acquisitions of AI-powered collectibles appraisal platforms like TCGplayer, eBay aims to leverage artificial intelligence, computer vision and advanced machine learning techniques to deliver more value across transaction experiences. Demand forecasting, authentication services for specialty goods and personalized recommendations help connect buyers with relevant inventory.

Advertising – eBay is expanding its advertising platform Promoted Listings by offering granular targeting capabilities via product attributes. Brands can laser focus campaigns to appropriate buyer segments. Early testing delivered 3-4X return on ad spend (ROAS) for advertisers.

Payments – Managing payments themselves allows eBay to streamline checkout flows. Integrations with payment processors like Adyen, Apple Pay and Google Pay maximize conversion rates. Sellers also directly get payouts from eBay rather than third parties.

eBay‘s CEO Jamie Iannone noted on the Q2 2022 earnings call: "We continued advancing our tech-led reimagination of eBay during the quarter…Leveraging our data and AI capabilities, we‘re more effectively matching buyers with relevant inventory at the right price points. We also continue improving critical purchase moments, like checkout flows and seller payouts to drive conversion."

These strategic initiatives seem to be paying off. eBay posted Q2 2022 total gross merchandise volume (GMV) of $20.5 billion, up 7% year-over-year. With management laser focused on product enhancements and global expansion, eBay‘s prospects look bright.

Final Thoughts

Pierre Omidyar’s simple 1995 experiment to test out consumer-to-consumer transactions on the early internet kickstarted a commerce revolution. Despite modern digital giants like Amazon and Shopify taking more online retail market share, eBay remains a popular destination for specialty goods. Its worldwide footprint boasts an incredible breadth of inventory across any niche interest imaginable.

eBay’s prospects continue looking up with investments into artificial intelligence and payments technology to accelerate development velocity and simplify user experiences. The iconic brand seems poised to thrive for another 25+ years facilitating person-to-person trade in the digital era and beyond.