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Thursday, Nov 26, 2009
In an origin that's worthy of its Web lore, eBay started in 1995 as a vehicle for founder Pierre Omidyar to help his then-girlfriend collect Pez dispensers. Omidyar's site grew quickly. Its listings now include automobiles, antiques, real estate and computers, and some users even make their living selling on eBay. But in early 1998, the company was known as Auction Web and had about 20 employees.
And Whitman didn't need the job. She was overseeing 600 Playskool employees, she had two sons and her husband, Griffith Harsh, was head of neurosurgery at Massachusetts General Hospital. As she told Business Week, she wasn't interested -- "I'm not thinking about living 3,000 miles across the country, uprooting my neurosurgeon husband, and taking my two boys out of school, to go to the West Coast for this no-name Internet company."
The headhunter persisted, however, and Whitman agreed to meet Omidyar. Whitman is all about brands, and as she got to know the company, she realized that it had the makings of a great brand. And Whitman knew she was interested in the Internet -- Amazon.com was already a well-known phenomenon, for example. So she joined and helped eBay go public four months later.
Whitman also set about making eBay more corporate. She created the company's first national advertising strategy. She recruited executives from places such as PepsiCo. She pushed for stores and companies to sell on eBay, so now corporations such as Sun Microsystems sell millions of dollars worth of products a year via the site. She encouraged eBay to offer various specialty sites under the eBay umbrella -- much the way FTD's global Web site, under her watch, included individual florists' shops under the FTD banner. Whitman also installed a trust and safety program, which offered insurance for buyers. In making the place more corporate, she made it more professional.
It's true that much of the credit for eBay's success must go to its business model. It's an ingenious blend of yard sale, classified ad and auction. Have an old sailboat you want to get rid of? List it on eBay, accept bids for three or maybe five days, then sell it to the high bidder. eBay gets a small fee for listing the boat, then a tiny commission from the sale. The appeal extends beyond the guy down the street. None other than Warner Brothers used eBay to auction off an old sailboat, only in this case it was the boat featured in the film "The Perfect Storm," and the price was $145,000.
The beauty of eBay's model is that the company just facilitates the listings and the sales; it doesn't have to make or transport any goods or carry any inventory. The users build the company, as Whitman said. As a result, eBay may collect as little as 6 percent on each sale, but most of that is profit. It's truly the sort of business that couldn't exist offline.
As wonderful as eBay's business model may be, that didn't guarantee a viable business. Whitman made the model work. She paid attention to that eBay community, allowing it to help guide the site and develop innovations like customized online storefronts. As Web traffic soared, eBay suffered several outages, including one that lasted more than 20 hours; Whitman's staff responded by e-mailing and calling customers and refunding millions in fees. The eBay brand kept customers loyal.
That loyalty is crucial -- the site's newsletter boasts of how eBay brought people together and saved small businesses. "eBay is an outstanding example of loyalty," said Bain & Co. consultant Frederick Reichheld, author of "Loyalty Rules!" He notes, for example, that eBay built a costly system to respond to customer e-mails within 24 hours. And thanks to this attention to building loyalty, more than half of eBay's customers come by referrals from other customers. Whitman managed to expand the company without destroying its community, maintaining what she calls "the small-town feel on a global scale."
Whitman's moves haven't always pleased all customers; she drew some flak, for instance, when she scaled back opportunities for users to post complaints on the site and when eBay held a charity auction that some called self-serving following the World Trade Center attacks. But Whitman kept most users in the fold as she moved the company forward. That allowed her to go after more big-ticket items. For example, in 1999, eBay acquired Butterfield & Butterfield, a traditional auction house that ranked a distant third behind Sotheby's and Christies. The purchase threatened to turn off the little guys who had built eBay. However, it helped eBay later develop online auctions of fine art and rare collectibles.
