by Adam Fisher
Pete Helme: By 1996 things at General Magic weren’t going well.
Steve Westly: And he’s got the thing set up in the back room of his apartment—it’s a two- or three-bedroom place, and the back room is eBay. It’s twenty-five cents to list and a teeny little fee, and you send your check to this P.O. box. And after six, eight, ten, twelve weeks, there’s a check every day. Then it gets exciting—because it’s no longer two or three checks, it’s like fifty.
Jim Griffith: Pierre created a rudimentary billing system which would track all of your successful listings and sales and then would invoice you for the amount of money you owed eBay—the commission and for listing. In the early days if you got way behind you might get shut off, but it was basically the honor system.
Steve Westly: And one of the first people we hired was a guy named Chris, whose job it was to go down to Wells Fargo and sign all the checks and deposit them, and that is how eBay worked.
Mary Lou Song: Poor Chris, so there wasn’t PayPal at the time, right? So every day the mailman would deliver a garbage bag full of envelopes, and Chris would have to open them by hand, every single day.
Chris Agarpao: Well, first the bags would start out real small, like stacks of maybe thirty, and then sixty, gradually as we grew, and then, you know, they were really heavy bags—tons and tons of mail.
Pierre Omidyar: And it just kind of grew. Within six months it was earning revenue that was paying my costs. Within nine months the revenue was more than I was making on my day job.
Chris Agarpao: It wasn’t all checks. Sometimes it was nickels and dimes, that they’d tape to index cards. So that was kind of funny. But it all added up to be something big.
Steve Westly: The company was profitable every quarter of its existence—every month of its existence—from day one. Now I’m not sure if any other company could say that.
Pierre Omidyar: That’s kind of when the lightbulb went off. Knock, knock, knock. You’ve got a business here, do something about it. So that’s when that really started.
Jeff Skoll: I said to Pierre, “The odds are long against this working, and it’s certainly going to be up against a lot of challenges in the future, but yes, maybe we have a chance!”
Jim Clark: The internet, prior to the point when we first brought out Netscape, was complete mayhem. People worried about doing any kind of private transactions. In those days, there was no security whatsoever. The hardest sell I had was people saying, “You mean you are going to send your credit card numbers around on the internet?” I said, “Well, it is going to be done securely.” I hired this PhD from Stanford who was a security expert, Taher Elgamal, and gave the problem to a small team. These guys cooked up what became known as SSL: Secure Sockets Layer. It is a way of establishing a secure link using the browser, and it became the most widely used technology on the web, and the reason we did it was so that you could have a secure connection so that you have a commercial transaction.
Jeff Skoll: We left our jobs mid-’96 and started working together full-time. We worked out of Pierre’s living room, and you know it’s me and Pierre trying to figure out what to do—and Pierre’s fifteen-year-old cousin, who was playing video games all the time.
Michael Malone: Now keep in mind that Jeff at this point was in his midtwenties. He had gone to Stanford B-school. He was still living on a couch with some other guys in a house.
Chris Agarpao: Pierre knew how to start the business, but he needed someone who could run it. Jeff was the business guru, and I wouldn’t say uptight, but he kind of knew his stuff. He was all business. Pierre was laid-back.
Jeff Skoll: When Pierre and I started working together, he showed me the link where you could send an e-mail to customer service. I said, “Okay, but who reads that?” And he says, “It just goes away!” I’m like hmmmm. One of our fundamental debates was about if the system could take care of itself, and I felt it actually couldn’t. I’m an electrical engineer with an MBA, I wanted to put some meat on the bones here. My thinking was Wow, this could be a very big company, or it could also be roadkill very quickly, and I wanted to make sure that we were ready for when this thing took off.
Brad Handler: Pierre was very focused on building out a community and trust and felt that the community could self-police, that it can take care of itself if we give the community the basic tools to do so. Jeff was more for rules, and that there needed to be enforcement of those rules for the commerce to flow. Pierre talked about how he was going to build a community, and I think either one on his own would have failed. So they were very fortunate to have found each other.
Mary Lou Song: In 1996 I had just graduated from Stanford and I met Jeff and Pierre. It was just the two of them in this teeny-tiny office on Bascom Avenue in San Jose. And I said, “What are you doing? What is this?” And Pierre said, “Well, I’m building a community where people buy and sell with each other.” And I asked all the right questions about what’s the business model, how are the goods transferred, what kinds of goods…
Jeff Skoll: Mary Lou was employee number six.
Pete Helme: I got a call from Pierre in August or September saying, “Pete, I need help! I need a bright engineer. I can’t do this on my own. Can you come?” I thought, Why not? I think Mary Lou had just started.
Steve Westly: It was a pretty young group. People would walk around in shorts. People would be sitting around in lawn chairs at the senior staff meeting.
Brad Handler: Mary Lou was the glue that sort of held everything together. She was the leader of the band.
Mary Lou Song: But what I loved about the conversation with Pierre and Jeff was everything about that conversation came back to the people, and to the community and contributing to a greater good, and I loved that because it was so refreshing.
Brad Handler: Every other would-be competitor made you sign in with a credit card in order to get access to the inventory. We were the only one that would let you view the inventory without first registering with a credit card. eBay treated people like people in a community. The others treated you like a credit card.
Jim Griffith: There was this little chat area that Pierre had put up, and it was just a very, very simple, actually kind of crude scrolling chat. It would hold one hundred posts, and every time you added a post, the oldest post would scroll off. There was no archive, but it was an ongoing conversation, with some very interesting people.
Mary Lou Song: There was The Well at the time, but we were enabling community around commerce. Our founding CTO, Mike Wilson, had worked at The Well.
Steve Westly: Pierre, Jeff, Mary Lou, and Mike, they should be historic people, because they are the ones that built the foundation for social media, by figuring out how to create online reputations and intense community. It’s hard to explain now, because it feels a little bit obvious, but back then, everybody said the internet is cool because it’s anonymous. They did gambling anonymously and adult sites anonymously, and everything was anonymous, and people kind of liked that. But Pierre and Jeff were saying, “No. No. No. No. No. What you want to do is make everything public in this increasingly anonymous world, and we’re going to allow people to create reputations so you can trade in a fair and safe way, with people you don’t ‘know’ in the traditional way.” The great thing about eBay is there is nothing anonymous on eBay.
Pierre Omidyar: I created the feedback forum, which I’m very proud of because it has been copied gazillions of times, and it was my idea. It allows people to kind of rate each other and give feedback on how their transactions went. And if they don’t like something that somebody is doing, and enough people don’t like it, that person is automatically kicked off of the system. That worked very well in the early days.
Jeff Skoll: I wish we had patented that, because that reputation system became quite pervasive and useful all along the way. And in the early days, that was the key.
Mary Lou Song: Pierre had made it so that if you got to ten positive comments, you would get a gold star. So I just crea
ted a star system. After you get a gold star, you get a red star, then you get a green star at fifty, you get… I can’t even remember the rainbow of colors, I just made up the system. I remember posting it to the announcements board and that I had created this new star system for them and instead of getting a “Hey, thank you, that’s great!” I got “Your colors suck, and your numbers suck and who put you in charge of this?” And the harder they pushed back on my stars, the more I dug in my heels, until somebody shared my personal e-mail address with the community on the forum, and I would come in to the office at you know eight o’clock, open up my e-mail box, and it was full of stars, stars, stars, stars, conversations about stars. Pierre and Jeff had a policy that if a community member e-mailed you, you personally had to respond. You couldn’t just ghost them: You couldn’t not respond. So I would spend the better half of my morning responding to all of these e-mails about the color of the stars, and so after about three days of this, I went to Pierre: “I have to talk to you about the stars.” He says, “Yes, you do.” And I said, “Well, I guess it would be good if I went back and apologized?” He said, “Yes, that’s a good start. And then what are you going to do?” And so I went back and I posted an apology and said, “I’m going to take suggestions for stars’ colors and numbers for the next week. We’re going to take a vote on it and then we’ll implement it.” So the star system wasn’t our star system. It was a star system designed and created and implemented for and by our community. And after that pretty much everything that we built was touched by the community.
Chris Agarpao: Jeff hired Griff so he could talk to the community, because Pierre had all these jobs and he needed somebody to lighten the load.
Jim Griffith: They hired me to do e-mails. But within a few weeks, the explosive growth started. So about two weeks into this, it went from thirty, to fifty, to a hundred, to about 150 e-mails a day. It was word of mouth: There was no marketing.
Chris Agarpao: Mary Lou was in charge of marketing.
Michael Malone: I got a phone call from this gal named Mary Lou and she said, “Mike, you remember me,” blah blah blah. I said, “Yeah,” and she goes, “I’m in a new start-up out here, and I’d really like you to come out and meet these guys. I think they’ve got something really interesting.” And that was this company called eBay. It was just Pierre and Jeff. And Mary Lou, but I didn’t really see Mary Lou much after that. I was mainly just seeing these two guys. And it turned out they had read my stuff over the years in the San Jose Mercury News and elsewhere and they just kind of wanted my advice.
Jeff Skoll: I was looking for someone who could be a guide. Mike was quite the futurist.
Michael Malone: So we had a bunch of meetings and we’d discuss the long-term business strategy of the company. And then we would pool our money, and we’d usually throw in five bucks each, and we’d go to Fung Lum’s and we’d get a big bowl of wonton soup to share. Then we’d go back and meet a little bit more. We talked about a lot of stuff. And I gave them the metaphor of the medieval crossroads.
Pierre Omidyar: If you think about it, commerce and trade is at the base of all human activity, and it’s a bit of an exaggeration, but I like to talk about how, you know, in the old days people would bring their stuff to market and they’d do business and then they’d go back to their hillside homes or wherever. And eventually they were doing this enough that you had to build a wall around them to protect them, and that was the birth of cities and so forth.
Michael Malone: And that kind of became the metaphor of the company.
Pierre Omidyar: And again, gross generalizations and simplifications, but fundamentally everything we do in human activities is related to trade and there’s something, I think, that’s wired in human beings that drives us to commerce.
Michael Malone: Later on eBay tried to promulgate the Pez story as the founding story of the company because it sounded so good.
Pierre Omidyar: The Pez thing, right. Yeah. My wife—who was my fiancée at the time—whenever she hears about it she rolls her eyes. “Tell them I’m a management consultant. Tell them I have a master’s degree in molecular biology. I am not just this little Pez candy collector.”
Mary Lou Song: Okay, so this is the real Pez story that I was told. That at the time that Pierre was thinking about all of this, he and Pam were in France driving through the French countryside. They stopped at a French country store, where she found French Pez, and she scooped it up. They pay for it. They get in the car. He starts driving. She’s going through all her stuff that she’s just bought and realizes that she forgot one. She missed one, so she insisted that he turn the car around…
Michael Malone: And Pierre said, “Let’s figure out a way to find these things,” blah blah blah blah, “and buy and sell them.” It wasn’t quite a myth—I mean I’m sure there was a Pez dispenser or two in there.
Pierre Omidyar: That was part of the inspiration, but frankly it was a small part of it for me… The birth of the idea is definitely a media-enhanced story.
Michael Malone: Basically they were just looking at “How do we build a place where you can do auctions?” And once again they weren’t the first. There were other auction sites out there.
Steve Westly: OnSale was the big dog; it had been funded by Kleiner Perkins. It was downright scary.
Pete Helme: And eBay was a tool for people who liked to do flea markets!
Pierre Omidyar: And garage sales and that kind of thing. So that flea market base has really evolved into a market for pretty much everything.
Michael Malone: So why did eBay win?
Mary Lou Song: The economic genius of what Pierre came up with was that we never interfered with the velocity of the transactions. We facilitated, we helped people find each other and connect, and our job really was to make sure that buyers could find sellers and sellers could find buyers and make that transaction as seamless as possible. If we had taken possession of their items, we would have interfered with that velocity.
Jerry Kaplan: We had a different business model, so Pierre was applying it in a different way. I certainly wasn’t delighted about it, but I don’t think I sat there and thought, Oh my God, this guy is trying to knock us off or steal from us. Remember the kind of countercultural “ideas are free” kind of attitude? Plus we didn’t think eBay had the same commercial potential as OnSale. It’s like How big are flea markets, versus how big are stores?
Steve Westly: When I told people that I had seen the future and I was going to work for an online flea market, they wouldn’t say anything, but their eyes would be saying, “I think he has lost his marbles.”
Pete Helme: I don’t know how we hired people in the early days. They were like, “You sell Beanie Babies and laser pointers? I don’t get it.” Nobody was excited about us.
Mary Lou Song: And then McDonald’s ran a Teenie Beanie promo. They were Beanie Babies that fit in those little packages inside of Happy Meals. So that was perfect. All of a sudden you put out a couple of press releases: “Beanie Babies here! This is where they’re at!” Then you get a lot of attention and a lot of people coming to buy and sell Beanie Babies.
Chris Agarpao: That was 1996. I collected them myself just because my coworkers were collecting them. They were like, “Dude, this is going to be big! You just got to keep the tag on.” Everybody just bought them and kind of put them on display all over their cubicles and so on. Pierre had a whole collection, Furbies, too. Gosh, you name it, he had it all.
Pete Helme: I don’t understand Beanie Babies, and I still don’t today, but it was one of the groundswell movements that got eBay noticed. Beanie Babies was one of those huge things—and porn, but we don’t really talk about that.
Steve Westly: And playing cards, trading cards, baseball cards, hockey cards, football cards, and you know a lot of people were very dismissive, because Beanie Babies don’t sit up there with commodities like oil and automobiles and PC or semiconductor sales. It was seen as pretty kludgy.
Pete Helme: People
didn’t think of eBay as a big technology thing, and at the time it was like, “Yep, I’m not doing anything cutting-edge here,” until we had our issues later with scaling and crashing, and then we learned how much you really had to know to do this kind of stuff.
Steve Westly: But I was pretty good with numbers, and I could see the sell-through rates and the growth rates. I saw what others outside the company didn’t, which is that there are a zillion people who are fanatical and passionate about tens of thousands of niche areas—we only put categories which the community asked for—and I was looking at these categories being requested, thinking, You’ve got to be kidding, I don’t even know what Depression glassware is. No one is going to buy this stuff!
Joey Anuff: When eBay came around I couldn’t think of anything better to do than buy every single toy my parents ever told me I couldn’t get. Like Bionic Bigfoot from The Six Million Dollar Man. Still in the box! It was a fucking miracle.
Steve Westly: It’s insane. There are millions of people who love this stuff. It was wild, and they were all in communities, community-ing with each other, and they were becoming pals and all along they’re becoming deeply committed to eBay. We had built ourselves into the middle of a very powerful storm.
Pierre Omidyar: For the first, I think, three years—at least the first two full years of our history—we grew at 20 to 30 percent every single month. I don’t think any other business has seen… I mean, every business in the start-up phase sees that kind of growth for a short period of time, but for such an extended period of time? And so as we were doing projections in terms of, “Okay, so this is what we’ve seen in the past, what can we project for growth next year, next quarter or whatever, so we can do budgeting and all that,” we would only say, “Well, this can’t last, you know, this can’t last. There’s no way you can grow this fast.” So clearly there’s no way I anticipated it, and even as we were growing—even with smart people—and I finally hired businesspeople to actually look at this thing.
