Hence, the Earlier Pez Reference
The origin of that network is the stuff of legend. In 1995, the founder and current chairman Pierre Omidyar's wife, an avid collector of — yes — Pez dispensers, bemoaned the difficulty of finding other collectors to trade with. The complaint got Omidyar thinking, and he soon seized upon the simple notion of an Internet auction site for consumers. After writing some software code at home, he introduced the online world to what was then called AuctionWeb.com.
Shortly thereafter, an outside consulting firm concocted a simpler, more-elegant brand name: eBay. Benchmark Capital kicked in $6.5 million to fund eBay's build- out (an investment now said to be worth some $4 billion). Following the IPO in 1998, the company's fortunes simply skyrocketed. Omidyar's initial idea — an online consumer trading community — was spot on. Users couldn't get enough of eBay.
And they still can't. For many consumers, eBay is practically an addiction. "eBay has one of the most powerful brands in business today," offers branding guru Duane Knapp, author of The Brand Mindset (McGraw-Hill, 1999) and the executive director of FutureBrand, a New York-based brand consultancy. "eBay is as closely aligned to the process of online trading as Kleenex is to blowing one's nose."
Part of the branding comes from the chairman's Mo-ist leanings. "The business model pivots off Omidyar's idea that people are honest," explains Knapp. "The company appeals to higher motives. It's a business, of course, but one that humanizes the process of business." Bengier sees it the same way. "We are deeply rooted in what we call the eBay values," he says. "Fundamental to this belief system is our notion of community and our conviction that people are basically good and trustworthy."
Well, not all of them. In late May, one eBay seller was accused of bidding on his own item, a painting purported to be the work of the late abstract expressionist Richard Diebenkorn. eBay eventually canceled the auction. Typically, though, eBay takes a back seat to issues regarding product quality or shipping timeliness. Instead, company management prefers to let users police themselves. Buyers who are disgruntled over the quality of a purchased item can gripe about it in the Feedback Forum. The comments are then turned into a seller profile, enabling prospective buyers to check the reliability of a seller before bidding on an item.
That simple idea has caught on with a number of B2B operators. "eBay's strategy of providing feedback about buyers and sellers was an inspiration for us," says David Centner, president of MaterialNet.com, a Lake Success, New York-based Internet raw- material-procurement trading platform. "Since we provide E-procurement to accommodate auctions," Centner explains, "we decided, based on the eBay example, to track buyer and supplier integrity to offer a higher comfort level to our users."
Atlanta-based Ebix.com Inc. also mimics the eBay approach, but with a slight twist. The online insurance exchange — where independent agents bid on consumer requests for automobile insurance rates — features outside ratings of agents. "We took the eBay idea of a track record and massaged it to fit our system," acknowledges Robin Raina, CEO and president of Ebix.com. "The consumer decision is made more educated by Ebix providing access to independent ratings of each of the insurance carriers by such agencies as Standard & Poor's, which have no ax to grind."
Still, some analysts decry eBay's see-no-evil approach. "eBay is hurting itself by not adding services around its model, including the most basic one — product inspection," argues Keenan. Michael May, senior analyst at Jupiter Research, believes the auctioneer's original model — to be as distant as possible from the transaction and absolve itself of certain responsibilities — will inevitably need some overhauling. "It worked well for the first few years, but no longer," May says. "The online marketplace must be held increasingly accountable for the transactions that take place within it."
But senior executives at eBay see a problem with getting too involved in policing its site. "In the United States, we are protected by congressional statute and court decisions against defamation claims," explains Jay Monahan, eBay's associate general counsel. "Overseas, however, there's not the same clarity." eBay has separate sites and servers in six cross-border markets: Australia, Canada, France, Germany, Japan, and the UK. The six sites come with local languages, local currencies — and local liabilities. "In many countries, there's no immunity for online service providers," says Monahan. "Therefore, we could be on the hook for claims." To minimize exposure, eBay has established clear procedures for reporting feedback in some countries, while ditching the Feedback Forum in others.
Don't Touch the Merchandise
If eBay has deftly limited much of its enterprise risk, observers say the company has done an even better job defending its intellectual turf. When it comes to copyright infringement, eBay protects its brand like a pit bull with a porterhouse.
Two recent lawsuits exemplify the company's dogged determination. In July, ReverseAuction.com agreed to pay $1.2 million to settle a suit brought by eBay. Apparently, ReverseAuction had used softbots — software robots — to harvest hundreds of thousands of email addresses off eBay's site. "The company demonstrated a blatant disregard for the privacy of our community," Bengier claims. eBay sued on several grounds, including a California anti- spamming statute, as well as a legal theory in intellectual property law that specifically prohibits robotic harvesting.
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