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The Perfect Store: Inside eBay

The Perfect Store: Inside eBay

by Adam Cohen

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In this engaging chronicle of one of the most stunning success stories in American business history, Cohen takes readers inside eBay the corporation, revealing the many surprising ways in which eBay's "virtual marketplace" has changed the face of American business and the American cultural landscape.


In this engaging chronicle of one of the most stunning success stories in American business history, Cohen takes readers inside eBay the corporation, revealing the many surprising ways in which eBay's "virtual marketplace" has changed the face of American business and the American cultural landscape.

Editorial Reviews

Kara Swisher
. . . an invaluable tool to figuring out what it takes to create a solid and lasting company . . . .
The Wall Street Journal
Publishers Weekly
This book's huge cast of supporting characters is considerably more interesting than its nominal stars, eBay's founders and senior management. To some extent that's unavoidable. How can anyone be more colorful than the Elvis aficionados and bubble-wrap entrepreneurs that inhabit eBay's virtual landscape? Yet readers may wish for a little more meat to the descriptions of those who built eBay into the leading online auction site. Cofounder Jeff Skoll and CEO Meg Whitman, MBAs from Stanford and Harvard, never come across as anything but one-dimensional. The most refreshing detail about Pierre Omidyar, eBay's other cofounder, is that before making his billions in the company's IPO he always knocked off work after eight hours. Unfortunately, with Omidyar the book descends into the usual hagiography of high-tech entrepreneurs. Cohen, a New York Times editorial board member and former technology reporter for Time, is much more evenhanded toward the hordes of eBay loyalists and more than a few detractors. Their zeal supports his claim that part of the company's market dominance is based on a sense of community. The company has carefully cultivated this perception, one of the book's most fascinating revelations. In the early days, staffers routinely sounded off on the site's bulletin boards using pseudonyms, even denying that they worked for eBay when asked. Cohen's quality of writing and research is above average for a high-tech tome. One wonders, however, if his insider access he claims to be the first journalist to be granted this at eBay makes him a little too nice to the principals. Agent, Kris Dahl. (June 5) Forecast: Expect brisk sales throughout eBay's vast customer base, as well as among students and observers of the Internet phenomenon. Copyright 2002 Cahners Business Information.
Library Journal
The brief but startling history of eBay; from Time's chief technology writer. Copyright 2001 Cahners Business Information.
Kirkus Reviews
A journalist's admiring history of eBay, written with a dated enthusiam for the new economy. The Web site eBay is quite a phenomenon-the Internet's flea market cum chat room, where only a few clicks separate Rolex watches from Elvis Presley oven mitts. In addition to the thousand-odd people who work for eBay directly, the New York Times estimates that 75,000 people rely on the site for their livelihood. It is, claims founder Pierre Omidyar, the perfect market-a place where buyers and sellers meet without middlemen and where price fluctuates in concert with supply and demand. Cohen is inclined to agree, viewing Omidyar as a visionary and eBay as an exemplar of the new economy as he traces its evolution from an ad hoc garage-based Web site to a multi-billion-dollar corporation. Because the site began as a hobby, Omidyar designed it to be self-regulating so that, rather than officiate disputes, he created a system of feedback that made both parties dependent on strong reputations. In lieu of customer service, he created bulletin boards that allowed users to answer each other's questions. The result, claims Cohen, was an Internet community that saw the site both as trading post and social club. Powerful customer loyalty in its early days allowed eBay to win the dominant market position it now enjoys. Unfortunately for Cohen, however, the quirky start-up story covers only the first half of eBay's history. With an initial public offering that valued the company at $16 billion, eBay became a giant that kept users by buying out competitors rather than improving its own product-not exactly the stuff of a perfect market. But Cohen plugs on undeterred. Although he sees eBay as a philosophicallydriven experiment in economics, the latter half of The Perfect Store describes a thoroughly ordinary corporation, working to maximize profits and expand operations. An in-depth, if credulous, look at an Internet pioneer.

Product Details

Little, Brown and Company
Publication date:
Edition description:
First Back Bay Paperback Edition
Product dimensions:
5.62(w) x 8.37(h) x 1.00(d)

Read an Excerpt

The Perfect Store

By Adam Cohen

Little, Brown

Copyright © 2002 Adam Cohen
All right reserved.

ISBN: 0-316-15048-7

Chapter One

Pierre Omidyar was born in Paris in 1967 to a French-Iranian family that placed a premium on intellectual pursuits. Omidyar's parents had been sent to France by their families as young adults to get a better education than was available in Iran in the early 1960s. Omidyar's father attended medical school; his mother studied linguistics at the Sorbonne. They met for the first time in their adopted land-an encounter that was all but inevitable, given the size of the city's Iranian community-and eventually married. When Pierre, their only child, was six, they emigrated to the United States so that his father could begin a urology residency at Johns Hopkins University in Baltimore.

Growing up in and around Washington, D.C., Omidyar was a typical American child, except for his early fascination with computers. In seventh grade, Omidyar used to sneak out of gym class and make his way to the unlocked closet where his science teacher stored a cheap Radio Shack TRS-80. While his classmates played dodge ball and practiced layups, he used the "trash 80," as it was known, to teach himself to program in BASIC. Omidyar lived in Hawaii during eighth and ninth grades, while his mother did linguistics fieldwork. When he returned to Washington, he graduated to an Apple II, and he was programming in PASCAL, a step up from BASIC. Omidyar used his skills to get his first paying job, computerizing his school library's card catalog for six dollars an hour. "I was your typical nerd or geek in high school," he says. "I forget which is the good one now."

Omidyar arrived at Tufts University, a few miles from Boston, in the mid-1980s, just as the tech world was about to explode. His major was computer science, and his passion was Apple programming. At the time, identifying with Apple was a statement of personal values as much as a choice of technology-the computer-lab version of participating in a 1960s march on Washington. Under the charismatic leadership of Steve Jobs, Apple had styled itself as a hip, iconoclastic alternative to IBM and the other computer behemoths. Apple's view of itself was captured in a now-legendary 1984 Super Bowl commercial in which a lone woman, pursued by storm troopers, hurled a hammer at a Big Brother figure on an enormous television, shattering the screen. Omidyar did his own small part to rebel against mainstream computing by staying out of the Tufts computer lab, which was stocked with PCs, and working from his dorm room on a Macintosh. He eventually wrote his first Mac programmer's utility, a tool for use by other programmers.

In his junior year, Omidyar decided he wanted to spend the summer as a Macintosh programmer. He searched ads in Macworld and sent out letters to companies that used the Mac platform, enclosing a copy of his programmer's utility as a work sample. Omidyar got an interview, and a summer internship in Silicon Valley with Innovative Data Design, one of the first companies to write programs that allowed Mac users to draw images with their computer. The internship led to a full-time job, and he took off the fall semester to keep at it. Omidyar fit in easily in Silicon Valley's programmer subculture. With his ponytail, beard, and aviator-style glasses, he had the look. He also had the worldview. Omidyar was politically libertarian, and he liked talking about philosophy, UFOs, and space aliens. After one more seamester at Tufts, Omidyar moved out West for good, finishing up his undergraduate degree at the University of California-Berkeley.

After he left Innovative Data Design, Omidyar took a job at Claris, an Apple subsidiary that developed consumer-applications software. Claris was supposed to be headed to an IPO, but while Omidyar was there it ended up being reabsorbed by Apple. The change in plans led to a mass exodus of talent, and Omidyar was among those who headed out the door. For his next venture, Omidyar teamed up with friends, including a former Claris colleague, in 1991 to found a startup called Ink Development Corporation. Ink Development was producing software for what looked like the next big thing in technology: pen-based computers. The thinking was that users would abandon their keyboards and use a stylus for writing, an approach Palm would popularize years later. "It was going to be great; it was going to bring computers down to the rest of us," says Omidyar. "Of course, the market didn't think so."

A year and a half into their great experiment, Omidyar and his partners realized that pen-based computing was not about to take off anytime soon. As it happened, Ink Development had also put together some software tools for online commerce, and this marginal project now seemed to be the most promising part of the business. The company relaunched as eShop, an electronic retailing company. EShop was moving in the general direction of the Internet, but not fast enough for Omidyar. It was still stuck on the idea of conducting e-commerce on proprietary networks-close to, but still distinct from, the actual Internet. In 1994, Omidyar left eShop. He wanted a job that would let him "do Internet things," he says, as well as put him in more direct contact with people than he had been in his string of programming jobs. Omidyar retained a sizable equity stake in the company he helped found. Two years later, Microsoft bought out eShop, and the stock Omidyar received from the software giant made him a millionaire before he turned thirty.

Omidyar's next job gave him the greater exposure to the Internet that he had been seeking. He joined the developer-relations department at General Magic, a hot mobile-communications start-up. General Magic, which had been started in 1990 by a group of Apple veterans, was trying to take Apple in a post-Macintosh direction by building a new generation of small, communication-oriented Apple computers that would work with telephones and fax machines. In his new position, Omidyar also had contact with people: his job was to help third-party software developers-programmers outside the company-write software that worked with General Magic's Magic Cap platform. It was while Omidyar was at General Magic, working with both the Internet and with people, that he created Auction Web.

It started, legend has it, with PEZ. In the summer of 1995, Pierre Omidyar was having dinner at home in Campbell with his fiancee, Pam Wesley. Wesley collected PEZ dispensers, and she mentioned that since they had moved from Boston to Silicon Valley, she was having trouble finding fellow collectors to trade with. It occurred to Omidyar that the still-fledgling Internet could provide the answer. He came to Wesley's rescue by writing the code for what would one day become eBay.

The PEZ dispenser story has been told and retold in countless popular accounts of eBay's history. But it is, Omidyar concedes, the "romantic" version of eBay's founding. The truth is, in the summer of 1995 Omidyar was doing what every other smart tech person within a hundred-mile radius of San Jose was doing: obsessing about the Internet and the uses to which it could be put.

Omidyar had not come west with Internet dreams. He had intended to program for the Macintosh, the computer platform he had fallen in love with in high school. But Silicon Valley in 1995 was, like Boston in 1775 or Sutter's Mill in 1849, a place caught up in an intoxicating shared vision of what the future would look like. The Internet was fast gaining critical mass. Dial-up service providers like AOL, CompuServe, and Prodigy were bringing millions of Americans online. Stanford engineering graduate students Jerry Yang and David Filo were attracting more than one million page views a day with a search engine they had named Yet Another Hierarchical Officious Oracle, abbreviated as Yahoo! If there had been any doubt about the commercial viability of the new medium, it was dispelled -for several years, anyway-when Netscape went public in August with a red-hot IPO that was widely regarded as the opening salvo of the Internet revolution.

Omidyar was ready to enlist. He was no stranger to cyberspace: he had been online for years, going back to his undergraduate days at Tufts. Back then, the Internet was a geeky backwater, the online equivalent of a high school audiovisual lab, where engineering students hung out in Usenet newsgroups trading jokes with punch lines like "3.14159," and Star Trek aficionados whiled away the early morning hours debating Klingon history. In college, Omidyar himself had been a regular in one of the geekiest news groups of all, a Usenet newsgroup for Macintosh programmers.

By the mid-1990s, however, a new Internet was emerging. Lowkey news groups were being pushed aside by something far glitzier- the World Wide Web, which suddenly gave anyone with a PC and a modem the power to call up documents stored on computers anywhere in the world. This new Internet, which was making the letters www a fixture of everyday conversation, had the power to connect everyone on earth-not through static postings left on a message board, but interactively and in real time. It was clear to anyone who was paying attention that this new Internet was about to change the world.

And all of Silicon Valley was paying attention. It seemed, that summer, as if people talked of nothing else. Programmers and entrepreneurs brainstormed about what the killer application was for this new technology, and plotted how to get in first with a business plan. Selling books or drugs or furniture. Delivering news or groceries or pet supplies. Mixing in celebrities or gambling or pornography. The millions-the billions-would pour in. Compared to the hot ideas bouncing around the Valley that summer, the application Omidyar was wrestling with had all the sex appeal of a college term paper.

In most times and places, creating a perfect market would have seemed like an arcane exercise. But in Silicon Valley in the midt 1990s, financial markets were as much a part of the culture as routers and microchips. New companies seemed to be going public daily, and freshly minted millionaires were everywhere. Omidyar kept hearing about company insiders, often friends and family of the founders, getting rich through stock purchases that were not available to average investors. This was standard practice for IPOs, but it struck him as unfair.

Omidyar had experienced the process firsthand. A few years earlier, he had been closely following a hot new video-game company called 3DO. Like many techies, Omidyar had been intrigued by its bold vision of creating a universal standard for the video-game industry. When 3DO announced plans to go public in May 1993, Omidyar placed an order for stock through his Charles Schwab brokerage account. What he had not counted on was that 3DO-whose high-flying CEO, Trip Hawkins, would later be named one of People magazine's "50 Most Beautiful People"-was about to become one of the most hyped IPOs of the tech boom. 3DO went public at $15 a share, but when Omidyar checked his account, he learned that the stock had soared 50 percent before his order had been filled. It all worked out in the end; Omidyar later sold his shares at a profit. But it struck him that this was not how a free market was supposed to operate -favored buyers paying one price, and ordinary people getting the same stock moments later at a sizeable markup.

Omidyar's solution was an online auction. He had never attended an auction himself, and did not know much about how auctions worked. He just thought of them as "interesting market mechanisms" that would naturally produce a fair and correct price for stocks, or for anything anyone wanted to sell. "Instead of posting a classified ad saying I have this object for sale, give me a hundred dollars, you post it and say here's a minimum price," he says. "If there's more than one person interested, let them fight it out." When the fighting was done, Omidyar says, "the seller would by definition get the market price for the item, whatever that might be on a particular day."

Since he was still working at General Magic, Omidyar had to do the programming for his perfect marketplace in his spare time. He was used to tinkering with Internet applications in his evenings and on weekends. He had already written a chess-by-mail program, which he was offering for free over the Internet. He had also completed the coding for a program he was calling Web Mail Service, which allowed owners of small-screen computer devices like the Newton to get access to Internet pages through standard e-mail. More recently, he had created WebMail Watch Service, which monitored web pages users were interested in, and notified them when the pages had changed.

With Labor Day approaching, Omidyar made the program for a perfect market place his project for the long weekend. On Friday afternoon he holed up in his home office, a converted extra bedroom on the second floor of his modest town house, and began writing code. By Labor Day, he had created an auction website. The site was not much to look at. Its blocky blue-black text against a dingy gray background gave it all the graphic charm of a Usenet newsgroup. Omidyar had no real idea what people would want to sell, so he just created categories as they occurred to him-computer hardware and software, consumer electronics, antiques and collectibles, books and comics, automotive, and miscellaneous. The computer code Omidyar wrote let users do only three things: list items, view items, and place bids. The name he chose was as utilitarian as the site itself: Auction Web.

Since Auction Web was only a hobby, and he intended to offer its services for free, Omidyar tried to keep costs low. He wrote the program by patching together freeware he found on the Internet, and he ran the site from his home, off of a $30-a-month account he already had with Best, his Internet service provider. Rather than create a new website, he added AuctionWeb to one he was already operating. That spring, Omidyar had formed a sole proprietorship for his web consulting and freelance technology work, which he had named Echo Bay Technology Group. The name was not a reference to Echo Bay, Nevada, the wilderness area near Lake Mead, or to any other real-world Echo Bay. "It just sounded cool," he says. When he tried to register EchoBay.com, however, he found he was a few months too late. Echo Bay Mines, a Canadian company that mined for gold in Nevada, had gotten to it first, and was using echobay.com for its corporate home page. Omidyar registered what he considered to be the next best thing: eBay.com.

At the time Auction Web launched, Omidyar already had three other home pages running on eBay.com. One was for a small biotech start-up for which his fiancee, Pam Wesley, a management consultant, had been working.


Excerpted from The Perfect Store by Adam Cohen Copyright © 2002 by Adam Cohen. Excerpted by permission.
All rights reserved. No part of this excerpt may be reproduced or reprinted without permission in writing from the publisher.
Excerpts are provided by Dial-A-Book Inc. solely for the personal use of visitors to this web site.

What People are Saying About This

Rosie O Donnell
...the only book that will never be sold on eBay. Who’d want to give it up? Bravo, Adam Cohen!
Jeffrey Toobin
...Cohen has written the definitive history of eBay—a strange and exhilarating tale of [an] Internet idea that really and truly worked. (Jeffrey Toobin, ABC News)

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