From the Publisher

In this brisk, engaging chronicle of one of the most stunning success stories in American business history, Adam Cohen takes us inside eBay the corporation as well as into the community of eBay's passionate users. His book reveals the many surprising ways in which eBay's "virtual marketplace" has indelibly changed not only the face of American business but the cultural landscape of the twenty-first century.

Product Details

• ISBN: 0316164933
  
• ISBN-13: 9780316164931
• Format: Paperback, 336pp
• Publisher: Little, Brown & Company
• Pub. Date: June 2003
• Edition Description: First Back Bay Paperback Edition
• Edition Number: 1
• Sales Rank: 236,189

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The Perfect Store

Time Warner

Chapter One

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 dodgeball 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 AuctionWeb.

It started, legend has it, with PEZ.
In the summer of 1995, Pierre Omidyar was having dinner at home in
Campbell with his fiancée, 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 newsgroups of all,
a Usenet newsgroup for Macintosh programmers.

By the mid-1990s, however, a new Internet was emerging. Lowkey
newsgroups 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 WebMail 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
marketplace 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: AuctionWeb.

Since AuctionWeb 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 AuctionWeb launched, Omidyar already had three other
home pages running on eBay.com. One was for a small biotech start-up
for which his fiancée, Pam Wesley, a management consultant, had been
working. Another belonged to the San Francisco Tufts Alliance, an
alumni group of which Pam was president. The third was Omidyar's
own: Ebola Information, his offbeat tribute to the Ebola virus.
Continues...

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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.

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