1 Introducing eBay
One of the earliest popular applications of the Web was an online auction system called eBay. Think of it as an enormous car-boot sale. In an ordinary (offline) auction system, you brought things you wished to sell to an auctioneer who catalogued and then sold them on your behalf at a physical auction attended by people who placed bids for the goods. There would be a series of bids with the auctioneer encouraging people to bid against each other, thereby raising the selling price. The highest bid at the close of the auction got the goods. The winning bidder paid the auctioneer the bid price. Afterwards, the auctioneer deducted a fee and passed the remainder to you. The winning bidder collected the goods.
Online auctions are an extension of this general idea into Cyberspace. eBay rapidly became the most successful and popular implementation of the idea. It enabled thousands of people to advertise goods for sale on the eBay website. People bid for the items online, and at the close of the auction, the highest bid wins. The process goes like this:
- Seller lists an item, and potential buyers bid
- Sale ends at predetermined time
- eBay sends contact data to buyer and seller
- Buyer and seller arrange shipping details
- Buyer sends funds – seller sends goods
- Buyer and seller rate each other via the eBay feedback forum
- Seller pays eBay a listing fee and, in case of a sale, a final value fee
eBay was founded by an American entrepreneur, Pierre Omidyar, in 1995. According to his official biography, Omidyar was seeking a way to use the Internet to create an efficient marketplace. He came up with the auction format for online person-to-person trading, creating a simple, easy-to-understand mechanism that let buyers and sellers decide the true value of items and connect with others.
Omidyar launched eBay initially as a hobby, but the company grew very rapidly. It was one of the few pure-Internet businesses to make a profit almost from its launch. It is said that in the early days its founder expected it to be a place where ‘collectables’ would be traded, but it rapidly evolved into a marketplace in which more or less anything was bought and sold.
On any given day, there are tens of thousands of items offered for sale on the system, and there are different versions of eBay for different countries (eBay.com for the US, eBay.co.uk for Britain, and so on). The variety of things available is astonishing, and includes many items which would be difficult to sell any other way. Some of the more extraordinary items have attracted media attention. Some years ago, for example, someone sold an entire small town on eBay. The US state of Maryland sold the State Governor's yacht on eBay for $270,000. I know someone who bought a disused Scottish church on it! There have been notorious cases where people have attempted to sell organs for transplantation (such transactions are banned by eBay, but that didn't stop people trying). There are items for sale costing many thousands of pounds, and items priced in pennies.
In order for online auctions to flourish, a number of tricky problems had to be solved. First of all, there is the issue of trust – how can vendors be sure that purchasers are honest? – and vice versa, in an environment where nobody ‘knows’ anyone else. How to detect and stamp out fraud. How to arrange payment systems that are convenient and safe. And so on.
Online auctions like eBay offer benefits for both sellers and purchasers. Vendors are able to sell things which might be difficult or impossible to sell by any other means (for example, old or unwanted household goods, toys, obsolete equipment, etc.). Purchasers are able to find and purchase items which may be very difficult to obtain via conventional retail channels (e.g. chargers for old mobile phones, items of computer equipment no longer available in stores).