The Perfect Store: Inside Ebay
In his book tilted The Perfect Store: Inside eBay, Adam Cohen tells not only the start-up history of how the online auction site, eBay.com, got its start, but expands beyond that to write a book that reveals how the site changed the thinking of e-commerce around the world. Adam Cohen does a remarkable and extremely thorough job of investigating eBay and how it got its start. But he not only defines the site’s history, he delves into the minds of the people running the company today and the man who started it, Pierre Omidyar. He reveals the secrets behind the company’s success and thereby offers insight into a successful business plan. Moreover, Cohen explains how eBay has influenced e-commerce and the Internet economy.
Cohen starts with a short history about the founder of eBay, Pierre Omidyar. By describing Omidyar’s thought processes, his aspirations, and his ethics, Cohen explains to the reader how eBay or what was first named, AuctionWeb, began its operations back in 1995 based on trust in fellow man. “Omidyar set out ethical guidelines for the AuctionWeb community to follow….He advised users to treat other people on the site the way they themselves wanted to be treated” (Cohen, 2002, p.26). Although a common saying, this actually meant a lot as “to a remarkable extent, AuctionWeb operated according to Omidyar’s idealistic prescription. Trust on the site was so high….and the feeling of community so strong….” (Cohen, 2002, p.26). The people accessing AuctionWeb grew into a community that helped each other. Omidyar encouraged that by setting up community boards and forums between users so that they might help each other with problems that arose. Although this was because he did not have the time to resolve all disputes or to offer advice on how to use his site to each person who asked, this only supported the sense of community that ultimately drove more people to his site to conduct their business rather than any other similar auction sites that were not essentially run by the users (Cohen, 2002, p.10).
It was Omidyar’s desire to prove that the Internet could be used for commerce, and that auctions which would offer the same information to the buyer as it did to the seller were possible and could be productive. This is what Omidyar believed a free market was all about. At first it seemed his site was doomed to be a failure, but Omidyar was not discouraged as he had encountered a few problems with late ad listings that he figured had slowed traffic to his site. He was a determined man and even though he considered his creation of the AuctionWeb a hobby, he did not neglect it. However, he also did not wish to spend all his waking hours fielding questions from users and resolving issues between buyers and sellers that usually turned out to be misunderstandings. So, he encouraged buyers and sellers to “work it out” (Cohen, 2002, p.27). This eventually led to the creation of the Feedback Forum, a system that enforced good behavior among eBay users.
Omidyar’s idealistic view of the human race led to the basis of eBay’s operations. The users of the site not only controlled their sales and their product, but could earn the respect of each other and their trust. Those who did not play by the rules were ultimately kicked out and shunned by the community. Ebay ran like a small village would in a sense, and the users were a community of their own. This played a large part in the success of eBay and also in the business plan. It was necessary for this sense of community to exist if the true idea of a free market by Omidyar’s standards was to exist too. Without a sense of trust and honest behavior among sellers and buyers, the plan for everyone to have the same opportunity to buy a product at the same prices would not work. Distrust would lead to the need for a controller of the product and the price and the capture of monies for the sale. However, this would not be the free market that Omidyar envisioned. Therefore, the exchange of goods, monies, and promises was all left to the free persons and merely monitored by, at first, Omidyar, and later his staff. And it all began with Omidyar’s faith in human nature and his desires to create a truly free marketplace and to prove Internet commerce was possible.
These ethics also created a business plan for eBay. He did not throw excessive amounts of monies into his business to attempt a rapid growth . He did not spend unwisely either. The first offices were furnished by card tables, beach chairs, and particle board desks (Cohen, 2002, p.39). Once Omidyar realized he needed assistance, he pulled in people he trusted with a sense of business, but also with a sense of ethics that matched his own. His business plan consisted mostly of listening to his customers, or community, by which they were always referred. And the community’s opinion of what was working and what was not working for the site was always taken into high consideration before decisions or changes were made. For example, Mary Lou Song, the first public-relations official for eBay found that her assignment to create different colored stars for the Feedback Forum and to reward users with higher feedbacks, resulted in an uproar from the community on the community Bulletin Board. This was a result of her telling the community her decision rather than asking its opinion. Song realized from this experience just how the community’s views and opinions “seemed to carry an extraordinary amount of weight” (Cohen, 2002, p.41). Song needed to apologize to the community and ask their opinion of the stars before proceeding with her plan. The involvement of the users was again shown as essential to keeping the free marketplace open, and the sense of community shown to be a great part of making eBay a marketplace run by the people not big business.
In fact, any attempts at eBay to stray from this formula causes enormous communal upheaval and protest as was demonstrated much later in the company’s history in October of 2000 when eBay made a deal with Disney. Ebay had signed a contract with Disney to gave Disney its own page on the eBay site that did not allow search engines to offer the items listed on the eBay main page from ebay sellers. Also the feedback from Disney sellers was private and could not be viewed by the community. This deal was all made without asking the opinion of the community. When launched, this contract created a great uprising among ebay users who “protested that the deal marked a historic departure from eBay’s principles” (Cohen, 2002, p.290). Later, eBay renegotiated the deal with Disney to solve these issues and to appease eBay users, a deal which Disney realized was actually in their best interest too. But this only proves that the community of eBay is strong enough to create change which is very important in a truly free marketplace (Cohen, 2002, p.290-291).
Through his depiction of eBay’s history, Cohen reveals how the issues that arose on AuctionWeb and the standards and rules that resulted became a blueprint for the e-commerce market today. When AuctionWeb started, the buyers and sellers acted on trust and this is how eBay operates today. However, rules and actions against those that were proven untrustworthy became necessary to protect both buyers and sellers. As problems arose, Omidyar and his partners devised ways of dealing with them. Procedures and rules were created to resolve these issues and became a model for other e-commerce sites and online auction sites of today.
Many ideas sprang from the eBay setup. Such ideas are bulletin boards and community help boards where customers could get immediate help and advice from other users, feedback forums where the community could view the level of trustworthiness of another user judged by his or her own peers, Buy It Now feature offering fixed price items, fraud departments that work with law enforcement to fight and to prevent fraudulent activity, and now in today’s Internet marketing world, privacy protecting email addresses and a security center making the users aware of fraudulent or phishing emails or solicitations, and most recently, retaliatory feedback that allows an answer to negative accusations (Cohen, 2002, p240-241). So, as problems arose, these issues were resolved with plans and products designed to specifically resolve the problem. Other sites took notice and even though they are not direct buyer/seller auction sites and most handle products and payments for sellers and buyers and set prices, they utilize some of eBay’s ideas. Amazon.com set up a feedback much like eBay’s. And other online auction sites such as Onsale and Yahoo!’s auction center created their plans by following much of eBay’s ideas and programs (Cohen, 2002, p.237-238).
Adam Cohen writes a strong book that not only develops the sense of what eBay is today, but also what impact it has had in the e-commerce world. Omidyar’s idea of a truly free marketplace has led to one of the biggest and the most successful online auction sites in history. Because he modeled his marketplace based on the ethics he holds which has the age old philosophy of treat others how you want to be treated, the sense of community was strong on his site. As a result, eBay has developed many regulations and procedures for the online free marketplace that have thrived for more than a decade. Adam Cohen brings this to light through a history of eBay that not only tells the reader how eBay came about, but also why. With this information the reader can see how eBay has proven to the doubtful world of commerce that the Internet is a useful and abundant tool for the marketplace, and e-commerce can not only exist but dominate the economy. The Perfect Store is a perfect title for this most thorough and enlightening book by the illustrious reporter, Adam Cohen, and a must read for anyone who wants to understand the world of commerce on the Internet.
Cohen, Adam. (2002). The Perfect Store: Inside eBay. New York, NY: Little, Brown and Company.