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Page last updated Aug 27, 2009 eBay's Structure and business model once the best on the internet now struggles from poor decisions It still unites the world's biggest supply with the world's biggest demand It still allows anyone to buy and sell - and swindle - like a pro But users are leaving and the stock is cursed. See why below.

In June 2008 they corrupted eBay's feedback system After the 2008 changes, the intent is to deceive as much as inform Among the changes: all feedback for Buyers MUST be Positive now, Positive only. There is no provision for Negative or Neutral Buyer ratings. Thus it is no longer possible to warn the community of crooks who cheat, or Buyers annoying or exasperating to deal with, or who poison the transaction with unreasonable demands after the auction closes. In 2008, after more than a decade of the best feedback system on the Internet, Ebay made the insane choice to shield bad Buyers. Ebay's Pierre Omidyar, the founder of the feedback system, decided after ten years as a billionaire that every Buyer should have a perfect record. Did some Pez seller give him a Neg and he couldn't take it? Whatever, outraged Sellers left in droves, aware the company culture is notorious for never admitting or correcting mistakes. The brilliantly successful Meg Whitman ran the place for ten years and retired in 2008. Her successor subscribes to the theory that every new head must quickly take charge. He seems to be new to online auctions, is a questionable judge of talent I'm told, and the mistakes mount up weekly. For example, the auction listing format is being re-programmed month after month and the coding bugs are devastating. Recently I tried to post a dozen auctions and gave up. When I tried to submit a filled out listing form, it was rejected. The reason given was that the box showing mailing weight wasn't filled in. (A) The form didn't have a box for mailing weight; they forgot it. (B) My delivery was via flat rate US Postal Priority box where weight didn't matter. Ebay has been touting this re-coding as it's new way to make selling "easier." On the contrary, there's been an internal collapse. There is no way to tell eBay this, as they make no provision for site feedback. Errors go uncorrected month after month and other sites get their business. It seemed to me that eBay had less "good buys" this year than last, so I checked the records. I shop the Internet for the best item at the best price, and my receipt file is a reliable record of where I found it. In 2007 I bought four items on eBay for every two on Amazon or elsewhere. That means eBay had the best deals, the best shipping. Thus far this year that's reversed: two on eBay for every four on Amazon and elsewhere. The tide has turned. It's not only eBay's prices that rose; the number of sellers price gouging on shipping is an epidemic there. Ebay has a rule against it, but for every auction you report for obvious price gouging on shipping, 30,000 do it more cleverly. That had a lot to do with the switch to Amazon. The majority of my Amazon purchases had not only the best choice at the best price, they usually had free 2-day shipping. Price gouging on shipping at eBay became epidemic after the last price increase. It was an undeserved, unpopular, unfair increase for which sellers got nothing but a blow to their profits. They made up their loss by raising the S&H. Though the tide has turned you can still read the interesting page below. It can save you a ton of money and many headaches.

eBay is the People's Auction Site where granny in her kitchen -
- and the most knowledgeable antique specialist -
and businesses selling to businesses

eBay does not hold auctions itself. It provides an international platform for everyone in the world to hold his own auctions.

Think of it as a vast mall with eBay the landlord having an unlimited number of stalls to rent, each stall an auction house run by a tenant. Some hold a few sales a year, some a few a week, and some have 5000 or more items listed every day at their eBay stall.

One actually runs an astounding 10,000 auctions a week for art posters. Less than 1% of his auctions attract bids but he's there 52 weeks a year. That's his business model and it does what he needs.

Currently the site hosts tens of millions of simultaneous auctions run by millions of tenants.

Each auction earns eBay a fee. They add up. And up. And up. And fees GO up and up and up. What began as a value-priced service now charges what the traffic will bear.

In the beginning, eBay had little to do with these sales, no more than the Fashion Square Mall landlord took part in sales at the Gap or Sears. Customers dealt with the auctioneer-tenant, not with the landlord. But eBay now interferes in ways mall landlords never do. For example eBay recently forbade auctioneers from accepting checks in payment.

That's dangerous. At some point an additional intrusive reach into how its tenants do business will convince some court that eBay is making decisions that rightfully belong to the auctioneer. That would move it from landlord to co-participant in the auctions, and force eBay to be responsible for sales on their site.

Ebay has escaped that thus far in the US. If ever eBay were declared legally responsible for the goods sold there, the stock would plummet to pennies and site would quickly close.

They are willing to run that risk to force Sellers to accept PayPal, a financial service eBay owns from which they earn fees.

In most respects the auction itself is between seller and buyer. eBay has nothing to do with the truth of the item description, whether it's stolen goods, whether it's a cheap knock-off priced like the real thing, the method or timeliness of shipping, collection of payments, etc. eBay's business is ostensibly renting space. The tenants - the individual auctioneers - are responsible for the auctions.

eBay's role in these sales is no more than the telephone company's role when we order a pizza, but through fees eBay gets a piece of the pie.

eBay is not an absentee landlord. They constantly prowl their site searching for auctions to close which violate their labyrinth of rules. Some rules are based on laws, some based on eBay's company culture, some based on VERO, the Verified Rights Owner Program. That's eBay's enforcement arm for claimants to copyright and trademark.

To eBay, a complainant who registers with their VERO program is NEVER wrong, even when they clearly and obviously are.

eBay is rife with political correctness. If the landlord doesn't approve of what you want to sell, you can't list it. Period. The banned list grows and grows; nothing ever comes off.

Bizarre political correctness is a priority; clearing the site of swindlers is not. The courts have held that eBay is not responsible for crooks using the site. For example, this court case on bootleg films sold on eBay.

Ebay was taking far fewer decisions away from auctioneers in 2001 when that case was heard. It might be decided differently today. A court could decide customers have a right to fairer treatment, perhaps a right to an eBay guaranty.

eBay's bottom end is people taking in each other's washing and making money doing it. They go to yard sales in the closing hours, buy all the leftovers for a $5 bill, and auction individual items, often with astounding results. Odd as it sounds, there is a huge market in the US of women buying used, year-old, K-Mart children's clothes for more than they sold for when new.

At the top end eBay offers a $195,000 Frederic Remington painting, $10,000 Tiffany lamp shades, million dollar collector cars, real estate, and multi-million dollar coin collections.

In-between are:

* People buying and selling the most astonishing array of white elephants the planet has ever seen in one place. For example, crockery selling for $2 at a yard sale can bring over $1000 on eBay. Never mind that it's thick in the ankles, lacks grace, is lumpy and often garish, finds the cheerless tint in every color, and is most at home in a trailer park in Ohio where it came from. Thousands of Americans flock to eBay for artless baked dirt pottery who wouldn't look twice at exquisite, delicate European or Japanese porcelain. Ebay mirrors America.

There are serious collectors here. For the accumulator of anything at all eBay is a dream come true. With all those auctions going at once, anyone can make scores of wonderful finds every time he searches the site.

One example: on auction I sold a stack of 10 Edison phonograph records from the teens and 20s. It included a recording of a George Gershwin song - "The Life of a Rose" - unknown to archivists. Musicologists were aware of the song but believed it was never recorded. This one may be the only copy left. The high bidder got the stack of records for $50.10 plus $10.90 postage.

* There are folks building or dismantling superb collections of anything you can name, from expensive objects d'art that cost a fortune when new, to ten cent comic books and plastic candy dispensers nearly everyone threw away. Or counterfeits. There's plenty of old-fashioned fraud mixed with new-fashioned fraud.

There are:

* people making hay while the sun shines on fads like Beanie Babies, Furbys, and "rare" sports trading cards. eBay sells more "rare sports cards" every hour than were printed since the beginning of time but no one minds. Beauty is in the eye of the beer holder. So long as it looks to the pigeon like a preserved original that's what counts;

* swindlers leading lambs to the slaughter by offering new computers, costly software, and cruises to exotic places at prices too good to be true. When it sounds too good to be true it's a swindler offering it.

* folks selling things they don't own. (Look for auctions with generic illustrations or catalog photos.) They ship weeks after you pay because they use your money to purchase the item they pre-sold to you. eBay demands they explain this in clear and readable type in the auction. Many do.

Pre-selling like that allows anyone with a source of goods, new or used, to be an eBay auctioneer running a large cash flow business with no start-up cost. Downsides to the buyer: they can't always deliver what you bought, and the Internet is a magnet for folks who take the money and run.

* entire communities in poor countries mobilized to cheat gullible eBay users, for example, Dragasani, Romania

Use eBay's Feedback system as a guide. I'll say that again: Use eBay's Feedback as a guide.

CEO Meg Whitman gives eBay's official estimate that 1 auction in 40,000 is an outright fraud. Maybe. There's no way to know, and an impressive ratio like that has public relations value. But translated, that means on any given day 2,500 auctions are outright frauds according to eBay's CEO. There are tips on this page how to avoid them.

By far the vast majority of auctioneers offer things they own, or were consigned to them, and publish an actual photo of the item they are selling. They accept payment by the usual channels and have verified themselves in some way, and they will have a feedback record as a seller that's at least 98% positive.

Tip from long experience: pay attention to that 98% Positive. Buying from a seller or selling to a buyer who has more than 2 negative feedbacks per 100 transactions is asking for trouble.

Be extra careful when a seller requires a money order or certified check. This seller almost surely left something important out of the description (or lied) and expects the buyer to want to return it. These sellers say "No returns" or "As is." Don't be surprised when you're disappointed with such merchandise.

And if the seller requires a wire transfer to his bank, back away. That's favored by international scammers and skilled professional thieves wise in the ways of draining your account. The bank may be in Nevada but the scammer lives in Rumania.

Wire transfer is a valid and important way for one trusted party to pay another, but is totally out of place with a stranger.

Across America today nearly every antique store is connected with the Internet. The store may well be using its eBay store page as its home page. eBay is that important to them.

As well it should be. The smallest hole-in-the-shop in the most backwater hamlet can post an item for sale that in one day will be seen by more customers than drive by the store in a lifetime.

Geography and foot traffic no longer matter. Tiny shops can move their most valuable items (and their junk) in seven days rather than months or years, and for higher prices.

Ebay has brought the world's largest supply and the world largest demand together. Doing so changed the collecting world, mostly for the better but there are downsides.

What was once so rarely found that a collector would pay anything to own it, now might be bought for a few dollars, or go begging for lack of bidders.

Example: A pristine, as-new copy of LIFE Magazine's 1969 special edition, To The Moon And Back, with the best photos of Neil Armstrong's moon walk, used to be worth $30 or more if you could find one. Today most eBay auctions for it won't bring an opening bid of 99 cents no matter how good the condition. Everyone who bought it in 1969 saved it and is selling it on eBay. The demand was crushed by over-supply.

After eBay grew to 10 million registered accounts, shop owners began closing their stores and operating their business on-line from home. You can't beat free rent and zero paid staff.

Now eBay has more than 100 million registered accounts and the on-line demand for many items has been met. Result? Some dealers went back to the malls and rustic storefronts to sell goods that online auctions can no longer move. They need to reach people NOT on eBay.

For some sellers the biggest problem isn't finding buyers but finding desirable merchandise. New techniques have sprung up for that. Since eBay is awash with the poorly educated, dealers learned to search for misspelled or mis-described items that shoppers won't come across. They get them for a bargain, then re-sell at better prices. The Internet version of "We buy junk; we sell antiques".

In response Ebay now provides sellers a spell checker when writing an auction description.

It's also commonplace for antiquer malls to be stocked with things bought on eBay. A $20 asking price doesn't sound unreasonable for that 1969 LIFE Magazine if the customer is unaware eBay has them for 99 cents plus postage.

Business-2-Business sellers come to eBay when their channels are choked with unsold goods. Sell the slow movers by the hundreds or thousands to the highest bidder for instant payment, and move on. eBay has ten thousand times more customers than any other auction service, and there's no advertising cost.

To impress Wall Street, publicly-traded B2B companies issue press releases announcing they sell on eBay .

Many states use eBay to hold their government "as is, where is" surplus sales. These are risky since the item is often not working or not complete. Bidders can't ask "Does it work?" because no one knows. States take no returns, make no refunds. The trade-off is rock bottom price.

Today eBay focuses on businesses selling to individuals, but its origin was the individual, amateur seller. A sizable percentage of these people are disabled, retired, or isolated in rural farms and mountain hollows.

Isolated? Disabled? Retired? None of those things means what it used to before eBay came along. The personal stories of eBay changing lives can fill a library.

eBayers are too busy to read them, as the site found out when it published "eBay Magazine" one of whose regular features was the story of a life changed by eBay. Despite being professional and useful the magazine lasted only a year.

Unlike dealing with Wal-Mart, an eBay transaction is with a real person, self-selected and untrained, making his own judgments. Real people are not always professional, polite, considerate, or remember to sign their check or tell you the address to ship to. Real people have computer breakdowns and are hospitalized and lose email and go on vacation and die, any of which can delay shipping.

Those factors account for at least 80% of the small percentage of sales that don't go like clockwork. The overwhelming majority of sales are enjoyable, problem-free transactions.

We compiled statistics showing that most problems occur in a mere 10 product categories, 10 out of hundreds. Aside from those categories, nearly all the remaining problems are caused by a failure to communicate - to send email, to receive it, to respond to it, or to understand it.

Failure to respond to email is the reason most cited for giving Negative feedback. It's ignoring responsibility and everyone knows it. Failing to respond to email is inexcusable.

Success on eBay is easy: avoid the 10 problem categories, send and respond to email, and telephone the other party if you don't make email contact after the sale. Follow that, read the auction description carefully, check the feedback of the seller or buyer, and there is only the slimmest chance you will not be a happy camper.

And keep up with the news. A widely reported CBS/FBI sting proved that more than 90% of sports autographs are fake everywhere including eBay. You're expected to know that.

Because not everyone in the 10 problem-prone categories is a thief or a bimbo I won't list the categories. Instead remember that the rule for happy transactions is to deal with sellers with many Positive feedbacks and no more than a few Negatives. Even a "shooting star seller" (at least 10,000 more Positive feedbacks than Negative) will have very few Negatives unless he deserves them.

A seller with a lot of Negatives should not get your bid. Likewise, a buyer whose feedback says he doesn't follow through when high bidder should have his bid canceled by the seller and be put on the seller's Bidder Block list.

Psychologists point out that people apply their own scruples to their business practices. When they are trustworthy, they trust others. So read the auction fine print. Sellers who don't trust bidders probably can't be trusted.

Experienced sellers know 99 out of 100 checks are good and nearly all bad checks are made good complete with bounced check fees. Yet some sellers will refuse to ship for a week or more after depositing a check or even a money order. They don't trust buyers. They are projecting their own iffy honesty onto their customers.

A few problem categories are exceptions to that and run a lower happiness rate than the norm, generating more complaints from buyers and sellers who discover their trading partner is a jerk.

Clothing, sports memorabilia, and mass-produced stuffed animals require extra care. Clothing is commonly in poorer condition than described. Sports memorabilia is awash with fakes and fraudsters. Mass-produced stuffed animals will involve at least one simpleton in the deal.

Computer categories require extra care. Broken PCs and peripherals aren't always described as broken. Shipping is commonly two to four times the actual cost, and insurance often four times what the carrier charges. Avoid the price gougers; go with sellers who treat you right.

In all categories be wary of those who flaunt religion. ANY mention of God or Jesus is a red flag when you see it on an auction page or business email. As wise old Missouri Baptist Harry Truman put it, "When you can hear them praying, it's time to check the lock on the barn." As Harry knew, a coat of piety is the favored camouflage of a scoundrel.

Each item is sold to the highest bidder in a "silent auction." Close to 50% of the items offered at eBay result in sales, including those that have a Reserve minimum. In almost all cases sellers get their money and buyers get their treasure.

Bidders have the option of placing a secret limit on what they will pay for an item. An automatic proxy system will tender their bid only to the lowest amount needed to keep them top bidder. If their top limit is exceeded by someone else, that person becomes top bidder unless the earlier bidder returns to the auction page and places a new, higher limit. Auctions expire at a fixed time.

Sophisticated bidders will watch an auction's last few minutes and enter their top limit toward the close, often in the last 5 seconds. Bidders who lose call that "sniping" and grouse about it, until they understand that any bid during the life of an auction is as good as any other.

The sniper's winning bid will always be the lowest amount necessary to win, frequently just $1 above the loser. In fact his top limit was probably far higher but the proxy system never bids more than the one increment required to be on top.

Ebay's proxy system is the same one used by Sotheby's when an item has absentee bidders.

The proxy system is totally automated and no one - not seller, other bidders, or eBay - can tamper with it. So far as anyone knows it's 100% safe and reliable.

If the Internet is slow or blocked, or eBay is having technical difficulties, these delays can prevent timely bidding. That's easily circumvented by entering your maximum proxy bid when you first come across the auction. If you lose, it can only be to someone with deeper pockets, not net lag.

An experienced sniper will make his first appearance in an auction in the last 10 seconds. Two or three good snipers going head-to-head with proxy bidding can drive a bid up by hundreds of dollars, even thousands, in a flash, totally automated, yet none will have bid more than what the item was worth to him.

The greatest thrill for a seller is watching this happen to his auction.

One time I put on eBay a rare light bulb I bought at a gallery auction for $55. For the entire week there was one bid, the opening minimum of $4.99. With eight seconds left, three snipers entered proxy bids. The winning bid was $263. The winning bidder thought it went cheap. He said his proxy limit was over $400.

After the sale, sellers get an automated email telling them the auction ended, the winning bid, and how to contact the high bidder. Should the winner fail to honor the contract, the seller notes that as a Negative in the bidder's public feedback record. Bad things follow from too many Negs.

To succeed on eBay Sellers need only describe their items honestly, respond promptly to email, pack with care, and ship when they get paid. eBay creator Pierre Omidyar found the way for anyone -- from world-class salesman to world-class moron -- to quit his job or quit loafing and make a good living on the Internet.

Minimum intelligence is required to put an auction on eBay. None is required to be a bidder.

Even knowing how to use a computer isn't required for eBay success. A seller of collector magazines once asked on a chat board how to copy and paste in Windows. Despite having had over 1000 eBay sales, he admitted he knew almost nothing about computers.

There are successful sellers with beautiful auction pages carefully crafted showing excellent photos of the item, with descriptions reflecting hours of research and years developing expertise in the subject.

There are successful sellers with abysmal page design, no description, blurry photos or none, and total ignorance of their items.

One knowledgeable, professional seller of upscale estate silver never uses pictures and (over) charges for shipping based on the selling price, not the cost to ship. Still, he's successful, though his sales are about one-fifth those of his competitors who use pictures and honest shipping charges.

One successful husband and wife team may have the ugliest pages at eBay. They violate every guideline. Black backgrounds with poorly contrasting colors, a display format too wide for the monitor, a moving marquee of trashy blurb, 400 words of fine print disclaiming responsibility, pathetic out-of-focus pictures, and virtually no description of the item because they don't know anything about what they are listing.

They buy crap at government auctions no one else wants, usually for the opening bid, and re-sell it on eBay.

Result? They could be eBay's poster child. This team with a knowledge level approaching zip and no selling skill earned the right to use the "Power Seller" logo which requires a minimum of $2,000 in sales every month. (Sales - not profits.)

All they have to do is post the auctions on eBay and play fair. Millions of shoppers do the rest.

The year 2000 saw eBay reach its first transition. After 4 years of attracting individuals followed by shop owners, it became apparent that demand for collectibles was not limitless. Collectors are a finite number. When most of them are on eBay buying and selling, the term "rare item" takes on a new meaning.

Before eBay "rare" meant something a collector seldom ran across. Since eBay, rare means just a few were up for sale this month.

An item that's "scarce" is usually available from 2 or 3 sellers a week. Common collectibles are available from hundreds of sellers all the time.

The result is that an eBay a SEARCH of completed sales is the world's best source of market value. It's far better than an appraisal; it's a report of actual prices realized with a description of condition. The Completed Auction search used to go back 30 days until eBay slashed it to 15.

eBay archives every iota of data it ever got, and for years some of us begged eBay to make their inventory of completed sales records available for online search. Finally they did, by subscription, but it only goes back 90 days. They have the material to publish the world's best price guides but have shown no interest in it.

eBay is not someone's hobby, though it began that way. When it became a public company on September 24, 1998, the power to control eBay was transferred from founder Pierre Omidyar to a board of directors. The focus moved from pleasing users to pleasing investors.

Founders have heads and hearts; board have only heads. The founder was concerned with eBay the auction venue. The board is concerned with eBay the profit maker. eBay now has fingers in many pies.

eBay hasn't turned its back on small users. There are too many million of them for that. But the emphasis has changed. Rules are looser for large clients, for Power Sellers, for its ever-growing list of "partners" some of whom, like Doubleclick, make our Internet lives annoying.

How many partners? We'll never know, but an eBay login sets 30 cookies, the most of any site on the web. A simple SEARCH sets 13 more eBay cookies plus 2 dreaded Doubleclicks. Make it a search for completed auctions and eBay sets 23 more cookies, and 2 more Doubleclicks. If any firm wants to buy tracking info, eBay has it all. They analyze every move you make. "Forget privacy, ye who enter here."

The on-line auction concept is still evolving. eBay's goal is infinite bigness. So far that's the best business model.

eBay owns on-line auction services in all the major e-commerce countries but they are not integrated. International selling still requires knowing the language.

Erasing that bar carries enormous potential. eBay US is available planet-wide on the Internet but only about 12% of the world's population knows enough English to participate. That's 770 million. The other 5.6 billion can't read to bid.

Just about everything at the site creates income to eBay. eBay keeps the auction entry fees even if things go bad between buyer and seller. There is a commission refund policy sellers can use if a sale falls through, but it's a grain of sand lost from the beach of eBay income.

The vast majority of users have no problems. Miscreants target easy victims where easy victims are the rule rather than the exception.

In July, 2000, eBay addressed the issue of forged autographs. They placed a warning message on the site, and listed the names of individuals and firms whose Certificate of Authentication would not be allowed to appear. Auctions relying on those COAs are canceled when reported. The names are those identified as questionable (or worse) by law enforcement and consumer protection agencies.

Beyond the fraud-rife areas the main risks are the same as they are for absentee bidders in a live auction: inaccurate item descriptions, shill bidding, and people interpreting terms like "excellent condition" differently. And as in a live auction, when absentee bidders win, some auction galleries inflate shipping charges.

If there's any doubt about the cost of S&H or the condition of an item, eBayers email sellers before bidding and ask specific questions. The wise customer never bids until a satisfactory answer comes. While it's possible to withdraw a bid before an auction closes (never after,) it's bad form and users can be suspended for over-doing it.

One safety net that sounded good in theory turned out to fail in practice so it's been dropped. Called Escrow, it's a service that after the auction closes, allows the buyer to examine and approve the merchandise before his money is sent to the seller.

Escrow leaves sellers wide open to swindlers so it's seldom used. Here's an example.

A seller offers a rare $2000 vase in perfect condition. Someone sees it who also owns that vase, but hers has a crack so it's worth only half as much. She buys the good vase using Escrow, tells the Escrow company the vase is cracked, keeps the good vase and ships the seller the cracked one. Escrow returns her money to her.

The seller can begin a long, time-wasting legal process but he will only throw good money after bad. If he gets to court he will not be able to prove he shipped the perfect vase he pictured in his auction. It's impossible to prove he didn't own two and shipped the cracked one. End of case. Seller loses his $2000 vase due to Escrow.

eBay once tried to force Escrow on its sellers. It's an illustration of eBay company culture: they make decisions if some fair-haired boy likes the idea. eBay's boilerplate still suggests using Escrow, a specific one they like, as if that mattered. Whoever itches for Escrow can't seem to grasp how it fails.

Auction shilling is a constant problem. A seller with multiple eBay accounts can bid up his own auctions with little chance of being caught. It used to be that users looking for shillers were an important source of eBay crime detection. In one notable investigation by an eBay user, one seller was found to have more than 400 bidding accounts to shill with.

Ebay's reaction? The tool for users to find shill accounts was removed from the site.

The next year shillers got two more breaks. It became grounds for suspension to reveal a shilled auction on an eBay chat board. And to report shilling to eBay became an intricate multi-step process.

The message is clear; they don't want to know. Despite the "No shilling" rule, eBay loves shillers. Why not. The higher the final bid the more wealth flows to eBay and the happier the investors.

Also the happier the commercial sellers so important to the site whether large or small. Ebay does nothing to prevent a store clerk from shilling the bosses auctions and vice versa, so long as they log on to eBay with separate accounts.

Far and away the reason so much hanky-panky goes on is the failure to verify and authenticate registration information. I suppose it reflects our American heritage that the white collar crook has a place in society so long as he keeps to it and rocks only small boats. That's eBay's business model: making money while making everyone's American Dream come true.

Shill bidding means higher eBay commissions. Swindlers and con artists pay their monthly eBay bill like anyone else, until the month they vanish or get too ambitious and some DA indicts them. It happens occasionally.

It's that business model - saints and sinners alike boosting the bottom line - that made eBay the hottest IPO of 1998 and required the services of 4 brokerage houses to bring the stock to market. Wall Street, which also uses the saints and sinners business model, saw fit to boost the stock price 197% the first day.

What "pilferage" eBay has is mostly sellers who cheat by pricing items at close to nothing to avoid commissions, and charge whopping shipping fees instead. One seller sold carpets for $1 and charged $150 and up to ship them. eBay gets no share of shipping and handling fees, so when users spot those auctions and report them, eBay closes them.

Then eBay bought the popular online payment scheme, PayPal. Paypal allows any seller to take credit and debit card payments without having a merchant account. The fee for using PayPal is based on the total amount, bid + S&H, so through Paypal eBay gets a piece of the S&H. These aren't nickels and dimes. eBay paid $1.5 billion for PayPal when it became available, lest Microsoft snap it up. Microsoft owning PayPal would have been a spider in eBay's bed.

eBay doesn't reveal its collection rate but its structure makes it pretty tight. They post bills electronically to the auctioneer's credit card, and the majority of sellers pay that way. If you want to hold auctions in the future you make sure the monthly bill is paid.

eBay's charge to use it rises steadily to meet the demands of investors. They are opulently profitable but investors demand above average profit growth year after year after year. That's capitalism's curse. If this years growth in profit isn't obscenely high, the stock price falls and eBay executives are blamed.

eBay doesn't use the term "commission" anyplace on the site. They call the sales commission a "Final Value Fee." Most states have laws requiring a license to collect auction commissions, laws written before on-line auctions existed. To avoid clashing with those laws the word "commission" doesn't exist at eBay.

eBay has a flat fee for cars, trucks, RVs, motorcycles, and similar conveyances. The vehicle business requires a license, eBay doesn't have one, so they can't charge a commission based on value.

eBay segregated its motor vehicles into a satellite auction site called "eBay Motors" and gave it a completely different look. A smart idea, the car business being what it is. They even paint black bands across the top and bottom of the screen, a suggestion of armbands used in mourning perhaps.

I'm partial to eBay Motors. I bought a vintage Mercedes sports car there sight unseen. Great car, very good deal.

Like automobiles, real estate also has state licensing issues, so there is only a flat fee to list realty. The law prevents them from charging a commission for real estate no matter what euphemism for commission they use unless they are licensed. But watch out. eBay has acquired realty brokerage licenses in 43 states thus far. What's up? I smell plans to create a national Multiple Listing Service with fees based on the property asking price. As a retired real estate broker I see that as exciting marketing.

Now if they only had a listing category for 1031 tax free exchanges.

There's another side of eBay interwoven into the service that's free and had much to do with its early success. Human contact. Whether through its various chat boards or just email with your buyers and sellers, eBay is a world community. An eBay regular cannot fail to make friends unless he refuses to.

This created on-line enclaves where people use chat boards as a coffeehouse or sewing circle, talking about their family, exchanging recipes, diagnosing computer problems, even flirting. Users have been known to gather their recipes into a book, sell copies of it via a Dutch auction (multiple bidders for multiple copies,) and donate the proceeds to charity.

Maybe it goes against the image but eBay can boast more than one granny who used her kitchen table to assemble her own computer from mailorder parts. Users might discover this when she shows up on an eBay chat board solving someone's PC hardware or software problem. eBay's boards are an excellent source to learn common Windows and Browser fixes.

One victim of eBay's blow-out early growth was their on-line Help desk. eBay had to close down the best online Support system in cyberspace due to too many people venting too many complaints with too little self-control. Some folks, grannies included, can go ballistic and abusive behind an alias.

It's important to realize that eBay has a number of borderline dysfunctional users unable to understand everyday concepts and unable to cope with disappointment. That's one downside of Pierre's goal of easy access.

eBay's original on-line live help was designed with that in mind. No matter how inane the question, no matter how angrily it was expressed, no matter the same question was answered 5 times in the previous 10 minutes, the response was polite and respectful.

It didn't work with the jerks. A small core of callous, shallow, inconsiderate, immature, and deliberately cruel users pummeled the support staff into tears in January and February of 1999 and killed the live help desk. It's useful to remember those users are still on eBay buying and selling.

Commerce is not rocket science but eBay has users to whom anything is rocket science.

"A bidder on my auction emailed me a question. What should I do?" was an actual query to live help from someone unable to conclude he should answer the question. And perhaps unable to read? In 4 or 5 places eBay takes pains to tell users to ask sellers any questions they have before bidding. This cretin couldn't make the connection.

He was not a newcomer. According to his feedback he was someone who had participated in more than 200 eBay auctions. As Pierre designed it, utter stupidity is no bar to buying and selling on eBay, or making a living.

On-line help now comes from discussion and chat boards manned by experienced users, and forums hosted by staffers. These are a great resource. No other online auction site has this interactive community. It sets eBay apart.

Good thing, too, because email support flirts with abysmal. Never mind reading the message. Just look for a key word, send a macro about that, and meet the hourly quota. eBay offers no telephone support except for the biggest accounts.

Something else that set early eBay apart was the use of focus groups to discuss ideas. Called "Voices," the groups served as a sounding board on site performance, new ideas, and coming changes.

Periodically a dozen or so members were flown to San Jose for a full day of meetings with eBay staff including the CEO. In September of 2000 I was part of Voices 7. PBS filmed that Voices group and all of us were on national TV. Voices groups remained in contact for years by email and conference calls.

eBay loses no sleep over discipline. At the point when eBay must crack a whip it's handled by email. At that time users learn eBay isn't their mother. A decision is made, action is taken, and you learn of it in a no-nonsense email.

If an auction is entered that's against the rules, eBay closes it and tells the seller why. If a user sends unsolicited commercial email qualifying as spam, he's warned not to do it again. If someone makes a pest of himself on the chat boards, he loses access there.

There are more than 100 other auction sites on the Internet but eBay has no serious competition. They are a whale swimming with minnows. eBay has more sales per hour than most auction sites have in a year.

This can be demonstrated. There are on-line services that search through all the on-line auction sites for an item you're looking for. Try any item and see where most are found. If the item is allowed on eBay, eBay will dominate the search results.

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Everyone who tries on-line auctions reports that if they want buyers, they have to be on eBay. If they're looking for tens of thousands of individual sellers eBay is the only place to find them. If they want to find a collectible, only eBay is where they can choose among, for example, 10 or more vintage Zenith Trans-Oceanic tube radios every week, week after week.

There's nowhere else on the planet to find that range of items. In all categories it allows, eBay has a lock on lookers, sellers, and bidders.

One exception to alternative sites is Teletrade where coins are auctioned. Teletrade is a veteran auction site for coin dealers that opened to the public. It's safer than eBay because items are examined by Teletrade staff before they're allowed to be graded and auctioned, and Teletrade does the shipping, not the seller.

There are also auction sites for items not allowed on eBay. eBay lists 30 forbidden categories, such as guns, lock-picking devices, postage meters, etc. and scores of "questionable" categories. Some perfectly legal items like show dogs are forbidden because eBay culture objected to them. There are excellent auction sites on the web for most of those categories.

eBay has tough competition for book auctions from Amazon. In some ways Amazon is a clone of eBay but a 2nd generation clone. They copied much that makes eBay easy to use, and added powerful listing enhancement features eBay doesn't have.

These include a half-dozen low cost ways to promote an auction. These are effective for sellers and lucrative for Amazon. If eBay tried to copy this, its army of cretins would go ballistic over yet another feature they can't understand.

Amazon also offers free 800 number live telephone support which could be the best in the world for e-commerce, and there email support is outstanding.

Amazon book auctions don't have as high a success rate as eBay's, but an unusual book that didn't sell or bring its Reserve on eBay will sometimes sell on Amazon because of the target audience. Amazon is also a good place to sell the just average books and videos rather than get embroiled in half.com, eBay's mismanaged stepchild.