eBay Set the Standard for e-Commerce for 20 Years

It’s hard to believe, but eBay is 20 years old this year. How did a humble company start as a side business for Pierre Omidyar come to be the gold standard for e-Commerce?

A good idea – solved a problem shared by a large # of people

Good leadership

Constant innovation – businesses succeed or fail through innovation

Consumers buy solutions; not products

Successful businesses never lose sight of why consumers buy their products — because they solve a problem.

Finding a problem is the first step in success.

Then, assess how big a problem it is — can existing products solve the problem? Is the problem trivial or debilitating? The bigger the gap between problem and solution; the more serious the problem, the bigger the opportunity.

Finally, assess the size of the problem — do a few people find the problem truly annoying or is it ubiquitous? The more people who suffer the problem, the bigger your opportunity.

Leadership

What constitutes leadership varies based on context and orientation. For many years, effective leadership meant managing people and processes more than giving orders and knowing everything. Effective leaders motivate employees and remove roadblocks to their success.

Identifying a bad leader is much easier than a good leader. Bad leaders:

• lack empathy
• fear change
• are too bossy
• are wishy-washy
• a poor judge of character
• lack humility
• show poor performance
• have poor communication
• are inflexible

No business succeeds without good leadership.

To his credit, Omidyar didn’t try to run the company himself. He hired talent (like Meg Whitman – its first CEO and Jeffrey Skoll, its first president) and stayed out of the way to let these talents folks drive the company — supervising an IPO that skyrocketed on its first day of trading and increasing the number of auctions 10 fold.

Constant innovation

Innovation is the lifeblood of business and any business that isn’t actively innovating is failing.

Rather than focus on its key revenue model — collectable actions — the company expanded into related and ancillary businesses. Internally, eBay expanded its auction portfolio to all kinds of items (although some categories are banned), most notably travel products through an agreement with a travel company.

When Whitman joined eBay as CEO in 1998, she acquired innovation through new, innovative companies related to e-commerce, such as PayPal and Skype. Rapid expansion included Europe and, soon, other countries. Their only failure was in China, where the strength of competitors like Taobao and, later, Alibaba forced the company to retreat.

Lessons from ebay

Obviously, mimicking Ebay by employing the 3 characteristics above underpins any effort to garner the returns the company enjoys.

Other lessons are more specific to the e-commerce area in which they compete.

• Eschew ownership
• Embrace data
• Stick to your knitting

Eschew ownership

As part of the sharing economy — in fact, an early leader — eBay recognized that consumers have things they don’t want or that they’re willing to share either after they’ve used it or when they’re not using it. Uber and Airbnb later followed the same mantra in creating their own products where consumers share ownership of assets.

As Ebay moved away from their early roots in consumer sharing toward a standard e-commerce site involving sale of new items rather than auctions for used ones, new entrants filled the void. Firms like letgo and Craigslist, which is 25% owned by eBay, operate as used e-commerce sites without the auction option.

Amazon took a slightly different spin on the whole ownership thing by selling custom published books through Kindle or as printed books. Authors now needn’t use a publisher, but can publish on Amazon through a profit-sharing agreement.

By not owning products, companies reduce business risk significantly. If an item doesn’t sell, the owner loses, not the etailer. Plus, there’s no expensive overhead for storage, theft, damage, or obsolescence.

Data and metrics

Running a business by the seat of your pants was never a good idea, but the importance of data for the modern firm raises the stakes significantly. Google and Facebook both make a significant amount of money through access to massive amounts of data and their ability to use that data in growing their businesses.

eBay also knows the value of the metrics they possess — estimated at 50 petabytes a day.

To put that into perspective, 50 petabytes represents all the written works of mankind in all languages. Or, a lot.

To manage this data river, eBay employs 5000 data analysts.

Stick to your knitting

While eBay ventured out from its e-commerce origins, it didn’t stray too far — at least initially. And, that’s critical.

A business needs focus — expanding into related areas is fine, but going way outside their knowledge zone is dangerous. Expansion should build on existing knowledge of the product market, target market, or both. Knowing the technology also helps, but is less critical than product and market knowledge.

Celebrating eBay’s 20 years

To celebrate eBay’s 20 years, some colleagues produced this very interesting infographic (see below) and asked that I share it with you.

Enjoy.

Read more:

• eBay India Celebrates 8th Birthday Bash On Social Media