eBay is an American Internet company that manages ebay.com, an online auction and shopping website where people and businesses buy and sell goods and services worldwide. In addition to its original U.S. website, eBay has established localized websites in Australia, Austria, Belgium, Canada, China, France, Germany, Hong Kong, India, Ireland, Italy, Netherlands, New Zealand, Poland, Philippines, Singapore, South Korea, Spain, Sweden, Switzerland, Taiwan, and the United Kingdom. eBay Inc also owns PayPal, Skype, and other businesses.
The online auction web site was founded in San Jose, California on September 3, 1995 by computer programmer Pierre Omidyar as AuctionWeb, part of a larger personal site that included, among other things, Omidyar's own tongue-in-cheek tribute to the Ebola virus.
The very first item sold on eBay was a broken laser pointer for $14.83. Astonished, Omidyar contacted the winning bidder and asked if he understood that the laser pointer was broken. In his responding email, the buyer explained: "I'm a collector of broken laser pointers." The frequently repeated story that eBay was founded to help Omidyar's fiancée trade PEZ Candy dispensers was fabricated by a public relations manager in 1997 to interest the media. This was revealed in Adam Cohen's 2002 book and confirmed by eBay.
Chris Agarpao was hired as eBay's first employee and Jeff Skoll was hired as the first president of the company in 1996. In November 1996, eBay entered into its first third-party licensing deal, with a company called Electronic Travel Auction to use SmartMarket Technology to sell plane tickets and other travel products. The company officially changed the name of its service from AuctionWeb to eBay in September 1997. Originally, the site belonged to Echo Bay Technology Group, Omidyar's consulting firm. Omidyar had tried to register the domain name EchoBay.com but found it already taken by the Echo Bay Mines, a gold mining company, so he shortened it to his second choice, eBay.com.
eBay went public in 1998, and both Omidyar and Skoll became instant billionaires. The company purchased PayPal in October 2002.
Millions of collectibles, appliances, computers, furniture, equipment, vehicles, and other miscellaneous items are listed, bought, and sold daily. In 2004, eBay launched its Business & Industrial category, breaking into the industrial surplus business. Some items are rare and valuable, while many others are dusty gizmos that would have been discarded if not for the thousands of eager bidders worldwide. Anything can be sold as long as it is not illegal or does not violate the eBay Prohibited and Restricted Items policy. Services and intangibles can be sold too. Large international companies, such as IBM, sell their newest products and offer services on eBay using competitive auctions and fixed-priced storefronts. Regional searches of the database make shipping slightly faster and cheaper. Separate eBay sites such as eBay US and eBay UK allow the users to trade using the local currency as an additional option to PayPal. Software developers can create applications that integrate with eBay through the eBay API by joining the eBay Developers Program. As of June 2005, there were over 15,000 members in the eBay Developers Program, comprising a broad range of companies creating software applications to support eBay buyers and sellers as well as eBay Affiliates.
Controversy has arisen over certain items put up for bid. For instance, in late 1999 a man offered one of his kidneys for auction on eBay, attempting to profit from the potentially lucrative (and, in the United States, illegal) market for transplantable human organs. On other occasions, people and even entire towns have been listed, often as a joke or to garner free publicity. In general, the company removes auctions that violate its terms of service agreement within a short time after hearing of the auction from an outsider; the company's policy is to not pre-approve transactions. eBay is also an easy place for unscrupulous sellers to market counterfeit merchandise, which can be difficult for novice buyers to distinguish without careful study of the auction description.
eBay's Latin American partner is MercadoLibre.
eBay's rivals include Amazon.com Marketplace, PriceGrabber.com Storefronts, Yahoo! Auctions and Overstock Auctions.
In April of 2006, eBay opened its new eBay Express site, which is designed to work like a standard Internet shopping site to consumers with United States addresses. Selected eBay items are mirrored on eBay Express where buyers shop using a shopping cart to purchase from multiple sellers. The UK version was launched to eBay members in mid October 2006, and differs from the US version by only offering brand new items from pre-vetted business sellers. The German version was also opened in 2006.
In June of 2006, eBay added an eBay Community Wiki and eBay Blogs to its Community Content which also includes the Discussion Boards, Groups, Answer Center, Chat Rooms and Reviews & Guides.
Turbo Lister 2 is a software tool designed by eBay to streamline the process of creating large numbers of listings. It is provided as a free download for eBay users.
eBay offers several types of auctions.
* Auction-style listings allow the seller to offer one or more items for sale for a specified number of days. The seller can establish a reserve price.
* Fixed Price format allows the seller to offer one or more items for sale at a Buy It Now price. Buyers who agree to pay that price win the auction immediately without submitting a bid.
* Dutch Auctions allow the seller to offer two or more identical items in the same auction. Bidders can bid for any number from one item up to the total number offered.
For Auction-style listings, the first bid must be at least the amount of the minimum bid set by the seller. Regardless of the amount the first bidder actually bids, until a second bid is made, eBay will then display the auction's minimum bid as the current high bid. After the first bid is made, each subsequent bid must be equal to at least the current highest bid displayed plus one bidding increment. The bidding increment is established by eBay based on the size of the current highest displayed bid. For example, when the current highest bid is less than or equal to $0.99, the bidding increment is $0.05; when the current highest bid is at least $1.00 but less than or equal to $4.99, the bidding increment is $0.25. Regardless of the amount each subsequent bidder bids, eBay will display the lesser of the bidder's actual bid and the amount equal to the previous highest bidder's actual bid plus one bidding increment. For example, suppose the current second-highest bid is $2.05 and the highest bid is $2.40. eBay will display the highest bid as $2.30, which equals the second-highest bid ($2.05) plus the bidding increment ($0.25). In this case, eBay will require the next bid to be at least $2.55, which equals the highest displayed bid ($2.30) plus one bidding increment ($0.25). The next bid will display as the actual amount bid or $2.65, whichever is less. The figure of $2.65 in this case comes from the then-second-highest actual bid of $2.40 plus the bidding increment of $0.25. The winning bidder pays the bid that eBay displays, not the amount actually bid. Following this example, if the next bidder is the final bidder, and bids $2.55, the winner pays $2.55, even though it is less than the second-highest bid ($2.40) plus one bidding increment ($0.25). However, if the next bidder is the final bidder and bids an arbitrarily large amount, for example $10.00 or even more, the winner pays $2.65, which equals the second-highest bid plus one bidding increment.
For Dutch Auctions, which are auctions of two or more identical items sold in one auction, each bidder enters both a bid and the number of items desired. Until the total number of items desired by all bidders equals the total number of items offered, bidders can bid any amount greater than or equal to the minimum bid. Once the total numbers of items desired by all bidders is greater than or equal to the total number offered, each bidder is required to bid one full bidding increment above the currently-displayed winning bid. All winning bidders pay the same lowest winning bid.
eBay has established detailed rules about bidding, in retracting of bids, shill bidding (collusion to drive up the price), and other aspects of bidding.
eBay generates revenue from a number of fees. The eBay fee system is quite complex; there are fees to list a product and fees when the product sells, plus several optional fees, all based on various factors and scales. The U.S.-based ebay.com takes $0.20 to $80 per listing and 5.25% or less of the final price (as of 2007). The UK based ebay.co.uk (ebay.co.uk offices) takes from GBP £0.15 to a maximum rate of GBP £3 per 100 for an ordinary listing and from 0.75% to 5.25% of the final price. In addition, eBay now owns the PayPal payment system which has fees of its own.
Under current U.S. law, a state cannot require sellers located outside the state to collect a sales tax, making deals more attractive to buyers. Although state laws require purchasers to pay sales tax to their own states on out-of-state purchases, most people ignore this requirement.
The company's current business strategy includes increasing revenue by increasing international trade within the eBay system. eBay has already expanded to almost two dozen countries including China and India. The only places where expansion failed were Taiwan and Japan, where Yahoo! had a head start.
* In July 1998, eBay acquired Cincinnati, Ohio based online auction site Up4Sale.com.
* In May 1999, eBay acquired the online payment service Billpoint, which it shut down after acquiring PayPal.
* In 1999 eBay acquired the auction house Butterfield & Butterfield, which it sold in 2002 to Bonhams.
* In 1999 eBay acquired the auction house Alando for $43 million, which changed then to eBay Germany.
* In June 2000 eBay acquired Half.com for $318 million, which was later integrated with the eBay Marketplace.
* In December 2000 eBay acquired the Precision Buying Service portion of Deja.com.
* In August, 2001, eBay acquired Mercado Libre and Lokau, Latin American auction sites. eBay also acquired iBazar, a French auction site.
* In July, 2002 eBay acquired PayPal, for $1.5 billion in stock.
* On January 31, 2003, eBay acquired CARad.com, an auction management service for car dealers.
* On July 11, 2003 eBay Inc. acquired EachNet, a leading ecommerce company in China, paying approximately $150 million in cash.
* On June 22, 2004, eBay acquired all outstanding shares of Baazee.com, an Indian auction site for approximately US $50 million in cash, plus acquisition costs. Baazee.com subsequently became eBay India.
* On August 13, 2004, eBay took a 25% stake in Craigslist by buying out an existing shareholder who was once a Craigslist employee.
* In September 2004, eBay moved forward on its acquisition of Korean rival Internet Auction Co. (IAC), buying nearly 3 million shares of the Korean online trading company for 125,000 Korean won (about US$109) per share.
* In November 2004, eBay acquired Marktplaats.nl for €225 million. This was a Dutch competitor which had an 80% market share in the Netherlands, by concentrating more on small ads than actual auctions. Marktplaats is the Dutch word for Marketplace.
* On December 16, 2004, eBay acquired Rent.com for $415 million in cash (original deal was for $385 million of the amount in eBay stock plus $30 million in cash).
* In May 2005, eBay acquired Gumtree, a network of UK local city classifieds sites.
* On May 18, 2005, eBay acquired the Spanish classifieds site Loquo.
* In June 2005, eBay acquired Shopping.com, an online comparison site for $635 million.
* At the end of June 2005, eBay acquired the German language classifieds site Opus Forum.
* In September 2005, eBay bought Skype, a VoIP company, for $2.6 billion in stock and cash.
* In April 2006, eBay invested $2 million in the Meetup social networking site.
* In April 2006, eBay acquired Tradera.com, Sweden's leading online auction-style marketplace for $48 Million.
* In August 2006, eBay announced international cooperation with Google. Financial details have not been disclosed by either party.
* In February 2007, eBay acquired online ticket marketplace Stubhub for $307 million.
* In May 2007, eBay acquired a minority stake in GittiGidiyor.
* In May 2007, eBay acquired the website StumbleUpon for approximately $75 million.
A major fraud-prevention mechanism for eBay users is its feedback system. After every transaction both the buyer and seller have the option of rating each other. They can give a "positive", "negative", or "neutral" rating and leave a comment no longer than 80 characters. So if a buyer has problems, he or she can rate the seller "negative" and leave a comment such as "never received product". Learning the system and examining a seller's feedback history is a buyer's best protection.
Weaknesses of the feedback system include:
* Small and large transactions carry the same weight in the feedback summary. It is therefore easy for a dishonest user to initially build up a deceptive positive rating by buying or selling a number of very low value items, such as e-books, recipes, etc., then subsequently switching to fraud.
* A user may be reluctant to leave honest feedback out of fear of negative retaliatory feedback (including "negative" in retaliation for "neutral").
* Feedback and responses to feedback are allotted only 80 characters each. This can prevent users from being able to fully list valid complaints.
* Accounts with good feedback can be hijacked by phishing giving a con artist the appearance of an excellent trading history. This problem is particularly prevalent in certain areas, such as digital cameras.
* Although Ebay protects sellers from getting a negative feedback from a deadbeat buyer (once the non-paying bidder case is decided in the seller's favor), they do not offer the same protection for a buyer who gets a deadbeat seller.
When a user feels that a seller or buyer has been dishonest, a dispute can be filed with eBay. An eBay account (whether seller, buyer or both) may be suspended if there are too many complaints against the account holder.
Many complaints have been made about eBay's system of dealing with fraud, leading to its being featured on the British consumer rights television program Watchdog. It is also regularly featured in The Daily Mirror's Consumer Awareness page. The complaints are generally that eBay sometimes fails to respond when a claim is made, and since eBay makes its money on commissions from listings and sales may not be in eBay's interest to take action against large sellers.
Frauds that can be committed by sellers include:
* Receiving payment and not shipping merchandise
* Shipping items other than those described
* Giving a deliberately misleading description
* Shipping faulty merchandise
* Counterfeit or bootleg merchandise
* Selling stolen goods
* Inflating total bid amounts by bidding on their own auction with "shill" account(s), either the seller under an alternate account or another person in collusion with the seller. Shill bidding is prohibited by eBay and, in at least one high-profile case involving Kenneth Walton (and his accomplices Ken Fetterman and Scott Beach) has been prosecuted by the federal government as criminal fraud.
Frauds committed by buyers include:
* PayPal fraud: Filing false shipping damage claim with the shipping company and with PayPal.
* Credit card fraud, in the form of both stolen credit cards and fraudulent chargebacks.
* Receiving merchandise and claiming otherwise
* Returning items other than received
* The buyer sends a forged payment-service E-mail which states that the buyer has made a payment to the seller's account. An unsuspecting seller may ship the item before realizing the E-mail was forged.
* Sellers of inexpensive items may benefit from inflating the shipping cost while lowering the starting price for their auctions, because some buyers overlook the shipping cost when calculating the amount they are willing to spend. Since eBay charges their fees based on final sales price without including shipping, this allows sellers to reduce the amount they pay eBay in fees (and also allows buyers to reduce or avoid import fees and sales taxes). This is called "fee avoidance", and is prohibited by eBay policy, as are excessive shipping and handling charges. A danger to the buyer in such cases is that in the event of defective merchandise, the seller may claim to have met his refund obligations by returning only the minimal purchase price and not the shipping costs.
* Sellers sometimes charge fees for use of PayPal as well. Although this is officially banned by eBay and PayPal and is against some local laws as well as violating merchant agreements with Visa, Mastercard and Discover, eBay does not police for this and will only look at it if the auction is reported. Therefore inexperienced users often wind up paying these illegal and unenforceable fees.
* Auction sniping is the process of watching a timed online auction, and placing a winning bid at the last possible moment (often literally seconds before the end of the auction), giving the other bidders no time to outbid the sniper. Some bidders do this manually, and others use online services and software designed for the purpose. While disliked by many eBay users, sniping is not against eBay rules.
* Burying shipping charges or undesirable terms in a large amount of text.
Holders of intellectual property rights, have claimed that eBay profits from the infringement of intellectual property rights. eBay has responded by creating the Verified Rights Owner (VeRO) program, which provides to rightsholders expedited auction takedowns and private information on eBay users, but has likewise been criticized.
* In June 2004 the jeweler Tiffany & Co. sued eBay claiming that eBay profits from the sale of counterfeit Tiffany products. As of July 2006, a trial date has not been set.
* Some manufacturers have abused eBay's VeRo program, through which copyright and trademark owners can quickly protect their rights, by seeking to prevent all sales of their products on eBay.
* In November 2006, a U.K. High Court ruled that a VeRO rightsholder's takedown request to eBay constituted a legal threat under design patent law. Since groundless legal threats under design patent law are unlawful, the ruling holds that groundless VeRO takedown requests based on design patents are also unlawful. Further, the text of the ruling appears critical of the VeRO program in general: "It is entirely wrong for owners of intellectual property rights to attempt to assert them without litigation, or without the threat of litigation, in reply."
A source of frustration for some eBay users is that despite the company's size, it offers no customer support by phone, instead referring all ordinary members to its online help features. Apart from a library of self-help resources, these features consist mainly of e-mail contact forms and "Live Help," which lets users chat with customer service representatives via instant messaging. In fact, most visitors to the eBay site will not find any company phone number listed at all.
eBay does, in fact, have a phone support department, but that service is limited to members of the rank "Silver PowerSeller" and above, the company's term for members who sell at least $3,000 worth of goods per month on the site. The phone number for that service is not published, though ordinary customers who discover it from other sources will usually be offered help as a one-time courtesy.
Other notable controversies involving eBay include:
* In May 2000, eBay seller Kenneth Walton auctioned an oil painting on eBay for $135,805, due to speculation that it might be the work of California modernist Richard Diebenkorn. Walton pretended to know nothing about art and claimed to be surprised by the price the painting fetched, and the auction attracted international media attention. In several investigative reports by The New York Times, it was revealed that Walton was in fact an experienced eBay art dealer with several unhappy customers, and that he had colluded with two other eBay sellers to bid up each other's auctions. The Times described this as a "shill bidding ring". Walton and his cohorts were banned from eBay and eventually convicted of fraud by the federal government in the first ever prosecution for shill bidding on eBay.
* On 28 May 2003, a U.S. District Court jury found eBay guilty of willful patent infringement and ordered the company to pay US$35 million in damages. The plaintiff was MercExchange, which had accused eBay in 2000 of infringing on three patents (one of which is used in eBay's "Buy It Now" feature for fixed-price sales, 30 percent of eBay's business and growing). The decision was appealed to the U.S. Court of Appeals for the Federal Circuit (CAFC). The CAFC affirmed the judgment of willful infringement, and reversed the lower court and granted a permanent injunction. eBay appealed the permanent injunction to the U.S. Supreme Court, which on May 15, 2006 found an injunction is not required nor automatic in this or any patent case where guilt has been established. The case was sent back to the Virginia district court for consideration of the injunction and a trial on another MercExchange patent the inventor claims covers the remaining 70 percent of eBay's business model. This case has been particularly controversial since the patents involved are considered to be business method patents.
* On 28 July 2003, eBay and its subsidiary PayPal agreed to pay a $10 million fine to settle allegations that they aided illegal offshore and online gambling. According to the settlement, PayPal between mid-2000 and November 2002 transmitted money in violation of various U.S. federal and state online gambling laws. eBay's announcement of its acquisition of PayPal in early July said that PayPal would begin the process of exiting this market, and was already doing so when the ruling occurred. These offenses occurred prior to eBay's purchase of PayPal.
* On 17 December 2004, Avnish Bajaj, CEO of eBay's Indian subsidiary Baazee.com, was arrested after a video clip showing oral sex between two Indian students was sold online. The company denied knowing the content of what they were selling (because it is a venue, not a retailer) and removed the offensive material as soon as they became aware of it. The Indian government attempted to make the case that Bajaj had violated India's IT Act, which forbids "publishing, transmitting or causing to publish" obscene material, even though the actual material was never published on Baazee's servers. eBay supported Baazee's defense.
* On 14 June 2005, eBay removed auction listings for originally free tickets to the Live 8 charity auction amid hundreds of complaints about such auctions. Normally, selling of charity tickets is legal under United Kingdom law.
* In 2005, the Australian National Rugby League tried unsuccessfully to persuade eBay to prevent scalpers from selling Grand Final tickets online.
* On 18 December 2006 eBay won a court case against Creative Festival Entertainment in Australia, allowing sellers to on-sell (or scalp) tickets for the Big Day Out concert. The case was won due to the big day out organizers not being able to fully enforce an anti-scalping policy printed on the back of the tickets. The presiding judge described the decision as "unfortunate".
* Some have criticized the emphasis eBay places on its subsidiary PayPal as a method of accepting payments.[attribution needed] eBay discourages sellers from using independent money-wiring companies such as Western Union and MoneyGram (Moneybookers is now allowed instead), stating that it prohibits or discourages certain forms of payment in order to reduce fraud. On the U.S. eBay, while sellers may accept such payments, they are prohibited from advertising them as a payment option. A similar policy applies to mailing cash as a payment option. Certain non-U.S. branches of eBay allow sellers to advertise wire transfers or mailed cash as payment options, provided such methods are not the only payment options the seller accepts.
* In late 2006 a change in eBay's policy which showed less information about sellers once auctions reached a certain value has been criticised for making shill bidding much harder to detect. This change is to the potential disadvantage of buyers and of significant advantage to unethical sellers who, sometime with the aid of accomplices, may artificially inflate the price of an auction.
An investigation by The Sunday Times in January 2007 uncovered substantial evidence of shill bidding. eBay's decision to hide much information about bidders once an auction reaches a particular price have opened it to accusations of encouraging shill bidders by making them significantly harder to identify. The case has been put that it is in eBay's interests to protect high turnover sellers who profit from shill bidding since they generate substantial income for eBay. There are claims that this change in policy, favouring unethical sellers over buyers, has significantly weakened eBay's reputation both amongst buyers and ethical sellers.
eBay in its earliest days was essentially unregulated, but as eBay grew, it found it necessary to restrict or forbid auctions for various items. Note that some of the restrictions relate to eBay.com (the US site), while other restrictions apply to specific European sites (such as Nazi paraphernalia). Regional laws and regulations may apply to the seller or the buyer. Among the hundred or so banned or restricted categories:
* Tobacco (tobacco-related items and collectibles are allowed)
* Alcohol (alcohol-related collectibles, including sealed containers, as well as wine sales by licensed sellers are allowed)
* Drugs and drug paraphernalia
* Nazi paraphernalia
* Bootleg recordings
* Firearms and ammunition
* Used underwear and dirty used clothing
* Teacher's editions of textbooks including homeschool teacher's editions.
* Human parts and remains
* Live animals (with certain exceptions)
* Certain copyrighted works or trademarked items.
* Lottery tickets, sweepstakes tickets, or any other gambling items.
* Military hardware such as working weapons or explosives.
* Virtual items from massively multiplayer online games.
* Many other items are either wholly prohibited or restricted in some manner. One major example includes several eBay members auctioning debris from the Space Shuttle Columbia following its February 1, 2003 breakup over Texas and Louisiana on re-entry from space. These auctions were removed immediately by eBay.
* In June 2005, the wife of Tim Shaw, a British radio DJ on Kerrang! 105.2, sold Tim's Lotus Esprit sports car with a Buy It Now price of 50 pence after she heard him flirting with model Jodie Marsh on air. The car was sold within 5 minutes, and it was requested that the buyer pick it up the same day.
* In May 2005, a Volkswagen Golf that had previously been registered to Joseph Cardinal Ratzinger (who had been elected Pope Benedict XVI) was sold on eBay's German site for €188,938.88. The winning bid was made by the GoldenPalace.com online casino, known for their outrageous eBay purchases.
* In September 2004, the owner of MagicGoat.com sold the contents of his trash can to a middle school language arts teacher, who intended to have her students write essays about the trash before it was cleared away by a well-meaning janitor.
* Water that was said to have been left in a cup Elvis Presley once drank from was sold for $455. The few tablespoons came from a plastic cup Presley sipped at a concert in North Carolina in 1977.
* A Coventry University student got £1.20 for a single cornflake.
* A man from Brisbane, Australia attempted to sell New Zealand at a starting price of $.01AUD. The price had risen to $3,000 before eBay closed the auction.
* One of the tunnel boring machines involved in the construction of the Channel Tunnel was auctioned on eBay in 2004.
* A man from Arizona sold an air guitar on eBay for $5.50.
* A group of four men from Australia auctioned themselves to spend the weekend with the promise of "beers, snags, good conversation and a hell of a lot of laughs" for AU$1,300.
* Disney sold a retired Monorail Red (Mark IV Monorail) for $20,000.
* The German Language Association sold the German language to call attention for the growing influence of Pidgin-English in modern German.
* In late November 2005, the original Hollywood sign was sold on eBay for $450,400.
* In February 2007, after Britney Spears shaved all of her hair off in a Los Angeles salon, it was listed on eBay for $1million USD before it was taken down after some considerable controversy.
Using MissionFish as an arbiter, eBay allows sellers to donate a portion of their auction proceeds to a charity of the seller's choice. Some high profile charity auctions have been advertised on the eBay home page, and have raised large amounts of money in a short time. For example, a furniture manufacturer raised over $35,000 for Ronald McDonald House by auctioning off beds that had been signed by celebrities.