There’s a solution now to the annual problem of unwanted Christmas and birthday gifts – ‘eBay them’. Founded in 1995 in San Jose, California eBay has now entered the English language. In 2005 the online auction company had a turnover of US$ 4.55 billion, employed 11,600 people and was present in 27 countries, that is its website was present, of course. Paypal, eBay’s payment system, now has over 100 million accounts world wide and is the UK’s fastest growing financial services company.

Founder, Pierre Omidya, was fascinated by markets, places where all kinds of goods and services are bought and sold. He decided to use the Internet to bring together buyers and sellers in a virtual space as they are brought together in the real world in yard sales, car boot sales, flea markets and the like. He made use of the Internet’s ability to connect many-to-many, 24 hours a day, all around the world. eBay connects buyers to sellers – like all great ideas it’s as simple as that.

The company makes money in several ways: it charges a small fee for the advert sellers put on the eBay site: a basic ad can be ‘enhanced’ at extra cost (more pictures, greater page visibility etc.); a commission is charged on the sale price, if no sale is made this charge is not collected.  eBay operates as a virtual market place – it sells nothing itself, carries no stock and has no distribution costs. It is an enormously powerful business model.

Meg Whitman, eBay CEO, cites three reasons for the company’s rapid success.

1.  eBay exploited the Internet’s potential to connect buyer to seller regardless of location.  This is an activity that can only be done via the Internet.

2.  The business model – there was the idea – from the start the business model stated that this idea had to make money and be profitable

3.  Sound business practice, for example, the impact of advertising, was closely monitored and all growth had to increase company profit

Of course there are and have been problems.  Most of the problems are concerned with bad consumer experiences.  A buyer may pay for goods that are not sent or may receive goods that differ from their online description.  A seller can send in false bids to increase a final sales price.  eBay admits problems do exist but claims that they affect a tiny percentage of eBay users.