The Ebay Way Of Life

Of course, ever since there have been garages people have been stuffing them with junk that didn't fit in their living rooms. But some psychologists think eBay's particular format lends itself to an obsessiveness that borders on the unhealthy. The excitement of auctions can captivate people far out of proportion to their real need or desire for, say, 90 hours of "Knight Rider" videotapes (which on May 29 attracted 13 bids as high as $126.53). And the object involved needn't even have the emotional resonance of early David Hasselhoff shows. Kimberly S. Young of the Center for Online Addiction in Bradford, Pa., once treated a man who spent his entire retirement fund of $300,000 bidding on nothing more evocative than lawn equipment and stereos. "We get a lot of eBay addicts," she says.

300-Thread-Count Pure Egyptian Cotton Queen-Size Sheet Set, listed for $159. The sellers were Suzanne Ziesche and Shannon Miller, roommates and business partners in Newport Beach, Calif., who discovered last year that among all the books, computers, wine and airplane tickets for sale on eBay, luxury linens had somehow been left off. So, after a brief excursion into leather-bound portfolios (they bought 80 from a wholesaler and still have 50 left), they found a source for imported bedsheets and began offering them at steep discounts and with hundreds of dollars' worth of lush adjectives (incredible silky softness and sheen) free with every order. In January, after several months of 12- and 14-hour days, they reached eBay's "silver power seller" level, meaning they averaged more than $10,000 in sales a month. "We would never have known how to get into this niche without eBay," says Miller. The four-piece set of sheets sold on May 30 for the "buy it now" price of $159--a relatively new feature that allows a buyer to make a pre-emptive order and avoid the last-minute anxiety of waiting for the auction to close.

Miller and Ziesche thereby joined a cadre of businesses--as many as 200,000--that exist entirely on eBay. They coexist with eBay merchants who are extensions of a brick-and-mortar business, like the Raynham, Mass.-based firm 3Balls, which began as an adjunct to a pro shop at a nine-hole golf course, and now has 20 employees managing a vast trade in used golf equipment; on May 29 alone they sold $24,797 worth of gear. Other entrepreneurs have colonized even more exiguous economic niches, such as clipping and reselling grocery coupons; the same day, someone was offering a bundle of 20 coupons, each worth $1 off two bags of Lender's bagels. After a notably desultory contest they were sold for $1.76 to someone who outbid the only other interested party by a penny. But even traditional businesses have been transformed by eBay's unique capabilities. If you have a stamp store, your customers basically are stamp collectors. But if you list your stamps on eBay, you are selling to an entire universe of collectors who may not know, or even care, what a stamp should cost, because their interest is actually in Lindbergh or Elvis or the Erie Canal. "They type in whatever they collect in the search engine," says Bob Miller, who began dealing in stamps and old postcards on eBay in 1997, "and up pops one of my listings, and they just have to have it." This is exactly the kind of creative ferment that eBay's executives believe will change the world eventually. "I see our role as managing evolution," says Dutta. "There are millions of entrepreneurs saying, how do I use this to make a buck? Some will succeed, and millions will fail."

Daguerreotype of young Abraham Lincoln. Listed at $11 million. Auction closed with no bids. The owner, a New York man named Albert Kaplan, now thinks it was probably a mistake to try to sell this photograph of a dark-haired man in his early 30s on eBay, where it would have more than doubled the highest price of any previous transaction on the site, a $4.9 million private jet. He bought it in 1977 for $25, and a quarter century of research, backed by opinions from forensic scientists, has convinced Kaplan that it is the earliest known image of the 16th president. But its provenance is uncertain, and other authorities on 19th-century photographs remain to be convinced.

One of the great advantages of eBay's own business model is that it can afford to be agnostic about the authenticity of items such as this. Someone who buys it and later decides it wasn't Lincoln after all would have no recourse against eBay (although if he paid for it and it was never delivered he might be eligible for a reimbursement from the company of up to $200, leaving him $10,999,800 out of pocket). But intentional fraud by sellers, while not an issue in this case, is always a concern for eBay. There was a lot of negative publicity last year when someone bid $135,000 for what turned out to be a fraudulent Richard Diebenkorn painting. And it is a direct assault on the company's guiding philosophy, inherited directly from Omidyar, that people are basically good.

Controlling fraud by sellers (and, sometimes, buyers) is in the hands of security chief Rob Chestnut. On May 29, Chestnut's staff of about a dozen was deploying new software to detect frauds, which he pegs at "less than 0.01 percent of all listings." The best defense, eBay officials maintain, is the vigilance of the community, enforced through the feedback system. But con artists know this, too, and they have taken to "hijacking" the accounts of eBay members in good standing. That apparently happened to a young Wisconsin mother who had used her eBay account to sell off a few baby clothes, but on May 29 was horrified to discover that she was listed as the seller of an Apple Powerbook computer at $2,500. She managed, although narrowly, to stop the buyer from sending off a wire transfer to an account in Canada. Chestnut's other responsibility is to police the site for banned items. On May 29, his aides took down a bootleg Barry Manilow video and a fake Rolex, several items with swastikas on them, a live parrot and a shell from an endangered tortoise, and a number of firearms, which have been banned on eBay since February 1999. But no one stopped the sale of...