Wired For The Bottom Line

The company had been founded in 1995 by Pierre Omidyar, who wanted to augment his girlfriend's collection of Pez dispensers. The Net was a great way to allow sellers of obscure items to reach others, and it was easy to use the technology to run auctions. Only after the site took off did Omidyar establish it as a business, and what a model it was: all the inventory, the ordering, the shipping and the payments would be done by customers, the sellers and buyers registered on the eBay site. Revenues would come simply by taking a cut of sales.

By the time Omidyar began courting Whitman to become his CEO, the site was wildly popular and already profitable. eBay had transformed auctions into supercharged classified ads, and the last-minute bidding frenzy added the extra oomph of a game show. But what finally lured Whitman to Silicon Valley from Pawtucket, R.I., was her discovery that its user base had become a community. Its ingenious (yet imperfect) means of establishing trust in sellers and bidders: feedback from users themselves. Extensive chat boards let eBaysians share tips and gossip. By the time Whitman attended a focus group of people whose livelihood now consisted of hawking items on eBay, she understood how auctions could empower people-- and how customer loyalty could help eBay maintain a dominant market share.

But as Whitman has learned, hosting an Internet community is like leading a tiger by the tail. When you let your users down--eBay has been plagued by power failures--you hear their pain instantly. If you decide to raise a fee, as eBay did recently, the attacks will come with the passion of a Balkan conflict. "LET'S [GET] THAT MORON OUT OF OFFICE," went a recent rant about Whitman on an eBay chat board. "SHE IS COMPLETELY INEPT AT HER JOB."

Whitman quickly revamped the site to make it easier for users to participate, and addressed ways to make customers feel safer in purchasing. Now she's working to solve the cumbersome payment process by allowing all buyers to use credit cards instead of personal checks or money orders. She is also trying to expand eBay beyond its core model of collectibles. Los Angeles is eBay's testing ground for local auctions--stuff like cars and furniture that can't be easily shipped. And eBay's purchase of the snooty Butterfield & Butterfield gets the company into high-end jewelry and art.