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The Perfect Store
By Adam Cohen

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 The Perfect Store

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The Perfect Store
By Adam Cohen
ISBN: 0316164933
Genre: Business & Money

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Chapter Excerpt from: The Perfect Store , by Adam Cohen

CHAPTER ONE


Pierre Omidyar was born in Paris in 1967 to a French-Iranian family that placed a premium on intellectual pursuits. Omidyar's parents had been sent to France by their families as young adults to get a better education than was available in Iran in the early 1960s. Omidyar's father attended medical school; his mother studied linguistics at the Sorbonne. They met for the first time in their adopted land-an encounter that was all but inevitable, given the size of the city's Iranian community—and eventually married. When Pierre, their only child, was six, they emigrated to the United States so that his father could begin a urology residency at Johns Hopkins University in Baltimore.

Growing up in and around Washington, D.C., Omidyar was a typical American child, except for his early fascination with computers. In seventh grade, Omidyar used to sneak out of gym class and make his way to the unlocked closet where his science teacher stored a cheap Radio Shack TRS-80. While his classmates played dodgeball and practiced layups, he used the "trash 80," as it was known, to teach himself to program in BASIC. Omidyar lived in Hawaii during eighth and ninth grades, while his mother did linguistics fieldwork. When he returned to Washington, he graduated to an Apple II, and he was programming in PASCAL, a step up from BASIC. Omidyar used his skills to get his first paying job, computerizing his school library's card catalog for six dollars an hour. "I was your typical nerd or geek in high school," he says. "I forget which is the good one now."

Omidyar arrived at Tufts University, a few miles from Boston, in the mid-1980s, just as the tech world was about to explode. His major was computer science, and his passion was Apple programming. At the time, identifying with Apple was a statement of personal values as much as a choice of technology—the computer-lab version of participating in a 1960s march on Washington. Under the charismatic leadership of Steve Jobs, Apple had styled itself as a hip, iconoclastic alternative to IBM and the other computer behemoths. Apple's view of itself was captured in a now-legendary 1984 Super Bowl commercial in which a lone woman, pursued by storm troopers, hurled a hammer at a Big Brother figure on an enormous television, shattering the screen. Omidyar did his own small part to rebel against mainstream computing by staying out of the Tufts computer lab, which was stocked with PCs, and working from his dorm room on a Macintosh. He eventually wrote his first Mac programmer's utility, a tool for use by other programmers.

In his junior year, Omidyar decided he wanted to spend the summer as a Macintosh programmer. He searched ads in Macworld and sent out letters to companies that used the Mac platform, enclosing a copy of his programmer's utility as a work sample. Omidyar got an interview, and a summer internship in Silicon Valley with Innovative Data Design, one of the first companies to write programs that allowed Mac users to draw images with their computer. The internship led to a full-time job, and he took off the fall semester to keep at it. Omidyar fit in easily in Silicon Valley's programmer subculture. With his ponytail, beard, and aviator-style glasses, he had the look. He also had the worldview. Omidyar was politically libertarian, and he liked talking about philosophy, UFOs, and space aliens. After one more seamester at Tufts, Omidyar moved out West for good, finishing up his undergraduate degree at the University of California-Berkeley.

After he left Innovative Data Design, Omidyar took a job at Claris, an Apple subsidiary that developed consumer-applications software. Claris was supposed to be headed to an IPO, but while Omidyar was there it ended up being reabsorbed by Apple. The change in plans led to a mass exodus of talent, and Omidyar was among those who headed out the door. For his next venture, Omidyar teamed up with friends, including a former Claris colleague, in 1991 to found a startup called Ink Development Corporation. Ink Development was producing software for what looked like the next big thing in technology: pen-based computers. The thinking was that users would abandon their keyboards and use a stylus for writing, an approach Palm would popularize years later. "It was going to be great; it was going to bring computers down to the rest of us," says Omidyar. "Of course, the market didn't think so."

A year and a half into their great experiment, Omidyar and his partners realized that pen-based computing was not about to take off anytime soon. As it happened, Ink Development had also put together some software tools for online commerce, and this marginal project now seemed to be the most promising part of the business. The company relaunched as eShop, an electronic retailing company. EShop was moving in the general direction of the Internet, but not fast enough for Omidyar. It was still stuck on the idea of conducting e-commerce on proprietary networks-close to, but still distinct from, the actual Internet. In 1994, Omidyar left eShop. He wanted a job that would let him "do Internet things," he says, as well as put him in more direct contact with people than he had been in his string of programming jobs. Omidyar retained a sizable equity stake in the company he helped found. Two years later, Microsoft bought out eShop, and the stock Omidyar received from the software giant made him a millionaire before he turned thirty.

Omidyar's next job gave him the greater exposure to the Internet that he had been seeking. He joined the developer-relations department at General Magic, a hot mobile-communications start-up. General Magic, which had been started in 1990 by a group of Apple veterans, was trying to take Apple in a post-Macintosh direction by building a new generation of small, communication-oriented Apple computers that would work with telephones and fax machines. In his new position, Omidyar also had contact with people: his job was to help third-party software developers-programmers outside the company—write software that worked with General Magic's Magic Cap platform. It was while Omidyar was at General Magic, working with both the Internet and with people, that he created AuctionWeb.


It started, legend has it, with PEZ.
In the summer of 1995, Pierre Omidyar was having dinner at home in Campbell with his fiancée, Pam Wesley. Wesley collected PEZ dispensers, and she mentioned that since they had moved from Boston to Silicon Valley, she was having trouble finding fellow collectors to trade with. It occurred to Omidyar that the still-fledgling Internet could provide the answer. He came to Wesley's rescue by writing the code for what would one day become eBay.

The PEZ dispenser story has been told and retold in countless popular accounts of eBay's history. But it is, Omidyar concedes, the "romantic" version of eBay's founding. The truth is, in the summer of 1995 Omidyar was doing what every other smart tech person within a hundred-mile radius of San Jose was doing: obsessing about the Internet and the uses to which it could be put.

Omidyar had not come west with Internet dreams. He had intended to program for the Macintosh, the computer platform he had fallen in love with in high school. But Silicon Valley in 1995 was, like Boston in 1775 or Sutter's Mill in 1849, a place caught up in an intoxicating shared vision of what the future would look like. The Internet was fast gaining critical mass. Dial-up service providers like AOL, CompuServe, and Prodigy were bringing millions of Americans online. Stanford engineering graduate students Jerry Yang and David Filo were attracting more than one million page views a day with a search engine they had named Yet Another Hierarchical Officious Oracle, abbreviated as Yahoo! If there had been any doubt about the commercial viability of the new medium, it was dispelled —for several years, anyway—when Netscape went public in August with a red-hot IPO that was widely regarded as the opening salvo of the Internet revolution.

Omidyar was ready to enlist. He was no stranger to cyberspace: he had been online for years, going back to his undergraduate days at Tufts. Back then, the Internet was a geeky backwater, the online equivalent of a high school audiovisual lab, where engineering students hung out in Usenet newsgroups trading jokes with punch lines like "3.14159," and Star Trek aficionados whiled away the early morning hours debating Klingon history. In college, Omidyar himself had been a regular in one of the geekiest newsgroups of all, a Usenet newsgroup for Macintosh programmers.

By the mid-1990s, however, a new Internet was emerging. Lowkey newsgroups were being pushed aside by something far glitzier- the World Wide Web, which suddenly gave anyone with a PC and a modem the power to call up documents stored on computers anywhere in the world. This new Internet, which was making the letters www a fixture of everyday conversation, had the power to connect everyone on earth—not through static postings left on a message board, but interactively and in real time. It was clear to anyone who was paying attention that this new Internet was about to change the world.

And all of Silicon Valley was paying attention. It seemed, that summer, as if people talked of nothing else. Programmers and entrepreneurs brainstormed about what the killer application was for this new technology, and plotted how to get in first with a business plan. Selling books or drugs or furniture. Delivering news or groceries or pet supplies. Mixing in celebrities or gambling or pornography. The millions—the billions—would pour in. Compared to the hot ideas bouncing around the Valley that summer, the application Omidyar was wrestling with had all the sex appeal of a college term paper.

In most times and places, creating a perfect market would have seemed like an arcane exercise. But in Silicon Valley in the midt 1990s, financial markets were as much a part of the culture as routers and microchips. New companies seemed to be going public daily, and freshly minted millionaires were everywhere. Omidyar kept hearing about company insiders, often friends and family of the founders, getting rich through stock purchases that were not available to average investors. This was standard practice for IPOs, but it struck him as unfair.

Omidyar had experienced the process firsthand. A few years earlier, he had been closely following a hot new video-game company called 3DO. Like many techies, Omidyar had been intrigued by its bold vision of creating a universal standard for the video-game industry. When 3DO announced plans to go public in May 1993, Omidyar placed an order for stock through his Charles Schwab brokerage account. What he had not counted on was that 3DO-whose high-flying CEO, Trip Hawkins, would later be named one of People magazine's "50 Most Beautiful People"—was about to become one of the most hyped IPOs of the tech boom. 3DO went public at $15 a share, but when Omidyar checked his account, he learned that the stock had soared 50 percent before his order had been filled. It all worked out in the end; Omidyar later sold his shares at a profit. But it struck him that this was not how a free market was supposed to operate —favored buyers paying one price, and ordinary people getting the same stock moments later at a sizeable markup.

Omidyar's solution was an online auction. He had never attended an auction himself, and did not know much about how auctions worked. He just thought of them as "interesting market mechanisms" that would naturally produce a fair and correct price for stocks, or for anything anyone wanted to sell. "Instead of posting a classified ad saying I have this object for sale, give me a hundred dollars, you post it and say here's a minimum price," he says. "If there's more than one person interested, let them fight it out." When the fighting was done, Omidyar says, "the seller would by definition get the market price for the item, whatever that might be on a particular day."

Since he was still working at General Magic, Omidyar had to do the programming for his perfect marketplace in his spare time. He was used to tinkering with Internet applications in his evenings and on weekends. He had already written a chess-by-mail program, which he was offering for free over the Internet. He had also completed the coding for a program he was calling WebMail Service, which allowed owners of small-screen computer devices like the Newton to get access to Internet pages through standard e-mail. More recently, he had created WebMail Watch Service, which monitored web pages users were interested in, and notified them when the pages had changed.

With Labor Day approaching, Omidyar made the program for a perfect marketplace his project for the long weekend. On Friday afternoon he holed up in his home office, a converted extra bedroom on the second floor of his modest town house, and began writing code. By Labor Day, he had created an auction website. The site was not much to look at. Its blocky blue-black text against a dingy gray background gave it all the graphic charm of a Usenet newsgroup. Omidyar had no real idea what people would want to sell, so he just created categories as they occurred to him—computer hardware and software, consumer electronics, antiques and collectibles, books and comics, automotive, and miscellaneous. The computer code Omidyar wrote let users do only three things: list items, view items, and place bids. The name he chose was as utilitarian as the site itself: AuctionWeb.

Since AuctionWeb was only a hobby, and he intended to offer its services for free, Omidyar tried to keep costs low. He wrote the program by patching together freeware he found on the Internet, and he ran the site from his home, off of a $30-a-month account he already had with Best, his Internet service provider. Rather than create a new website, he added AuctionWeb to one he was already operating. That spring, Omidyar had formed a sole proprietorship for his web consulting and freelance technology work, which he had named Echo Bay Technology Group. The name was not a reference to Echo Bay, Nevada, the wilderness area near Lake Mead, or to any other real-world Echo Bay. "It just sounded cool," he says. When he tried to register EchoBay.com, however, he found he was a few months too late. Echo Bay Mines, a Canadian company that mined for gold in Nevada, had gotten to it first, and was using echobay.com for its corporate home page. Omidyar registered what he considered to be the next best thing: eBay.com.

At the time AuctionWeb launched, Omidyar already had three other home pages running on eBay.com. One was for a small biotech start-up for which his fianc?e, Pam Wesley, a management consultant, had been working. Another belonged to the San Francisco Tufts Alliance, an alumni group of which Pam was president. The third was Omidyar's own: Ebola Information, his offbeat tribute to the Ebola virus. The site had a photograph of the virus that he had found on the Centers for Disease Control website, and it linked to news stories and data about Ebola and Ebola outbreaks. If users typed eBay.com/aw into their browser, they would be taken directly to AuctionWeb, which the home page called "eBay's AuctionWeb." But if they typed in only eBay.com, they would have to wade through three home pages, including Omidyar's homage to a loathsome disease.

On Labor Day, when AuctionWeb was up and running, Omidyar got to work trying to publicize it. He posted an announcement on a Usenet newsgroup that tracked new sites, and another on the National Center for Supercomputing Applications' "What's New" page, where it ran alongside Battery World, "a one-stop source for all battery needs," and CARveat Emptor, a site that provided consumer advice about automobile sales and services. "The most fun buying and selling on the Web," Omidyar wrote in the "What's New" listing. "Run an auction or join the fun of an existing auction." But both listings were delayed. The moderator of the new-site newsgroup had taken Labor Day off; the AuctionWeb listing did not appear on it until the following day. And because the "What's New" page had a heavy backlog, the announcement did not go up until October. That meant that on AuctionWeb's first day, there was no publicity at all. Of course, even if there had been, many of the site's potential users were spending the last holiday of the summer outdoors. Given these obstacles, Omidyar was not discouraged when, at the end of AuctionWeb's first day of operation, it occurred to him that it had not attracted a single visitor.


After its traffic-free Labor Day launch, AuctionWeb started to attract a slow trickle of visitors. Omidyar had none of the slick marketing devices other websites were starting to employ-no advertising budget, no public-relations advisers, no deals with other sites to drive traffic. But he was continuing to post announcements in Usenet newsgroups for what he was calling his "free web auction." In these early posts, Omidyar described the items on the site, lists that remain one of the earliest records of what was for sale on AuctionWeb.

The items that showed up for auction in the first few weeks were a strange mix of computer-related and noncomputer-related goods. In a September 12 post on misc.forsale.noncomputer, Omidyar listed the noncomputer items on the site, along with the current bids for each. It was a small, eclectic assortment:

Antiques, Collectibles
Superman metal lunchbox, 1967, used good condition Current bid: $22.00

Autographed Marky Mark Underwear
Current bid: $400

Autographed Elizabeth Taylor Photo
Current bid: $200

Autographed Michael Jackson Poster
Current bid: $400

Toy Power Boat, late 50's-early 60's
Current bid: $60.00

Hubley #520 Cast Iron Hook and Ladder Truck
Current bid: $300.00

Collectors Multicolor Reflection Hologram
Current bid: $5000

Czech Vase
Current bid: $25.00

Cobalt Clear Cut Glass Rose Bowl
Current bid: $25.00

The list was not a representative sample—it was every noncomputer-related item on the site. A week later, Omidyar updated the list, which had grown from eighteen to thirty items, a 66 percent increase, in just seven days. Among the new listings: a 35,000-squarefoot warehouse in Caldwell, Idaho, for which the bidding started at $325,000. In early October, Omidyar posted a notice on misc.forsale. pc-specific.misc that listed the computer-related items. It was a larger, but less colorful, lineup, which included hard drives, antivirus software, and a used Sun-1 workstation.

Throughout the fall, both listings and traffic on AuctionWeb increased steadily. While Omidyar was putting up his newsgroup posts, AuctionWeb was also starting to benefit from the marketing force that would drive its growth for years to come: word-of-mouth publicity. Computer geeks and tech-savvy bargain hunters were e-mailing one another the AuctionWeb URL, and inserting hyperlinks on their websites that took web surfers directly to the AuctionWeb home page. By the end of 1995, AuctionWeb had hosted thousands of auctions, and attracted more than ten thousand individual bids.

Omidyar was still offering AuctionWeb for free. He could do it because his expenses were next to nothing-he was still running the site off of Best, his home Internet service. Toward the end of 1995, however, Best administrators were complaining that AuctionWeb was attracting so much traffic that it was slowing down their system. In February 1996, Best began charging him $250 a month, the rate for a commercial account, ignoring his protests that AuctionWeb was not a business.

Best's fee hike changed everything. "That's when I said, 'You know, this is kind of a fun hobby, but two hundred fifty dollars a month is a lot of money,'" Omidyar says. To pay the bills, he started to charge AuctionWeb users—"basically out of necessity," he says. Based on no market research, Omidyar decided he would not charge buyers at all, and that he would not charge sellers to list items. The only fees would be what he called final-value fees, which would be a percentage of the final sales price. The fees, he decided arbitrarily, would be 5 percent of the sale price for items below $25, and 2.5 percent for items above $25.

Omidyar had no way of knowing if users would be willing to pay to use the site. In fact, it occurred to him that fees could bring his little Internet experiment to an end. But Omidyar got his answer soon enough, when piles of envelopes filled with cash and checks started arriving at his front door. The amounts were not large, and the trappings were not fancy. Some of the envelopes contained dimes and nickels Scotch-taped to index cards. Still, when he added up the checks, the coins, and the crumpled bills at the end of February, he found that AuctionWeb had taken in more than $250-more, in other words, than Best was charging him. That put his fledgling little website in a category almost by itself: it was one of the very few Internet companies to be profitable from its first month of operation.

In 1995, it was not clear that commerce would ever take hold on the Internet. A study by the Pew Research Center that year found that just 8 percent of Americans felt comfortable using a credit card online. The Pew study had no statistics on the percentage of Americans who would be willing to participate in auctions with strangers on a website that crashed almost daily, but it figured to be a lot smaller. If AuctionWeb was to have any chance of taking hold, establishing trust and confidence was essential.

Early on, Omidyar set out ethical guidelines for the AuctionWeb community to follow. In his experience, he said, people are generally good. He advised users to treat other people on the site the way they themselves wanted to be treated, and when disputes arose, to give the other person the benefit of the doubt. Omidyar's injunction was essentially the golden rule transported into cyberspace. It was the value system his mother had instilled in him, and one he tried to follow in his own life. "Some people say, 'Isn't that trite, it's like a Hallmark card,'" he says. "But I think those are just good basic values to have in a crowded world."

To a remarkable extent, AuctionWeb operated according to Omidyar's idealistic prescription. Trust on the site was so high in the early days, and the feeling of community so strong, that it was common for sellers to ship items even before they had received bidders' payments. Still, the harmony Omidyar hoped for did not always preavail. When buyers and sellers disagreed, they usually contacted Omidyar directly—easily enough done, since his e-mail address, Pierre@eBay.com, was prominently featured on the site. Omidyar got about a dozen e-mails a day from users complaining about each other. It almost always turned out, Omidyar says, that the dispute arose from a simple misunderstanding. "On the Internet, people forget that when they're dealing with an e-mail address there's an actual human being on the other side," he says. "Often their fears are manifested, or they jump to conclusions and think the most negative interpretations of that e-mail."

One thing Omidyar knew was that he did not want to arbitrate all these disputes. He was busy enough just keeping AuctionWeb up and running in addition to working at his day job. Moreover, true to his libertarian leanings, he believed people should be able to resolve their differences on their own. Omidyar's routine when he received an e-mail with a complaint about another user was to respond to the author, send a copy of the e-mail to the other person in the dispute, and tell them both, "You guys work it out." The parties usually resolved the matter on their own, but Omidyar realized he had to come up with a mechanism for enforcing good behavior. Unlike most companies, AuctionWeb was not able to control the quality of its service. "The brand experience" on AuctionWeb, Omidyar observed, was "defined by how one customer treats the other customer." If Omidyar wanted his customers to have a positive experience on AuctionWeb, he had to convince them to treat each other well.

In February 1996, Omidyar announced his proposal for how to do just that: the Feedback Forum. "Most people are honest," he wrote in a Founder's Letter posted on the site. However,

some people are dishonest. Or deceptive. This is true here, in the newsgroups, in the classifieds, and right next door. It's a fact of life. But here, those people can't hide. We'll drive them away. Protect others from them. This grand hope depends on your active participation. Become a registered user. Use our Feedback Forum. Give praise where it is due; make complaints where appropriate. . . . Deal with others the way you would have them deal with you.

Remember that you are usually dealing with individuals, just like yourself. Subject to making mistakes. Well-meaning, but wrong on occasion. That's just human.

Through the Feedback Forum, the complaints that landed in Omidyar's e-mail in box would be brought out into the open. The entire community would know about them and have an opportunity to deal with them appropriately. Omidyar made clear from the outset that he wanted positive comments as well as negative ones, both to encourage people to say favorable things about one another, and because positive comments could be just as revealing as negative ones. "I was afraid it might just turn into a gripe forum," he says. "But as I watched it develop over the weeks, I was amazed to realize that people actually enjoy giving praise, too."

The rules of the Feedback Forum were straightforward. Users were allowed to give each other a rating of plus one, minus one, or neutral, and to include a written explanation if they wished. EBay's software then tabulated each user's score and put the total in parentheses after his or her name. The Feedback Forum played the same role on AuctionWeb that reputation plays in a small town. Through the numbers that appeared after users' names, the AuctionWeb community's opinion of them would follow them wherever they went. The new system did not entirely remove Omidyar from the role of enforcer. He decided that when users' Feedback Forum ratings got too low-negative four or less-they would be banned from the site. Omidyar arrived at the cutoff point of negative four without much deliberation-it just struck him as the point at which his assumption of goodness was sufficiently rebutted-and he did not reveal it to users. But even years later it would remain the number that caused eBay to "NARU" someone-to make him or her Not a Registered User.

Around the same time, Omidyar added another feature to the site: a message board called, simply, the Bulletin Board. Like the Feedback Forum, the Bulletin Board was designed to limit his role and place more of AuctionWeb's administration in the hands of the community. Omidyar did not have time to explain to each individual user how to write a listing in HTML, or to give advice on bidding strategy. The Bulletin Board was in the tradition of the Usenet newsgroups Omidyar had long used, a place for people to gather, share information, and ask for help.

As soon as the Bulletin Board went up, the questions poured in. What was the best way to ship? What should a seller do when a high bidder disappeared? The answers came just as quickly. "If someone came on and said, 'Please help me,' there were twenty-five people who would rush to help," recalls Steven Phillips, a retired naval petty officer from Dallas who sold chintz and pottery in the early days. A core group of regulars emerged who functioned as a de facto customer-service department. The site even had-in those innocent, spamless days—a directory of e-mail addresses, making it easy for users to communicate with message board regulars. Phillips alone got 100 to 150 e-mails a day from his fellow AuctionWeb users, and he answered all of them.

With every day that passed, more cash- and check-filled envelopes arrived at Omidyar's town house. In March, revenues hit $1,000, once again more than the site's expenses. In April, revenues rose to $2,500, and in May AuctionWeb took in $5,000. The envelopes were piling up so fast that Omidyar literally did not have time to open them. He used some of the funds to make his first part-time hire. Chris Agarpao, the brother-in-law of a close friend, started coming to Omidyar's home twice a week to open the envelopes and deposit the money. In June, when revenues doubled for the fourth consecutive month, topping $10,000, Omidyar decided it had become a real business. "I had a hobby that was making me more money than my day job," he says. "So I decided it was time to quit my day job."

Omidyar thought when he left General Magic he would be able to reclaim his nights and weekends. But he found that all of his waking hours were now being taken up by AuctionWeb—keeping it running, writing code for new features, and answering user e-mail.

Having worked in start-ups, Omidyar knew that if AuctionWeb was going to keep growing, he would need a strategy that went beyond bringing in Agarpao to open envelopes and deposit checks. "I had a vague idea of what I needed to do as an entrepreneur," Omidyar says. "But I knew I wasn't going to be able to put together a business plan." He started looking for someone who could.

Omidyar thought immediately of Jeff Skoll, a Stanford MBA he had met through friends two years earlier. Skoll, a slightly built, hyperkinetic Jewish Canadian, was a born entrepreneur. His father sold industrial chemicals, and by age twelve Skoll himself was going door-to- door selling Amway products in Montreal. Skoll's youth coincided with a rising tide of separatism in Quebec, and he experienced the depth of French-Canadian nationalist sentiment firsthand when he was making the rounds selling electronic keyboards. He was often asked to demonstrate them, but the only song he could play was "O Canada," the national anthem. It went over well among the English-speakers, but not in French-speaking areas. One woman, on hearing Skoll's musical performance, sicced her dog on him. Not much later, Skoll's family joined the growing English-speaking exodus from the province and settled in Toronto, where he attended high school.

Skoll graduated from the University of Toronto in 1987 with an electrical engineering degree and a 4.0 GPA. He then founded two high-tech companies: Skoll Engineering, a consulting firm that helped corporate and government clients set up inventory management and accounting systems, and Micros on the Move Ltd., a computer rental company. Skoll's ambitions, however, extended beyond the comfortable life he was starting to carve out in Toronto. Six years after graduating from college, he headed to Palo Alto, California, to enroll in the Stanford Graduate School of Business. Skoll finished up his degree in 1995, at the same time Omidyar was wrestling with the idea for AuctionWeb, and found himself just as drawn to the Internet as his future partner. Skoll took his freshly minted MBA to Knight-Ridder Information, Inc., a unit of the large newspaper chain, which hired him to help direct its Internet strategy.

Skoll struck Omidyar as an "analytic powerhouse" whose skills would complement his own. But the attraction, at least initially, was not mutual. The previous Thanksgiving, when AuctionWeb was just a few months old, Omidyar had tried to interest Skoll in joining the company, but it had not gone well. "I told Jeff there were people buying and selling on the Internet who never see each other but actually send money and stuff back and forth," recalls Omidyar. "He said, 'That's ridiculous.' " Skoll had just come back from the first meeting of CommerceNet, a nonprofit symposium promoting commerce on the Internet. At the symposium, the moderator had asked the crowd of three hundred how many of them had bought or sold anything online, and only three people raised their hands. It seemed to Skoll that if e-commerce had made so few inroads in that tech-savvy audience, AuctionWeb was fighting a losing battle.

Since that Thanksgiving, however, Skoll had reconsidered. He could see, from his vantage point at Knight-Ridder, that the Internet had the potential to completely transform how goods were sold. One reason Knight-Ridder had established Skoll's unit was that the newspaper giant realized the Internet posed a significant threat to classi- fied ads, one of its major sources of revenue. On the Internet, sellers could have considerably more space to describe their items and post photographs than they would in a print ad. The audience would not be limited to readers of a single newspaper, or of any newspapers at all. Online ads could be interactive, allowing buyers and sellers to contact each other by e-mail. Not least, the Internet allowed for dynamic pricing, which meant sellers did not need to choose a price in advance—they could charge whatever the market would bear. These advantages were, of course, all built into Omidyar's online auction model. Skoll eventually realized that "what Pierre was doing was a lot bigger than just a simple website." In February 1996, Skoll had agreed to do consulting work for AuctionWeb. By August, the site was so successful that Skoll quit his job and signed on full-time.

In Skoll, Omidyar found a yang to his yin. "It was the perfect balance," says Omidyar. "I tended to think more intuitively, and he could say, 'Okay, let's see how we can actually get that done.'" Skoll was the hard-driving one, the one focused on business development and fending off the competition. The more easygoing Omidyar tended the website and nurtured the AuctionWeb community.

When Skoll reported for work, AuctionWeb was still operating out of Omidyar's home. Skoll wanted to move the company to Palo Alto, which he considered to be the "epicenter" of the Internet boom, or at least to nearby Santa Clara. But the Silicon Valley real-estate market was so tight AuctionWeb could not find office space in either city. While they looked for offices, Omidyar and Skoll moved AuctionWeb's headquarters from Omidyar's home to Skoll's, a group house in Los Altos Hills that he shared with a few of his former business-school classmates. Skoll's home had more room than Omidyar's, but it was still nothing like a real office. One of Skoll's housemates worked at the NASA Ames Technology Center, a NASAfunded high-tech incubator in Sunnyvale. He helped AuctionWeb get temporary offices there, a one-room space that could barely fit Omidyar, Skoll, and Agarpao. It was clearly not a long-term solution.

Omidyar suggested expanding the search for permanent quarters to the city of Campbell. A sprawl of suburban homes and office parks, Campbell paid tribute to its long-lost agricultural heritage every May, when it played host to California's largest prune festival. Campbell was not as fashionable as Palo Alto, and it was certainly not the epicenter of the boom. But what Campbell lacked in hipness and frenetic activity, it made up for with more practical attributes. Rents were lower and, more important, there might actually be some offices to be had. From Omidyar's perspective, Campbell had another advantage: he lived there.

The real-estate agent that Omidyar and Skoll pointed toward Campbell came back with a dentist's-office-sized suite on the second floor of 2005 Hamilton Avenue. The suite was located in the The Chinese book I Ching teaches that the yin embodies elements of the yang, and vice versa, and so it was with Omidyar and Skoll. Omidyar, the antimaterialist, was already a millionaire, and would become the wealthier of the two from his stake in eBay. Skoll, the corporate-minded MBA, would later assume a very different role at eBay, that of in-house champion of the community.

Greylands Business Park, a clump of low-rise brick buildings that cried out "business" far more than "park." Greylands was directly across the street from one sprawling shopping center, and diagonally across from an even larger one. The prospective headquarters were as blandly utilitarian as AuctionWeb's website, but they were a clear improvement over the room in the NASA incubator. Omidyar and Skoll told the agent they would take it.

There was just one problem. To evaluate AuctionWeb's financial situation, the landlord wanted Omidyar and Skoll to fax over a balance sheet. AuctionWeb did not have one, and it seemed unlikely the landlord would be satisfied with what the company did have: Agarpao's extensive list of cash deposits. Determined not to let the office space get away, Skoll sat down and began taking inventory. "What are the servers worth?" he asked Omidyar. They guessed about $5,000. Liabilities? They listed that month's phone bill, which had not yet been paid. When he was done, Skoll had a rudimentary balance sheet, which he faxed off. The landlord was unpersuaded. Before AuctionWeb could move in, Omidyar, the only partner who actually had some assets, had to personally guarantee the lease.

Skoll's other priority, after office space, was professionalizing the AuctionWeb site. Skoll argued that the San Francisco Tufts Alliance, the biotech start-up, and Ebola Information-which were all still on eBay.com-were distracting and, in the case of the Ebola page, more than a little creepy. Omidyar, perhaps partly to tweak Skoll, put up a defense of the Ebola page. McKinley's, an Internet search engine that rated websites, had awarded Ebola Information four stars, he reminded Skoll, while it gave AuctionWeb only three. It simply made no sense, Omidyar argued, to remove the one page that could be driving the most traffic to eBay.com. Skoll was not convinced. In the end, Omidyar gave in and reluctantly removed everything but AuctionWeb from the eBay site.

In May 1996, Jim Griffith was sitting at a computer in an art studio in West Rutland, Vermont, shopping for computer parts.

Griffith, who has the bushy white beard, rounded physique, and biting wit of a mischievous St. Nicholas, had come to Vermont in a last-ditch effort to pull his life back together. He was coming off two hard decades of living in New York, where he had started out pounding the sidewalks of the casting-call circuit, struggling to make it as an actor. When his matinee dreams died, he threw his creative energy into a career as a decorative artist, doing ornate painting in the homes of the city's moneyed classes. His friend, Broadway director John Tillinger, introduced Griffith around, and in time his paintbrush was rubbing up against some of the toniest walls in Manhattan, including those of Lauren Bacall's home in the Dakota apartment building.

After ten years of painting upscale apartments, Griffith burned out. The combination of an especially disastrous work project and a head-on collision with middle age pushed him over the edge. He and his partner decided to get out of the city and start over in West Rutland. Griffith had planned to paint murals there and send them to clients back in New York, but he found it was too difficult to line up assignments from out of state. He ended up working as an administrative assistant for the Carving Studio, a nonprofit arts organization dedicated to teaching stone carving.

Working on a clunky old computer, a gift to the studio from a local bank, Griffith joined the information age. As his passion for art redirected itself to computers, he found himself spending countless hours on Usenet newsgroups. Griffith had been on an extended hunt for an obscure type of memory chip when one of his newsgroup contacts e-mailed him that the chip was up for auction at that moment on an online auction site called AuctionWeb. Griffith went to the site and placed a bid. He won it for $10, and he was hooked. Living in one of the most picturesque towns in one of the most beautiful states in the union, Griffith spent much of the summer of 1996 on AuctionWeb bidding on computer parts.

When he was not scrolling through computer listings, Griffith was spending time on the Bulletin Board. He was by now fairly proficient at using AuctionWeb and was happy to answer the technical questions that were being posted. Griffith soon became a fixture on the boards: Uncle Griff, a friendly source of advice for new users. One day, another board poster asked him what he looked like. "I don't know what came over me, but I said, 'I'm wearing a lovely flower print dress and I just got through milking the cows,'" he says. "That's how it started about Uncle Griff actually being a crossdressing bachelor dairy farmer who liked to answer questions."

The legend of Uncle Griff grew quickly. On the Bulletin Board, Griffith referred to his AuctionWeb persona in the third-person: Uncle suggests you do this; Uncle would never do that. He also began to fill in ever more elaborate pieces of Uncle Griff 's biography. Uncle Griff lived with his mother, but she was not available to post. He had duct-taped her mouth shut and stuffed her in a closet.

AuctionWeb lifted Griffith's spirits for a while, but by the fall he was spiraling downward again. In mid-October he stayed in bed for two weeks and thought about ending his life. Griffith forced himself to begin therapy and started taking Prozac, a drug that he says "should be in the water supply." Just as he was snapping out of his depression, he got a phone call.

It was Jeff Skoll. He wanted to know why Uncle Griff had stopped posting on the boards. Griffith was stunned that his absence had been noticed at AuctionWeb headquarters. Skoll had an assignment for Griffith. AuctionWeb was receiving fifty to one hundred e-mails a day from users, and it had no customer-support staff. Skoll was prepared to pay Griffith to answer the e-mails on a regular basis, and to keep up his presence on the Bulletin Board. Griffith was up for it, but he wanted to make sure Skoll knew what he was getting into. Uncle Griff was, Griffith pointed out, an unusual persona. "Yeah, we love it," Skoll responded.

Griffith became AuctionWeb's second part-time employee, at a salary of $100 a month, and its first official customer-support person. Skoll asked Griffith to select an alias to use as his AuctionWeb identity. That way, he could keep being Uncle Griff on the Bulletin Board without having his postings carry over to his official duties. When Skoll called, Griffith was looking through a book about one of his favorite movies, Greed, an eight-hour-long silent film directed by Erich von Stroheim. He came across a photograph of the actress Dale Fuller, who played the mad Mexican housekeeper. For his official AuctionWeb work, Griffith told Skoll, he wanted to be known as Dale.

Griffith returned to AuctionWeb with his two identities, Uncle Griff on the boards, and Dale@eBay.com to answer customersupport e-mail. Bulletin Board posters who knew both personas did not make the connection, and Griffith never let on. To help with the e-mail, Skoll sent Dale a Word document, much of it prepared by Omidyar, with suggested responses to frequently asked questions. In addition to handing out advice, Griffith spent a lot of time doing what Omidyar hated: stepping in and trying to resolve disputes. Griffith was amazed by how heated the controversies could get, and how seriously the participants took their online lives. He often got email from posters saying that because of disputes on the Bulletin Board they had cried all night, sometimes all week.

To the noncombatants, the disagreements generally seemed wildly overblown. At one point, Uncle Griff had to step in to defuse an argument between a buyer and a seller of baseball cards that had started in private e-mail and moved onto the Bulletin Board. The fighting escalated until both men were on the boards every night, "screaming" at each other in capital letters. Griffith tried to persuade posters that hostility was counterproductive. "If you've got a bidder who is not honoring their bid, the last thing you should do is send them a nasty e-mail telling them they're a terrible person," he advised. "It may make you feel better for the moment, but in the end it doesn't serve any purpose at all."

When all else failed, Uncle Griff used his offbeat personality to defuse tension. Once, when a flame war was raging between two users, he cut in and announced that he had just been in his attic and had found a trunk that had not been opened for years. It contained a lot of his mother's old clothing, and he asked everyone to try an item on. Uncle Griff offered one board poster a feather boa, another an elaborate hat, and he declared that he himself was putting on a pair of high heels. He made a point of handing off virtual clothing to both of the posters involved in the fight. "Some people would respond, 'Oh, Griff, you're so silly,' " he says. "But what it did was break up the dispute without referring directly to the dispute."

Not long after Griffith got his call from Skoll in Vermont, Patti Ruby got one of her own in Indiana. Ruby owned an Indianapolis antique store with her husband and worked on the side as a computer programmer. Like Griffith, she had come to AuctionWeb early, and had become a personality on the Bulletin Board. Aunt Patti, as Ruby called herself, was knowledgeable about computers and antiques, and willing to take the time to answer users' questions about either. Ruby became eBay's second "remote," as its employees outside of Silicon Valley came to be known. She started out part-time, but within two weeks of Skoll's call she quit her programming job and began working for AuctionWeb full-time. Skoll asked Ruby, as he had asked Griffith, to choose an AuctionWeb identity. She became Louise@eBay.com and remained Aunt Patti on the boards, both personas that would become famous in AuctionWeb's early days.


Excerpted from The Perfect Store , by Adam Cohen . Copyright (c) 2002 by Adam Cohen . Reprinted by permission of Little, Brown and Company, New York, NY. All rights reserved.

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