eBay - STAYING ONLINE - ALWAYS
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BACKGROUND NOTE
In February 1998, Meg Whitman[1]
, a Harvard MBA, joined
eBay as its President and CEO. Whitman initiated efforts to arrange an Initial
Public Offering (IPO) for eBay. In September 1998, eBay offered 4.025 million
shares to the public at $18 per share. It received a tremendous response and the
stock closed at $47 on the first day of its listing.eBay's main product
categories were automobiles, antiques & art, books, movies, music, coins &
stamps, collectibles, computers, dolls, doll houses, jewelry, photo &
electronics, pottery & glass, sports, toys, premium arts & collectibles and
miscellaneous items.
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Its operations included registration of users,
facilitating the auction and maintaining relevant databases. The company
provided seven days availability with a few hours maintenance period each
week. Members were notified by e-mail when they registered on the site.
The company notified them when they were either outbid or had won an
auction. The company also sent daily status reports to active sellers and
bidders regarding their current auctions. It also maintained a database
regarding member registration information, billing accounts, current
auctions and historical listings.Customers could use the relevant links to get information regarding how
to use the site. They were also informed about the tools that eBay had to ensure
the site's safety. |
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A bidder could see the listing
of the total items to be auctioned by clicking categories or specific
sub-categories. A 'shop by photos in the gallery' facility allowed a bidder to
see the photograph of the items along with the description. Users who wanted to
trade in the local region could specify region in the text box (pick a region)
and could begin trading by choosing a suitable category (automobile,
appliances). A seller could get information regarding activities like
registration, how to enter the credit card number and how to photograph an item.
Clicking the 'sell' button, a seller could also visit the page where he could
list the item for sale.
In addition to a search facility on its home page, eBay provided a 'search' link
on the main navigation bar to enable visitors to search items in six ways;
listing title by search, item number, seller search, bidder search, completed
auction and regional search. Search facilities also provided the option to
narrow down the number of items to be listed after the search. For instance,
while searching items through 'listing title search,' one could specify the
price range and country where the item was available and could sort the listing
based on the last date of auctions.
eBay also sent electronic invoices to all sellers via
e-mail on a monthly basis. The accounts of the sellers, who opted for credit
card payment mechanism, were billed directly. At regular intervals, eBay updated
a text-based search engine with the titles and descriptions of new items, as
well as the pricing and bidding updates for active items. The company also
supported a number of community bulletin boards and chat areas where its
customer support personnel could interact.
By 2001, eBay had emerged as the largest person to person auctioneer in the
world with a registered user base of 42.4 million. For the financial year ended
December 31, 2001, the company generated $748.82 million revenue and $90.45
million net profit. eBay was ranked as the #1[2]
online shopping
destination, with nearly 5 million unique daily visitors during the peak
shopping season in December. For the quarter ended December 31, 2001, eBay
hosted over 126.5 million items. The company's users transacted a record $2.735
billion in gross merchandise sales during the same period.
Though the company had been performing well financially, the frequent outages
had attracted severe criticism. According to a former staff member, eBay had not
installed redundant storage hardware[3]
to take over if the main storage system
failed, even after six years of the site's launch in 1995.
Though the management had been warned about the risk of storage failure and was
recommended an upgrade in the storage infrastructure, the expense was not
approved. eBay's initial applications relied on a single large database. Till
January 2001, a single Oracle database supported the item listings and auction
operations. When eBay began to split the database, resource constraints and a
divided management came in the way of initiating major changes.
TECHNOLOGY
REAPING THE BENEFITS
[1] Whitman had earlier been the General Manager, Pre School division of Hasbro
Inc., a toy company (1997-98); President and CEO at Florist's Transworld
Delivery, a floral products company (1995-96); worked in various capacities at
The Strite Rite Corporation (1992-95) and had been Senior VP for Walt Disney
Consumer Products division (1989-92).
[2] According to an IT research firm, Jupiter Media
Matrix.
[3]
Additional storage hardware,
which serves as a backup, in case the main storage system fails.
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