Executive looks at eBay success

Pierre Omidyar, founder and chairman of internet auction powerhouse eBay Inc., spoke with GW business students about the past, present and future of eBay and the technology industry Wednesday afternoon.

After receiving GW’s School of Business and Public Management Entrepreneur of the Year Award at a luncheon earlier in the day, Omidyar spent his afternoon speaking to GW students as part of the school’s Howard Hoffman Lecture Series. Both events were held at Georgetown’s Four Seasons Hotel.

Omidyar stepped away from the podium and walked around the room, answering student questions throughout the two-hour lecture.

Omidyar said new sellers entering the eBay marketplace do not face a large barrier. People can log onto the Web site to sell new or used products to the lowest bidder. Sellers deal directly with buyers, and eBay only intervenes in the process when a complaint is filed. To be successful, new sellers must gain the trust of the community, Omidyar said.

People are able to build a reputation based on how they interact with other people, Omidyar said.

Omidyar discussed eBay’s early troubles as it grew beyond its own expectations. He said the company’s old management transformed into a world-class team able to keep up with the pace of the exploding enterprise – a process he said was difficult.

You have to recognize that some people are not going to scale, he said, adding that employees who do not fit the structure must be removed in order to build an effective team.

Students said they enjoyed Omidyar’s informal approach.

He managed to be charmingly uncomfortable . and down to earth at the same time, said Jeffrey Clark, a first-year GW business graduate student.

Omidyar discussed business strategy and its potential to change over a company’s lifespan.

If you had accessed eBay before Labor Day of 1997, you would have found that at ebay.com there were three things, Omidyar said.

The site originally consisted of an auction page, an information page on the Ebola virus and a page dedicated to the San Francisco-Tufts Alumni Group. Despite constant criticism of the auction page’s reliance on trust between strangers, Omidyar banked on that concept and created eBay.

Omidyar said eBay’s revenue stream is unique. Unlike many dot-com firms, eBay derives the majority of its revenue from consumer business, not advertising, he said. Fees charged for posting a new product on its market and commission paid to the company on final sales account for about 99 percent of revenue, while advertising accounts for only one percent of the company’s income, he said.

Omidyar said the future of eBay is bright.

Our sellers are the number one retailers of consumer electronics, photography equipment, computer equipment, hardware (and) computer software on the internet, ahead of every other e-retail company that you’ve ever heard of, he said.

But eBay must stay centered on its primary objectives, Omidyar said.

So, getting to the challenges, I think as we realize that we’re addressing such a large market, our challenge is going to be to maintain focus, Omidyar said. You have to do a small number of things really well.

Omidyar also addressed the recent demise of what he called dot-com euphoria.

What’s happened in the last couple of years has been . not terribly constructive, he said. Omidyar placed the blame on the belief that ideas, not profits, create a successful business.

This faulty business model not only damaged investor confidence in the technology industry but also caused countless employees to shift jobs based on wild dreams of riches, he said.

Omidyar said recent hype over the success of telecommunications businesses represents a growing trend in the technology industry.

There’s a tendency in high technology to take the latest thing and say it’s going to change the world, he said.

Omidyar said mobile phones penetrate the consumer market very well, but concluded, technology sucks.

Labeling himself technologically agnostic, Omidyar said he tries to stay away from each new craze. New technology should have a useful purpose, he said. He also said a product introduced in the consumer market too early will flounder. Instead, Omidyar said he suggests building upon a base service, like the eBay platform.

Omidyar, a 33-year-old millionaire, said he has just begun thinking about the responsibilities that come with wealth.

It’s an overnight creation of wealth, he said. It left me with a sense of responsibility to make sure that wealth gets put to good use.

Omidyar said he wants to use his Web site to help people rediscover the place of community in their lives. eBay brings individuals together into a community in which people help each other, he said.

The site can do more than just sell goods at low prices, he said.

I think that is a change that can be leverageable onto the other issues . maybe even environmental issues, he said.

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