CNBC
updated 6/29/2005 3:52:09 PM ET 2005-06-29T19:52:09

Just shy of its 10th anniversary next September, eBay has exploded into both a cultural and an economic phenomenon. Some 1.8 billion items, worth more than $40 billion, are expected to be traded on its global electronic marketplace this year: Everything from cars, clothing and electronics gear to Justin Timberlake's French toast breakfast and a gumdrop sucked and discarded by Arnold Schwarzenegger. Some people are addicted to the site.

And the companyhas changed the fortunes of many — in fact, if eBay employed the 430,000 people who earn an income selling on its site, it would be the nation's No. 2 private employer, behind Wal-Mart. Those people include a disabled mother of two who makes a living selling on eBay; an Army wife who turned to eBay when her husband was sent to Iraq; and an Iowa couple who transformed a $2,000 investment into an eBay business expected to reap more than $1 million in sales this year.

These people help make up the eBay community, and management works hard to understand them at "voices" focus groups, trying to make sure the site will keep their interest. But despite those efforts, some former sellers feel betrayed and have deserted the popular auction site.

In a CNBC Special Report hosted by David Faber, including exclusive interviews with CEO Meg Whitman and founder Pierre Omidyar, “The eBay Effect” reveals little-known facets of the company’s history and operations, including:

  1. EBay has been the fastest growing company in the history of U.S. business. Though it will not turn 10 until Labor Day weekend in September, eBay will take in more than $4 billion in revenue this year. It has 9,000 employees and 135 million customers.
  2. EBay — the dominant global cybermarketplace — conducts more transactions every day than either the New York Stock Exchange or the Nasdaq. This year, about 1.8 billion items are expected to be listed on eBay and, by year-end, more than $40 billion worth of cars, clothing, computer and anything else you can think of, along with many you will not, will be traded. More than $80,000 dollars of goods and services get traded every minute.
  3. EBay is different from virtually any other company because its business depends on the hard work of hundreds of thousands of people who sell on its Web site but are not employed by eBay. Almost half a million people earn all or most of their income from selling on the Web site. If they worked for eBay it would be the second largest employer in the country- after Wal-Mart.
  4. EBay goes to great lengths to stay attuned to this “community” of users. Ten times a year, it brings a group of eBay buyers and sellers to corporate headquarters in San Jose in a program called “Voices,” to find out what they do and do not like about eBay. These consultations last two days and nights, and afterward eBay officials continue to keep in touch with Voices members.
  5. Ebay’s Network Operating Center keeps track of every transaction, every visit to the eBay auction site. That means that, at any minute of the day, eBay knows exactly where its money is coming from, how many people are on the site, their listings per second, the number of bids and so on. This monitoring allows eBay to troubleshoot problems. In the aggregate, the traffic information provides a fascinating study of American activity, allowing eBay to track social events. For example, when the American Idol show is on, traffic dips, lasting for about two to three hours as it cycles through from the East to the West Coast.
  6. Although eBay says that fraud occurs in less than one hundredth of one percent of all its transactions, victims continue to be frustrated by eBay’s stance — that buyers and sellers should try to resolve their differences on their own. Complainers about fraudulent transactions generally get only an automated response to that effect from eBay, though the company does monitor the site from bases in San Jose and Salt Lake City for fraudulent items — bouncing blatantly fake art, for example.
  7. EBay’s recent fee increases for sellers continue to diminish its business. According to powersellersunite.com, some 7,000 eBay stores have shut down because of the increases.
  8. EBay’s Rules, Trust and Safety committee meet to review whether questionable items should be allowed on the site. Among those the team has rejected: Breast milk (for safety considerations), personal sexual services, and families for rent.
  9. EBay, which entered the European market six years ago and the Asian market four years ago, is counting on major growth from overseas. The company operates in 27 countries, and this year roughly half of its revenues will originate outside the U.S. Germany is eBay’s largest market outside the U.S.’ meanwhile, its user base in China grows by some 20,000 people every day and is already above 20 million. International eBay users look for many of the same things as Americans, and it is true, too, that the London Tube buys spare parts on eBay.
  10. EBay has spawned a raft of businesses for others – including school districts that make money offering classes in eBay, the drop-off stores for people who want their stuff sold for them on eBay, and many businesses that help people sell wares on eBay like pink packing peanuts and software designed to help buyers win auctions at the lowest possible price.  

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