Going once, going twice and growing like crazy

Everything under the sun is on sale in eBay's online auctions.

Published June 30, 1998 7:00PM (EDT)

What can you buy on eBay? An $18,000 mint Harley Davidson; an antique tintype depicting a grimacing man in drag; and an enamel Charlie Chaplin pin. There are dancing-baby screen savers and "Star Wars" action figures; a new game of Twister and an 18th century tea caddy; Art Deco necklaces, Japanese prints and a Mexican Barbie. Not to mention 30,000 Beanie Babies.

You can, without exaggeration, find virtually anything you're looking for on eBay, the biggest, oldest and most successful auction site on the Web. Since eBay's inception in 1995, it has sold more than 12 million items. On any given day, you'll find close to 500,000 auctions, with 70,000 or so new auctions added every 24 hours. That's a lot of people selling their treasures -- or their junk, as the case may be.

Pierre Omidyar, a software developer who is now eBay's chairman, founded the site, as its pages proudly state, as a "grand experiment in Internet commerce." It's the ultimate free market: a place where anyone can sell anything, as long as there's an interested buyer -- and 70 percent of the time, there is. Because of this, eBay has become the locus of the dollar-bill dreams of a million would-be entrepreneurs.

But as an open market, eBay is not all about antiques and collectibles. It also increasingly provides a home to just about anyone hoping to make a buck: with multilevel marketing schemes, "Get Rich Quick" deals and odd information packets. There's even a thriving community of pornographers. eBay is a microcosm of the Internet, with all of its communities and all of its crooks -- and apparently they're all getting along just fine.

eBay's leaders still believe that "communities can be built on trust, now more than ever," says Steve Westly, eBay's vice president of business development. "There are always those few people doing things on the periphery. But the great majority of the people here are doing this the fair way, meeting people with their same interests and coming to a site every day that has the products they are looking for."

The model for eBay is beautifully simple: Users can register any item they want to sell for 25 cents and build an ad using the provided template. eBay also profits from charges for premium placement, boldface type and other classified-ad style enhancements. If the item sells, the auctioneer has to give a percentage to eBay, varying from 1.25 percent to 5 percent based on the value of the item. Auctions last anywhere from three days to a week, during which time any registered user can bid. All money transactions are conducted solely between the buyer and the seller.

Which, of course, means caveat emptor: buyer beware. eBay is an idealistic system based on faith and trust -- there are no watchful authorities, and no one is policing fraud except for the eBay members themselves. If you send your check and never receive your merchandise, or if the auctioneer deceptively advertised the product you end up receiving, it's your tough luck. You can complain to eBay, but odds are they won't be able to do much about it.

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eBay says that these situations are rare -- fewer than 100 transactions a month need arbitration -- but it has set up safeguards to discourage fraud. At the center of that system is the Feedback Forum -- a kind of institutionalized reputation repository, in which users accumulate positive or negative points based on ratings from other users. When members' ranking drops to "-4," eBay kicks them out. Buyers are advised to consult the Feedback Forum before bidding on any auctioneers' item, and many actively police their own communities and chat rooms.

According to Westly, "We have only seen, as a whole, the best behavior from our users. We're at a place now where we have a lot of people, but by and large these are people who come here for the right reasons." But as eBay grows, hucksters do keep poking holes in the system. For example, the site now prohibits members from registering with free e-mail addresses -- since eBay discovered that sellers would use several free accounts to jack up their positive ratings in the Feedback Forum or use them as shill accounts to drive the prices up on their own auctions.

"Online auctions are the top kind of Internet fraud we see," says Internet Fraud Watch director Susan Grant, who is working closely with eBay on fraud prevention. Her concern is for victims like the disabled woman who recently bought a "portable wheelchair" in an auction -- and received a folding chair on casters instead. Considering the relatively anonymous and unmonitored nature of auctions, she worries that more vulnerable and naive users will be taken advantage of.

"As the Net has opened up, giving people the ability to communicate with each other no matter who or where they are, it brings up the question of whether we as a society are ready to do this. Do we have the civility, the social skills and the responsibility to treat each other properly on the Web?" asks Grant.

There are plenty of sellers on eBay who are essentially cleaning out their basements, selling the abandoned detritus of their lives to a much bigger population than they could ever draw to a Sunday garage sale. But for a more ambitious group of users, eBay is the epitome of the American Dream -- a fast, easy way to make a lot of money.

eBay's founders are fond of telling stories about welfare families who have pulled themselves out of poverty by setting up little eBay businesses, craftspeople who couldn't sell their products until they discovered eBay and disabled people who have become full-time auctioneers without having to leave their homes. Then there's Bruce Nicklin, who's at the apex of eBay's fledgling entrepreneurial culture. A former Maytag business manager, Nicklin got his start on eBay last year by selling the junk in his garage; today, he has 23 employees and a business called NetSeller, which is on target to sell $5 million worth of merchandise (primarily computer equipment) in online auctions this year.

"You've got different levels of sellers," explains Nicklin, with a born salesman's conviviality. "There's the part-time seller going to flea markets and garage sales, who thinks he can pick up stuff to sell and make a buck. Then you've got the mid-seller who maybe has a small business or a store and is using eBay to bring in some extra money. Then there's the big guys like us, making this into their whole business."

Nicklin's company buys surplus computer goods from wholesalers ("Computers are almost like being in the bakery business," he explains. "There's a very short shelf life for computers, so there's an endless supply of surplus stuff") and then resells them on eBay, as well as other auction sites like FairAuction and Haggle. This "buy in bulk, auction individually" model is used by many of the largest eBay auctioneers.

Perhaps Nicklin could have started a successful business on the Web regardless, but what eBay is offering its sellers is a ready-made storefront with millions of rapt buyers. Start-up costs, as well as advertising costs, are virtually nonexistent. And, attests Bryan Sweigart, who does brisk business on eBay out of his antique store in Pennsylvania, many auctions bring in more money than the products would go for in his retail store. For these accidental auctioneers, eBay is a lucrative windfall.

So lucrative, in fact, that a more dubious marketplace has sprung up in an attempt to capitalize on the dreams of the eBay newbies who think they might be the next Nicklin. Log on to eBay and you'll find countless auctions advertising tools for building a business on eBay: pamphlets, CD-ROMs and diskettes with promises like "Get $1,000,000.00 on eBay ---- this way ---->" or "YOU CAN LIVE THE AMERICAN DREAM!" There are a hundred homemade products that will show you how to put pictures in your eBay ads, list the addresses of wholesale Web sites and provide tips on HTML and "secret" auction bidding. Many ads promisingly include photographs of piles of checks and cash they "received this month" (ironically, most seem to be using the same picture).

These are the kind of half-baked promises that you might see in the spams that circulate the Net every day. And people are buying them.

"There's a lot of demand for information about eBay, because it's new," explains auctioneer Mark Laderman, who claims nearly $8,000 a month in sales of this kind of informational software. "And there are a lot of people saying, 'Hey, a lot of people are making money on eBay and I want to know how, too.' Just like I did when I first found eBay."

The "Beanie Baby Dealer's Guide" was the first of many informational products from Laderman, a polite Southern pizza restaurateur and toy collector, and his Beanie-loving wife. When the guide turned out to be a hot seller, he started producing a whole series of guides to making money on eBay (not to mention a few "Quit Smoking in a Week" kits and "Be an Internet Spy!" guides) -- primarily consisting of information and links he gathers off the Internet.

Not only is Laderman selling the disks, but he's selling the rights to those disks -- buyers of his $14.95 CD-ROM have permission to copy all the files to floppies and then sell those to other eBay users. And there are plenty of other eBay sellers doing the same thing. For example, there's soft-spoken Linda Marotta, who is trying to open a gift shop by selling porcelain angels and dolls on eBay; she also hawks her own moneymaking software disk -- which includes information about becoming an agent for her porcelain collectibles, as part of a long listing of moneymaking opportunities on eBay. She explains, "We're hoping buyers will want to sell our products -- we still want to sell on eBay, but we don't have any time to do it, we're very busy. Someone can still be making money and working for us."

It's a novel twist on the classic multilevel marketing schemes (which are also occasionally found on eBay), tailored for the auction market. And unlike the unsavory flavor of most Internet get-rich-quick spams, these auctions feel relatively rational -- many of the auctioneers are simply excited small-time entrepreneurs who've caught the eBay bug and believe this might be a way to the top. Most, like Laderman, are meticulously concerned with maintaining their Feedback Forum reputations and have received glowing praise from previous transactions.

And there certainly is an odd, self-sustaining marketplace for these kinds of programs: eBay is flooded with hundreds of people who buy and then sell the same 20 or 30 self-help programs until the market gets flooded -- then they move on to a new product. Even the most dubious auctions have bidders. As Laderman puts it, if there's a demand, why not sell to them?

eBay has no problem with these kinds of auctions -- after all, they are actually selling products, quite often with legitimate money-back guarantees. Westly believes that the eBay employees are "a lot like city planners ... Our goal is very much to stay out of the way, to let good behavior and the preservation of the reputations drive it." And most of the other communities seem to have no problem with their neighbors, either. As Nicklin puts it, "I think most people ignore it, and for those that are susceptible to get-rich-quick schemes, well, God help them."

Sweigart sees these auctions as a safety valve; he suggests that if eBay tried to provide a totally fraud-free environment, buyers might let their guard down. "Some people may learn a lesson," he says, "but some people enjoy it. I even enjoy reading it sometimes."

Still, Internet Fraud Watch -- a private nonprofit group that's a division of the National Consumer's League -- is monitoring eBay with concern. "I don't think there's a place for people who are promoting things that are deceptive or unfair anywhere, whether it's on eBay or in a newspaper or on television," says Grant. "We are concerned about the lack of screening that goes on for things we see all the time, things that you know are bogus ... the get-rich-quick schemes, the offers to create new credit identities."

But how can you possibly screen the tens of thousands of new auctions that go up every day? eBay discovered this with pornography -- it wouldn't go away on its own, and auctioneers would find ways to disguise it from watchdogs. Instead, eBay created a porn ghetto ("Erotica, Adult Only") where skin-mag purveyors share the landscape with "Titty Mouse Pads" and a small mountain of homemade videos. There, at least, they won't be happened upon by unsuspecting families.

Why, after all, should only the collectibles and antiques dealers have a chance to vend their wares? eBay is the perfect marketplace for borderline products, where previous user feedback can lend legitimacy to those dealers who deserve it. And unlike Usenet, where substantive conversations were drowned out by spams, scams and porn (and, ironically, more and more ads for eBay auctions), eBay is at least keeping its hucksters in their own little ghettos where, as a minority population, they too can work toward their capitalist visions.

Currently, there are nearly 100 sites offering online auctions, from the computer-focused FairAuction and the famous OnSale to eBay imitators like AuctionUniverse. None have managed to replicate eBay's community functions, its market size or its free nature -- perhaps that's why their sites attract fewer get-rich-quick deals. eBay alone evokes, and invites, that kind of entrepreneurial fervor.

As Laderman predicts, in his Tennessee drawl: "eBay is not a hobby. I would like for this to be a full-time business -- selling products, not just information. In my opinion, the future is the Internet. I foresee that 90 percent of all business will be done on the Internet in just a few years -- and I want to be well positioned when it happens."

By Janelle Brown

Janelle Brown is a contributing writer for Salon.

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