You may know that eBay is a service that lets businesses and people sell items through their website. But do you know how they became the wildly successful company that they are today?

eBay was originally founded by Pierre Omidyar in the fall of 1995, became a notable success story of the dot-com bubble, and is now a multibillion-dollar business with operations in about 30 countries as of 2011.

The website is free for buyers to use, but sellers who use the site are charged fees for listing items (after a certain number of free listings) and charged fees again when their items are sold.

Photo – Bustle.com

eBay has grown and expanded quite a bit since its launch in ’95, and now includes services such as “instant ‘Buy It Now’ shopping; shopping by Universal Product CodeISBN, or other kind of SKU number (via Half.com, which was shut down in 2017); online classified advertisements (via Kijiji, or eBay Classifieds); online event ticket trading (via StubHub); and other services. eBay previously offered online money transfers as part of its services (via PayPal, which was a wholly owned subsidiary of eBay from 2002 to 2015),” according to Wikipedia.

So how did this mega-successful company start?

eBay: The Early Years

The AuctionWeb (the original name for eBay) was founded in California on September 3, 1995 by a French-born Iranian-American man and computer programmer by the name of Pierre Omidyar as part of a larger personal site. It’s said that one of the first items ever sold on AuctionWeb was a broken laser pointer for $14.83. Astonished by the sale, Omidyar contacted the winning bidder to make sure he understood that the laser pointer he won was broken. In the email response, the buyer explained, “I’m a collector of broken laser pointers.”

Photo – Bustle.com

Reportedly, eBay was simply a hobby for Omidyar, until his internet service provider told him he would need to upgrade his service to a business account because of the high volume of traffic to his website.

The resulting price increase (from $30/month to $250) caused him to start charging those who wanted to use eBay, but users seemed palatable to this change. This resulted in the hiring of Chris Agarpao as eBay’s first additional employee, who was hired to process the checks coming in for fees.

In September 1997, the company officially changed the name of its service from AuctionWeb to eBay. The site originally belonged to Echo Bay Technology Group, Omidyar’s consulting firm, so he first tried to register the domain name “echobay.com.” When he found the domain already taken by the Echo Bay Mines, a gold mining firm, he shortened the domain to his second choice, and that’s how it became “eBay.com.”

The Pez Myth

Photo – me.me

There’s a frequently repeated story that eBay was founded to help Omidyar’s fiancee trade Pez dispensers, but that story was actually just a myth fabricated by public relations manager Mary Lou Song in 1997 to interest the media, who had all but ignored the company’s previous explanation of wanting to create a “perfect market.” This fact was revealed in Adam Cohen’s book, The Perfect Store (2002), and was later confirmed by eBay.

How Beanie Babies Shaped the Future of eBay

The Pez dispenser myth did exactly what its originator intended; it created enormous publicity, which led to some of eBay’s most explosive growth early on among toy collectors. However, at the time, Beanie Babies were the leader in the toy popularity category, and they were the most difficult brand to find in retail stores. Because of this, eBay was the perfect market for buying and selling Beanie Babies, and so they became the dominant product on eBay, accounting for about 10% of all eBay listings in 1997.

While still a privately held company, eBay could pinpoint the cause of its growing market share to two major factors:

  1. The growing collectibility of Beanie Babies in the mid-90s; even internationally, Beanie Babies were a popular collector’s item.
  2. Ty (the company the produced Beanie Babies) producing the first business-to-consumer web site: a poor one. The original Ty website contained a trading post where people could “trade” their Beanie Babies, but the trading post was massively dysfunctional, overwhelmed with unsortable and unfilterable listings. Ty’s dysfunctional website created a very palpable demand for a place to buy, sell, and trade Beanie Babies.

eBay was able to meet the demand by providing a user-friendly interface for Beanie Baby collectors. eBay wouldn’t be the major competitor in online selling it is today without Beanie Babies.

Did we miss any cool facts about eBay? Let us know in the comment section below!