eBay's Bid For Success

Internet Auction Site Racking Up Big Gains

(CBS) 
There is no advertising and no promotion: "We think it's important to have this level playing field," adds Whitman. "So your neighbor next door has an equal chance of success as a large corporation."

That democratic idea, the core principle of the company, comes from Pierre Omidyar who started eBay as a hobby and is now worth about $4.5 billion.

“I sat down, frankly, over Labor Day weekend 1995, after having kind of thought about these issues for a couple of months, and I just whipped up some code, “ says Omidyar. “By Monday afternoon, Labor Day, I had the site up.”

He sees its potential as limitless and has even developed a feedback system, rating customer satisfaction. The reputation of a seller is critical; too many negative comments and you’re banned as an eBay seller forever.

eBay investigates fraud claims, but relies mainly on buyers and sellers to police themselves. Omidyar estimates that only 30 sellers out of a million fail to deliver on their promises.

If it sounds a little too perfect, it may be. Omidyar and Whitman were named in a recent Congressional investigation for accepting special prices on new stock offerings from eBay’s investment banker, Goldman Sachs, and selling their shares for quick profits. Both say there was nothing improper or illegal in what they did, or in their relationship with Goldman Sachs.

Meanwhile, eBay’s reputation on Wall Street is better than ever.

“Our business model is to connect buyers and sellers,” she says. “And so ultimately our buyers and sellers may do more economic activity than a Walmart. But it is not one group of people deciding what to buy. It is the power of many sellers.”

Thousands of successful sellers from all over the world showed up at eBay’s first national convention in Anaheim last summer. The company had a reward for its big sellers -- access to low-cost premium health insurance, a fitting reward for the mom-and-pop sellers who form the backbone of eBay.

Whitman says that the buyers and sellers make up eBay: “We actually do work for them,” she says. “That is not a myth. That is not a PR spin. That actually happens to be the case. And it's the soul of eBay. By the people. For the people.”