From Paul Gil,
Your Guide to Internet for Beginners.
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May, 2008

Overview and Summary of eBay
(Part of the Become a Power eBayer reference series)

Part 1: How eBay Works.

It started in 1995 in San Jose, California. Computer programmer, Pierre Omidyar, and his wife decided to trade collectible goods using the internet. Pierre founded a web site, "Auctionweb". where traders could meet to sell their goods to other collectors, all within an environment of professional trust. Auctionweb was later renamed to eBay (with a lower-case “e”).

In less than 13 years, eBay.com has grown into the largest and most successful online business model in history. Today, tens of millions of people converge daily at eBay.com and eBaymotors.com to buy and sell millions of dollars in new and used merchandise. From simple products like old Monopoly games and used Elvis records, to wholesale electronics and digital cameras, all the way up to exotic motor vehicles and real estate, eBay has become the global trading platform for the everyperson.

The eBay business model is magnificently simple: provide a safe and motivating online marketplace where anyone can gather to trade products with confidence. Charge people a small fee to sell their wares, and enforce safety and trust for everyone.

At its base level, eBay works exactly like an electronic “flea market”:

1. eBay sellers pay a small flat fee plus a 1.5% percentage fee to eBay in order to market their wares;
   
2. eBay buyers visit and use the marketplace without any surcharges;
   
3. Any parties that abuse the system or each other will be disciplined or ejected.

At a higher level, eBay is different from a regular flea market for ten reasons:

1. The eBay marketplace is international, and crosses language and national boundaries;
   
2. The massive choice of goods is awe-inspiring;
   
3. Sales can either be auction format (competitions between bidders), or traditional fixed price format. The sellers choose whichever format they prefer;
   
4. The buyers and sellers will likely never meet in person;
   
5. The buyers do not get to see the product in person before purchase, but are given various post-purchase guarantees to ensure satisfaction;
   
6. Very sophisticated computer measures are implemented to minimize electronic dishonesty on all sides;
   
7. Fulltime staff are employed to enforce safety and fairness across the system;
   
8. An honesty incentive model called “positive feedback” is used to motivate buyers and sellers to trade with integrity;
   
9. Professional third parties payment services, like Paypal, Bidpay, and Escrow.com, are brought in to ensure safe and trusted payment between eBayers;
   
10. eBay is easier to use than a flea market.

Next: eBay 101 continues here...

• Part 2: What a Transaction at eBay.com Looks Like.
• Part 3: The 8 Big Do's and Don'ts of eBay.
• Part 4: PayPal 101: "How Does PayPal Work?"
• Warning for eBayers: What Online Scams Look Like
• "NWT" and "NWOT": eBay Abbreviations and Other Internet Shorthand, Explained