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< StockTalk >
TMF Interview With eBay VP of Marketing & Business Development Steve Westly

March 30, 1999

With Yi-Hsin Chang (TMF Puck)

Launched in September 1995, eBay (Nasdaq: EBAY) is an online flea market that allows users to sell and buy just about anything in an auction format. Individuals use eBay to trade items in more than 1,000 categories, with 250,000 new items up for sale every day. Since the company went public last September at $18 a share ($6 split adjusted), the price has shot up an astonishing 900%.

TMF: I've always wanted to know, what's the origin of the name eBay?

"The name is in some ways short for electronic bay, and we like to think of this as a safe harbor for trading."
Westly: Well, the company was founded by Pierre Omidyar three and a half years ago, and the name is in some ways short for electronic bay, and we like to think of this as a safe harbor for trading. So that's how the name came to be.

TMF: With your tremendous success of late with online auctioning, do you have any plans to diversify and expand into other e-commerce areas, including auctioning surplus goods, and not just one-on-one auctioning?

Westly: Not at this time. One of the great things about eBay is we've been fully focused on providing the users with a great experience and the person-to-person trading area, and we plan to continue to do just that. Our only goal is to get better every day at giving users a safer, more fun environment to trade, and that's all we're committed to do.

TMF: And not to become a portal either?

Westly: Well, portal is a broadly used term, and some people have said we may already be there, but we do not have plans to go into wholesaling or surplus goods or any of the other areas you mentioned. Our goal is to continue to give our users a world-class experience doing exactly what we're doing today.

TMF: Are you concerned that eBay's growing too quickly?

Westly: No, not at all. We've had fairly consistent growth over time. The one thing that we're completely determined to do is to make sure that every day we make the site easier, more intuitive to use and strengthen the community. I think the thing that really differentiates eBay from the others is that there's a level of community here that I think is really second to none on the Internet.

"Our only goal is to get better every day at giving users a safer, more fun environment to trade, and that's all we're committed to do."
TMF: Are you at all concerned that this type of online auctioning is a passing fad?

Westly: Well, not at all. We believe that human beings regardless of age, gender, or where they live in the world love to collect. They have two things in common: One is they love to collect things, and two is that they really enjoy the thrill of the hunt, and that's something that we're committed to doing better than anybody else.

TMF: Well, you mentioned the rest of the world. Is eBay primarily a U.S. service right now, and what are your plans for expanding internationally?

Westly: Well, we have a large number of users today from many countries throughout the world. I talked to one of our top sellers who said they have sold things to people in over 25 countries already. So we have quite a bit there, and now we're beginning to expand our offering internationally, and you'll be seeing us do more in Australia, Europe, and in Asia.

TMF: Are there any constraints internationally in terms of shipping or even selling goods?

Westly: Sure, there are a number of issues, including language issues, currency issues, and shipping issues, and we're working on solutions for all of them. But the real issue is that people, wherever they are in the world, love to collect things, and they love the thrill of the hunt. So we think eBay will be a natural fit and certainly well-received.

TMF: Well, I'm sure you're aware Amazon (Nasdaq: AMZN) just announced it's going into the auction business as well. What do you think makes eBay different from competitors like Amazon and Yahoo! (Nasdaq: YHOO)?

Westly: Well, we think that Amazon is certainly a savvy Internet competitor. It's done a very good job in the area of business-to-consumer commerce, but it's a very, very different business compared to the person-to-person space in which eBay is really the clear leader. What really makes us different is we have this strong, really well-developed community that I think most sites don't have.

"The thing that really differentiates eBay from the others is that there's a level of community here that I think is really second to none on the Internet."
I was just reading an article -- and this was something that I didn't know about until I literally read it -- that I think really plays up the type of community we have. There's a woman on our site who traded a lot in the doll area. A lot of people knew who she was, and she was apparently quite an expert at helping give people advice on what were good doll buys and background on how much they should pay for certain items, and as a respected member of the community bought and sold a number of things. She stopped coming to the site, and people in the community said, "Hey, where is" -- I've forgotten her name.

So they sent her a letter, called her up, and said, "Hey, we missed you on the site," and she said, "Well, you know, unfortunately I've just gotten a divorce, and I lost the computer in the divorce." So everybody got on email and said hey, you know what happened, and so on and so on, and these people raised the money for this woman and bought her a PC. It's a demonstration of the type of family commitment you'll find on eBay, the deep level of community that we think a lot of our competitors just aren't fully geared up to do yet. And that's kind of the promise, the commitment that we try to have with our users every day.

TMF: How do you plan to maintain that sort of advantage and to keep that community alive?

Westly: Well, there's a word we've coined here. It's called eBaysian. For every thing anybody does we say, "Hey, is that an eBaysian thing to do?" And it basically means do we treat people well, do we follow up quickly, do we take care of them? People here are very committed to treating people well every day, and we hope and we like to think that it comes with every aspect of what we do.

TMF: Do you plan to sell ads on your site to increase revenue?

Westly: That's a great question. We do sell some ads now, but we sell fewer than 1% of the banners on our site. The reason for that is we think that most of the area on our site really belongs to our users, and we do not want it to have too corporate a feel.

TMF: I solicited questions from eBay shareholders on our site, and one of the emails I got was to the effect that they didn't want to see ads on the site, that they were so happy to be somewhere where they weren't being bombarded by ads.

Westly: We hear that a lot, and we try to respect that, and, as I said, we sell some advertising now. It's about 1% of all the space we have. We try to just sell ads to partners that we think our users would like, and that's the way we want to keep it. It's a very different commitment to our users than I think some of our larger competitors have.

TMF: Are you planning any new services such as matching up buyers with sellers through email alerts?

Westly: We're always planning new features. We launch new features absolutely all of the time. Some of them are very small -- only our seasoned buyers will always notice. But we have a feature called "personal shopper" that does much of what you're talking about, and we'll release that over the next few months. The team is working night and day on this stuff. You have never seen such a high level of morale or esprit de corps in any group I've ever worked with.

TMF: Well, you recently stopped carrying guns and ammunition on the site.

Westly: That's correct.

TMF: What kind of control do you have over pirated software and music?

Westly: Well, we've been a leader in this area. We just launched a program we call our Legal Buddy program. We worked with over 100 companies where they've told us they're worried about their items being pirated -- you know, Adobe software, a lot of firms you've heard of. We proactively scan items on our site, and we let them know every day if the items are being sold with titles that they're concerned about. If they tell us there's any hint of an item being pirated, we will shut that auction down immediately and notify the seller. So we want to be very proactive in working with companies to make sure we reduce the risk of that happening.

TMF: What's been the response from them?

Westly: They've been extremely grateful. Most people, as you may know, are not quite as proactive as we are.

TMF: I know you can't say much, but what's the status of the government's investigation of possible illegal transactions on the site?

Westly: We are always committed to working with the government on any investigation and we work closely with a variety of government agencies to make sure that we help remove bad apples from our site, and we're completely committed to doing that. That's the most I can say at this point, that we work very closely with government agencies on this.

TMF: In general, what are you doing to combat fraud?

Westly: Well, we do a number of things as you may know. We're really the pioneers of creating a feedback forum so that, unlike most other sites, at eBay you know exactly who you are trading with because you can see their reputations, and that is a great, great thing. The second thing is because everything is public at eBay, people are almost always on their best behavior. We have a number of features -- like we don't allow people with anonymous Web-based email accounts unless they give us a credit card. At other sites, they can use those, which enables people to go in and do inappropriate things anonymously. eBay does not allow that unless you post a credit card with us.

"Now we're beginning to expand our offering internationally, and you'll be seeing us do more in Australia, Europe, and in Asia."
Again, we work very closely with law enforcement. We have a large, highly trained group of customer-support staff, including some former law enforcement members themselves, who are highly in tune to any potential inappropriate behavior. Finally, we announced two months ago that we provide free insurance for all of our users through Lloyds of London, and bringing one of the best-known insurance names in the world gives people a real sense here that they can trade in what they know will be a free and safe environment.

TMF: Do you think that's comparable to the guarantee that Amazon is pushing, or do you think you'll have to do something in reaction to that?

Westly: I think that Amazon is following our lead, and I'm sure over time they'll try to find a [insurance] partner. I would imagine over time they would try to find a partner like we have in Lloyds that is better known and gives their users a little higher sense of security than doing it themselves.

TMF: Is there anything else you'd like to add?

Westly: No, I think you have covered most of the bases.

TMF: Thank you so much for taking the time to talk to us.

Westly: You bet. If you're ever in Silicon Valley, please let us know. I would love to have you stop by. It's a pleasure to talk to you.

TMF: Thanks a lot.

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