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Lessons from eBay

One of the most incredible successes of the dot-com era is eBay. eBay was founded in 1995, and since its humble beginnings, it has grown to boast over 10 million users buying and selling goods and services online. On any given day, more than 16 million are items listed on eBay across 27,000 categories, and over $14.87 billion in annualized gross merchandise sales were transacted in 2002. eBay stock went public in a frenzied IPO in September 1998, and since hitting the market at $18 per share, eBay's stock price has ranged from a low of $3.76 to a high of $61.60.

eBay has driven a lot of change in the way people buy goods ands services. Aside from creating the world's largest online garage sale, the company has also found a way to legitimize the sale of goods and services through a simple tool called “feedback.” Whenever you buy or sell an item on eBay, you are given the opportunity (and encouraged) to provide feedback on the person you dealt with in the transaction. This system of feedback is better than any Better Business Bureau data I have ever seen. eBay also provides other forms of buyer protection, but I believe the feedback mechanism is the best. You don't have to buy from anyone whose feedback is negative or has insufficient feedback to make you feel comfortable. In this manner, eBay legitimizes the sale of goods and services through a simple “honor system.”


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