Pierre Omidyar had an idea most people thought was crazy: use the internet to let complete strangers buy and sell things to one another.

He built a simple auction site and put up a broken laser pointer. Someone in Canada paid $14.83 for it.

That little experiment turned into eBay, an $80B marketplace.

In today’s issue, I share Pierre’s journey into the online auction world, along with:

Enjoy this story worth bidding on …LG

Pierre Omidyar was six when his family left France for the United States. Upon arrival, they moved every two or three years meaning Pierre kept moving from school to school, so he never got much chance to make friends.

What he had instead were gadgets. He went shopping for a calculator with his father back when calculators cost $100. He broke most of what he was given, then took the pieces apart trying to fix them, which he never once managed to do.

He broke things, took them apart, and tried anyway.

In seventh grade he started cutting gym class to get at a Radio Shack computer his science teacher kept in an unlocked closet, and taught himself to program on it.

By high school the school was paying him $6 an hour to computerize the library card catalog, so that librarians formatting cards by hand could type once and let the machine do the rest. It was the first money he ever made writing software.

CODING BY U.S. MAIL

The plan was engineering. He got into the engineering school at Tufts and lasted two semesters before chemistry ended it. He studied harder for that midterm than he had studied for anything in his life and scored 25 out of 100. He transferred to the liberal arts school and focused on computer science instead.

The class that washed people out of the computer science program turned out to be taught by a professor Pierre has called one of the best he ever had. He came out of it hooked.

Inspired, he searched for things to build, and landed on the Macintosh. The school's computer labs were full of IBM machines, and he ignored them, working from his dorm room on an Apple and learning everything about it he could. He built a small tool that made other programmers' work easier.

In his junior year he went looking for a summer job. Instead of sending a resume, he read the want ads in the back of Macworld, wrote to every company he could find that made software for the Mac, and put a copy of his own code in each envelope. Not a description of what he could build. The thing itself.

One of them hired him.

BETTING ON THE PEN

After he graduated, Pierre went to work for Claris, the software company Apple had just spun out, building drawing programs for the Mac. Everybody there assumed Claris was headed for an IPO. Then Apple changed its mind and kept it. The IPO was off, most of the leadership walked out, and Pierre walked out with them.

On the way out, he and a few friends started talking about doing their own thing. They were predicting people were about to stop typing and start writing directly on their screens with a pen. Almost everybody in the industry believed it was coming. They started a company called Ink Development to build software for it.

Almost everybody was wrong. Eighteen months in, the pen was going nowhere. However, a side project they launched was quietly getting traction, a set of tools that let merchants build and run their own stores online. They renamed the company eShop and bet on that instead.

But Pierre wanted to do Internet things, and he thought eShop was heading the wrong way, toward private networks run by big companies instead of the open internet. He also wanted work that put him in front of actual people.

He left eShop at the end of 1994 and kept his ownership shares.

THE BROKER'S PHONE CALL

Pierre went to work at General Magic, another Apple spinout, building software for a handheld device people were supposed to carry around. The company went public in early 1995 and the stock doubled on the first day. The devices did not sell.

On the side, Pierre was picking up consulting and freelance technology work, and turning over ideas of his own. One of them was about how markets work. A price is only fair when everybody has the same information.

Then it happened to him. He had a little money saved and wanted to buy into a gaming company that was about to go public. The shares were priced at $15. His broker called to tell him Pierre had paid $24.

Pierre asked how that happened. The broker said, "$15 was the ideal price, not the price that people like you can get."

Regular people were locked out. And regular people were not sitting on stock to sell anyway. They were sitting on stuff.

That year, every company building a store on the web was working on how to sell more of their own product to more customers. Nobody was working on how to give ordinary people the kind of market the professionals already had.

Instead of running a classified ad that said here is my thing, give me $100, you would post the lowest price you were willing to take. If more than one person wanted it, they could fight it out, and whatever they landed on was what the thing was actually worth that day.

Pierre thought this simple idea had legs so he started working on it nights and weekends.

NOBODY CAME

He had named his side business Echo Bay Technology Group, after a spot near Lake Mead he liked the sound of. Echobay.com was taken by a Canadian mining company, so he dropped three letters and registered ebay.com. instead, a month before there was anything to put on it. (Fascinating how a brand name this big was chosen this way :-).

The idea had been turning over in his head for a few months, but decided that over Labor Day weekend he would sit down in the bedroom of his townhouse, write the code and launch it.

It did three things. You could list something for sale. You could see everything that was listed. You could bid.

He called it AuctionWeb and parked it on ebay.com, next to a page for a biotech startup, a page for a Tufts alumni group, and a page he had made about the Ebola virus. It ran on the same $30 a month internet account he already had.

Everybody he told about it said the same thing. Strangers will never do business with strangers over the internet. Forget it.

AuctionWeb went live on Labor Day, Monday, September 4. Pierre posted an announcement to a newsgroup that listed new websites, and waited.

Nobody came. Not one visitor in 24 hours. The moderator of that newsgroup had taken Labor Day off, so the announcement did not go up until the following day.

The day after it finally appeared, somebody listed the first item, an issue of a comic book called The Maxx. Bidding got to 75 cents.

THE BROKEN LASER POINTER

Soon after, Pierre listed something of his own. A laser pointer he owned had stopped working, and he put it up starting at $1.

That busted pointer was the first item sold and went for $14.83.

The buyer was a man in Canada named Mark Fraser. Pierre wrote to him to make sure he understood the thing was broken. Fraser knew. He wanted a laser pointer for the presentations he gave at work, a working one cost more than $100, his boss was not going to buy him one, and he had decided to build his own out of parts.

An object worth nothing in one man's apartment was worth $14.83 to the one person who wanted it. It only had to find him.

LET THE CUSTOMER BRING THE CUSTOMERS

Pierre spent nothing marketing the site. He went instead to where the buyers and sellers already were, which was Usenet, the discussion groups that had been running since before the web, where people were already buying and selling from each other by email.

He posted his entire non-computer inventory to one of them. Eighteen items. Autographed Marky Mark underwear at $400. A 1952 Rolls Royce at $38,500, which never sold. Two of his seven categories had nothing in them at all.

He was not describing a marketplace. He was showing people what was in it.

Then he gave sellers a reason to send their own people to him. Every auction got its own web address. Instead of sorting through fifty emails with fifty different offers, a seller could post one link and let the software do the work. It was free, so every seller brought buyers with him, and every buyer found more sellers waiting.

That was the whole growth plan. eBay's marketing budget for the following year came to $32,000, and the company did not buy real advertising until two full years after launch.

By December, AuctionWeb had run thousands of auctions and taken more than 10,000 bids. Pierre was still at General Magic, running the site alone at night and still not charging anybody a cent.

THE $250 BILL

In February 1996 his internet provider told him his traffic was too heavy for a personal account and moved him to a business one. His bill went from $30 a month to $250.

In response, Pierre started taking a small cut of every completed sale. 5% on anything under $25, 2.5% on anything above.

It was not a business model. It was a way to cover a bill.

He made back more than $250 before the month was out. eBay was cash flow positive from the day it started charging. Its first full year brought in $372,000 and kept $148,000 of it.

THE HUMAN SIDE OF COMMERCE

The other thing that happened that February was the complaining.

Pierre was still the only person at the company. He wrote the code, he answered the email, and now he was being asked to settle arguments between grown adults he had never met. He compared it to being a parent with kids running in. Daddy, he did this to me. Daddy, he did that.

On February 26 he wrote his users a letter. "Most people are honest. And they mean well." Some are not, he told them, and that is true here, in the newsgroups, in the classifieds, and next door. The difference is that here they cannot hide.

Then he handed them a tool. Complain in public instead of complaining to me. And while you are in there, give people credit when they earn it.

He expected a complaint box. Most of what came back was praise.

That tool was the real invention. The auction was a simple script any decent programmer could have written. The Feedback Forum let a buyer look at a seller in a country he had never visited and see a hundred other strangers vouching for him.

He had set out to build a fair market. He has said that at the beginning he did not get the human side of it at all, that for him it was an experiment.

MAIL BAGS FULL OF CHECKS

For two straight years the site grew 20% to 30% every single month. Pierre kept telling himself it could not last. Then he hired business people, and they told him it could not last either.

There was no practical way to collect small payments online yet, so sellers mailed in what they owed. The first person eBay ever hired was not a programmer. In June 1996 Pierre called Chris Agarpao, who had been in his sister's wedding party, and asked if he wanted a job.

It was a few hours a week at Pierre's kitchen table, opening envelopes, counting what was inside, and taking it to the bank. Some of it came in coins.

Pierre added up one month of checks from AuctionWeb and the total was bigger than his paycheck from General Magic. In July he quit (Microsoft had acquired eShop at that same time so he had that infusion to lean on as well).

In August 1996 Jeff Skoll joined as eBay's first president, after first telling Pierre the idea was stupid. He wrote the business plan on a normal five-year projection, and eBay hit the five-year numbers in year two.

In September 1997 AuctionWeb took the name of the domain it had been sitting on and became eBay.

HIRE PEOPLE SMARTER THAN YOU

In June 1997 Benchmark Capital put $5 million into eBay. The company was already profitable and did not need a dollar of it. Pierre took it because his last company had taught him that the right investor is worth more than the money, then put it in the bank and left it there.

What he wanted was help hiring people better than himself. He had decided early that he was not going to be the one running this, and neither was Skoll.

Meg Whitman was on the very first list the recruiter produced. Bob Kagle at Benchmark said she would be perfect and there was no chance of getting her. She was running Playskool at Hasbro and had just moved her family to the East Coast.

She flew out anyway. Over dinner, Pierre and Skoll told her what they were hearing from users. A man in a focus group had apologized for not using eBay much, then admitted he was only on it three or four times a day. Whitman had spent her whole career in consumer marketing, and she knew what that sounded like. People were in love with a company nobody had heard of.

She started on March 1, 1998. Pierre told her on the first day that she was running the show.

THE MARKET BUILT ON STRANGERS

That fall, eBay went public. By the end of the first day the market had decided the company was worth close to $2 billion.

Pierre stayed a year to help Whitman with the handoff, then stepped back. He was chairman until 2015 and left the board in 2020. He and Pam have given away more than $4 billion.

Three decades later, eBay moves about $80 billion of merchandise a year on $11.1 billion of revenue, and the company is worth roughly $46 billion. Every year, 136 million people buy something from somebody they have never met.

Pierre Omidyar’s story works because he made a big idea feel simple. He built a basic tool, showed it to people already buying and selling online, learned from their behavior, and let specific details carry the story.

#1. Start Simple, Then Find Your People

AuctionWeb did 3 things: list an item, see what was listed, and bid. Pierre then took it to Usenet groups where people were already buying and selling by email. He simply gave them an easier way to do something they already wanted to do.

Action: Strip your idea down to its simplest value, then tell the story where the right audience already gathers. Start with people who immediately understand the problem instead of trying to convince everyone.

#2. Let Your Customers Rewrite the Story

When complaints started arriving, Pierre realized trust mattered as much as the transaction itself. The Feedback Forum grew directly out of what customers were telling him.

Action: Look for the moment customers changed how you understood your own business. Share what you originally believed, what they showed you, and how your thinking changed.

#3. Let the Community Tell the Story

Pierre did not try to control every interaction. He gave buyers and sellers a Feedback Forum, and their praise became proof that strangers could trust one another.

Action: Give customers ways to share their experiences publicly. Their stories can often make your case better than yours can.

Last year, nearly $80 billion of merchandise changed hands on eBay. That works out to about $218 million every day, $9.1 million every hour, and $152,000 every minute.

Quite a leap from 1996, when roughly $6 million moved through the site during its entire first full year. Today, eBay connects 136 million active buyers across more than 190 markets, with about 2.6 billion live listings at any given time. And it all started with a broken laser pointer that sold for $14.83

In the Academy of Achievement Class of 2000 interview, Pierre Omidyar looks back on eBay just five years after launching it. What makes this interview worth watching is how openly he talks about what he got wrong, why trust became more important than commerce, the failures that nearly overwhelmed the company, and why founders should pursue ideas they care about rather than chase money. You hear the thinking behind eBay directly from the person who built it. Watch here:

Pierre Omidyar, Academy of Achievement Class of 2000, Full Interview

https://youtu.be/7cx1TCdfRDo

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