1. Serves the long tail--there was no existing market for many of these products (beanie babies, collectible cars). Contrary to many online sites which just mirrored the offline world, this sector was too fragmented to exist offline--it could only exist on the internet.
2. Network effect business--I can not stress how valuable this is for growth. First mover advantage is huge. Once competitors have the ability to imitate, the competition is over.
3. Community of users--first three years of growth, management was hands-off and let the community lead management to correct strategic decisions. Interesting to note that Meg (see below) eventually had to take control of management decisions as the company grew--best examples are acquisitions and removal of illegal and harmful items (guns, etc).
4. Meg Whitman--I visited a class at Harvard last winter, and the discussion was on whether Meg Whitman was lucky or good. I think she was good. The argument against her was that she just happened to be at the right place at the right time, and nobody was going to stop the growth of eBay. I disagree; she was intelligent enough to realize that she needed to take a hands-off approach to management. She knew that other than the user community, Pierre Omidyar (founder) was the most important part of eBay. Yet she still offerred a different opinion, and at times vetoed the engineers decisions because she knew how to take the company from where it was to where it was going. I find it very similar to Eric Schmidt (CEO of Google), who was in the same position with Sergey and Brin--he was almost like a baby-sitter, but they needed a baby-sitter, one with passion and vision for where the company was headed.
Where hasn't it been successful?
1. China -- Taobao
2. Japan -- Yahoo! Auctions
3. Korea -- GMarket
Why? Not the first mover, and had not listened to the community. When they first created sites in Asia, the currency was still in dollars, auctions ended at U.S. local times, etc. Gmarket is interesting as well because eBay had dominated the Korean market until GMarket entered with less auctions, and more fixed price sales for in-season products. They also featured real-time price negotiations between buyer and seller (something eBay may be attempting to do with their recent acquisition of Skype).
New areas of growth:
-Real estate
-International sites
-Different auctions
-Localized auctions (think craigslist)
-Mobile alerts, mobile interface
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What does network effect business mean?
Network effect business means that each user benefits from the addition of another user. Think about a company like Skype (free VoIP). If you don't know anybody who uses Skype, it is worthless to you. As more of your friends use it, the value of Skype's service increases. This can serve as a huge competitive advantage.
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