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I’m still reading ‘the perfect store‘ by Adam Cohen, which tells the story of eBay. I really must commend the author for his work on this book. It’s a very detailed, methodical book so far, and he doesn’t brush over anything. I hate it when a business biography glosses over important periods in the growth of a business. So far I’ve read up to the point investors were first brought in (and not because they needed cash, they needed the professionalism of a VC) however it’s the stages leading up to this point that have really interested me.
The founder of eBay, Pierre Omidyar, was a not a typical MBA educated, suit wearing, business entrepreneur. Sure, he was already a millionaire thanks to his share in another successful dot com, but eBay wasn’t developed with venture capital or any start up funding at all. Ebay’s growth was organic, natural, and was not given any advantages that a millionaire founder might be inclined to provide by using his own capital. It was the story of a hobby site gone crazy, and it was managed like that in the early days too.
Ebay’s culture was very relaxed. No suits, a small, messy office, not many systems (envelopes with auction fee payments were piling up in bags all over the place), one guy working the code on the website (which was crashing due too much load), another person handling customer support over email and forums, and another opening envelopes and recording payments. It was an absolute mess and they were buckling under the pressure of their own popularity.
A word of warning, if you are running an Internet business in the early stages (like me) and you are easily excited by thinking about your business, don’t read this book before going to bed. I cannot get to sleep if I read this book as I hit the sack. My mind clicks over, every paragraph inspires me and my mind launches into a overdrive of business thoughts and ideas. It’s not a bad thing mind you. This book in fact made me realise a very important idea regarding my own business, unfortunately I was so buzzed by the idea, that I was busy scribbling down notes at 3am in the morning and didn’t get a lot of sleep. Stick to fairy tales and counting sheep before bed if you want a good rest.
During the early stages eBay’s founders were always worried that a big Internet business like AOL would realise the potential for auctions and utilise their traffic and market power to compete eBay away. In fact they were so worried about it, their initial business plan focussed on a long term goal of selling online auction software and merely use eBay as a very good showcase tool. They figured that eBay wouldn’t enjoy it’s current growth or market dominance for much longer.
There were a few competitors at the time, however the only major rival, at least one that was receiving some reasonable press coverage, was a business that auctioned it’s own goods. A one-to-many principle if you remember from my last post. Basically they were a retailer that auctioned off products. On the books they had more significant revenues than eBay at the time, but that was because they recouped the total price of each item, and not just a small percentage fee as eBay did.
Regardless of competitors eBay had one clear advantage over every other auction site, and it was this advantage that really made the difference. Ebay had a community. A very loyal group of people were not just using eBay for auctions, everyday they actively participated and interacted on the eBay forums. Omidyar had originally instigated the forums for auction feedback purposes and also as a means for more experienced users to help out those new to eBay, again leveraging the many-to-many principle. Over time the forums grew to a huge social community which gave people a sense of belonging. Whenever new features were under development eBay staff always checked with the community for feedback. It was a very tight family.
Ebay had one thing I’m dying to replicate – outstanding word of mouth. Nowadays eBay uses all kinds of advertising methods like Google adwords, publicity, and other media advertising, but back then they didn’t advertise at all. They didn’t spend a dime – they were too busy trying to cope with how many people were already using the site – can you imagine that! The only advertising done, and it was free, was when Omidyar first launched his hand-coded hobby website (originally called ‘AuctionWeb’) – he made a few posts on newsgroups.
Then it hit me. My first real success online was a website I started much in the same manner as eBay, as a hobby. It’s called MTGParadise, or Magic: The Gathering Paradise [www.mtgparadise.com]. I managed that site for seven years. I built it back in my early days at university, in 1998, as a place to write about my hobby, a collectable card game called Magic (it was my life back then). It started off as a local website, then a national website, it had name changes, URL changes, design changes and I spent countless hours working on it. For a long time it stayed a small hobby site. It never was huge because it was not interactive, mostly a collection of articles, card lists and news.
One day I installed a free forum. It didn’t get much use at first, but eventually people started to trade cards and just hang out on it. My niche was Australia. There were already a few very popular international Magic sites, but mine was the only significant Australian site. Adding that forum was the smartest thing I ever did. MTGParadise became THE place for Australians to trade cards, talk strategy and indulge in their hobby. By 2003 the site ballooned and was getting 1000-1500 unique visitors per day and 300,000 – 400,000 impressions per month.
During that time I did no paid advertising. I swapped links with other sites, posted in newsgroups and mailing lists but generally just kept the place going. It was a lot like running a business, managing staff, writers, moderators, generating new content and keeping technical things running smooth. The community was tangible. The word of mouth was golden. People would say “I traded on Paradise”.
My fascination with the card game disappeared but I kept the site going for many years after. Just last year I decided I should move on and pass the site on to people that were still actively involved with the game. I sold the site in 2004.
Why did that site succeed? Why did eBay succeed? The community. The stickiness, the sense of belonging each user experiences. Wrap that with an addictive feature (eBay: auctions, MTGParadise: trading cards) and you have a recipe for good word of mouth.
Now why haven’t I attempted to replicate this with my current business?