Free How They Started by David Lester

to organic growth—it could achieve a certain degree of self-organization,” Pierre said in one interview.
    In 1997, with the business growing at a phenomenal rate, Pierre invested substantially in advertising for the first time and helped design what has now become the business’s iconic logo. The year marked another milestone as the one millionth item was sold on eBay: a toy version of Sesame Street ’s Big Bird. By 1998, the site was making a name for itself as the best place to trade for Beanie Babies, tiny stuffed animals that were fast becoming a collector’s item.
    Fortune continued to favor Pierre’s sense of timing. Toward the end of 1997 and throughout 1998, business communities around the world were experiencing the dot-com boom, and seemingly everything online at the time became attractive to investors and consumers alike. Pierre recognized that the business was becoming too big for him to handle alone and that the time was right to seek outside help and expertise. He had already filled several roles, among them chief financial officer, president and CEO, as well as chairman of the board.
    Pierre decided to seek outside funding and sold a 22 percent stake in the business to venture capital firm Benchmark Capital in return for an injection of $6.7 million, which some reports have suggested was the most lucrative investment ever made in Silicon Valley. Benchmark began the search for an experienced management team, and the new recruits included Margaret (Meg) Whitman, a Harvard Business School graduate who had previously worked for Disney. She took the role of president and CEO, while Pierre remained as chairman. Meg poached senior executives from the likes of PepsiCo and Disney who helped to take the company public in 1998 and presided over a big investment in advertising.
    The IPO, too, was a phenomenal success and provided funds for further expansion. Pierre and Meg watched the share price jump from $18 to $50 in a matter of minutes, and within two months of listing, the price had reached $100. By early 1999, Benchmark’s stake was worth $2.5 billion, equating to a staggering return of 50,000 percent. After a secondary offering, eBay’s valuation peaked at $26 billion.
Teething troubles
    Rapid growth came at a price, however. In June 1999, following a site redesign, eBay suffered a number of breaks in service, with one lasting 22 hours. This had a severe impact on consumer interaction with the site and knocked more than $8 off the price of its shares. Further outages occurred, and company revenues took a severe hit. According to reports at the time, the service interruptions cost eBay $3.9 million of its second-quarter revenues after it refunded listing fees and granted extensions on auctions.
    At the time, the 22-hour outage was one of the worst Internet crashes in history, and a backlash quickly ensued as users wasted no time registering their complaints on an Internet newsgroup dedicated to the site. Others raised questions about the robustness of the technology.
    Keeping the customer foremost in mind had always been Pierre’s aim, and he set about reassuring customers about the quality of eBay’s service. Staff worked around the clock to address technical problems, and eBay made some 10,000 phone calls to the site’s top users, alerting them to the problems, apologizing for the inconvenience and assuring them that everything possible was being done to get the site back up and running.
    A few users however, began turning to other sites that were giving eBay a run for its money with their own versions of online auctions, most notably search engine Yahoo! and online retailer Amazon. The latter had launched online auctions in March 1999 with a model similar to eBay’s, including a commission on sales and a rating and feedback system. New competition, however, appeared to be a good thing, as eBay beefed up its services in response. It expanded the range of products on offer, streamlined the buying and