The Perfect Market: A History of eBay — Part 1

E-commerce seems inevitable in retrospect, but its initial prospects were fraught. According to the Pew Research Center, in 1995 only 8% of Americans were comfortable buying something online with a credit card. eBay is the great grandmother of US e-commerce, creating a market and blazing a trail for companies that would come after like Airbnb, Carvana, and Etsy. This is the first part of a deep dive into eBay, based on Adam Cohen’s book, The Perfect Store: Inside eBay.

The Perfect Market

Before the internet, the perfect market was an economics textbook pipedream. A perfect market would have plenty of buyers and sellers. It would also have minimal search and transaction costs. Even in large cities, with high retail density and diversity, this ideal was a ways off. Transactions required rummaging through bins at a record store or driving somewhere only to find out that the item you were looking for was out of stock.

In 1995, eBay founder Pierre Omidyar, equal parts hippie, libertarian, and philosopher, realized that the internet allowed perfect markets to exist in real life. It could power a global marketplace connecting sellers with the buyer willing to pay the most for a specific good, be it JFK’s autograph or a vintage PEZ dispenser.

The internet aggregates geographically dispersed buyers and sellers and removes physical proximity as a prerequisite for commerce. Whether you were in London, Lagos, Little Rock, if you had a credit card and a…