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28th July 2003

Dot-com success shock!

The internet auction house ebay has proved it's possible to make vast amounts of money from a dot-com business.

In the second quarter of 2003 it made a profit of 110 million dollars - compared to 54 million the same time last year.

Ebay's appeal lies in the enormous range of items you can buy from its site. Around seven million items are listed at any one time, everything from stuffed armadillos to real Rolls Royce cars.

In the space of a few years, ebay's become one of the most popular - and profitable - sites on the world wide web.

It was founded in 1995 by Pierre Omidyar, a French Iranian living in the US who wrote its basic software in a weekend.  At first it only appealed to a few computer geeks but soon attracted collectors of antiques and memoribilia.

Adam Cohen who's written a book about the business called The Perfect Store says, "I think human beings are just hard wired to trade things. It's just something people love to do. But there are many things that early dot-commers tried to get people over the web which people didn't really want to do.

However, as people have this driving urge to buy and sell goods it was a great activity to begin with. The other thing is what works well on the internet is things that can't be done off line. You could never walk through a store and look at seven million items but on ebay you can search and find exactly what you want."

The founder Pierre Omidyar and his team were shrewd operators. Unlike so many dot-com entrepeneurs, they kept their overheads as low as possible. Profits come from a commission on sales. Ebay is a market rather than a shop, so members have to trust each other.

This is helped by the use of feedback ratings showing how many successful trades each user has made. A hundred thousand people actually make their living through selling goods on ebay. Retailers gain access to a global market place. And Doug McCallum, who runs the British arm of the business says sellers often get far more their products than they would locally.

"It allows people to find the real market value for almost any product. Our founder realised the power of this when he put a pointing device on the site stating very clearly it was broken. Clearly it had no value to him. But soon it received a bid on the site and in the end it sold for $14 dollars. It made him realise that everything has market value for somebody - but usually you can't find that person."

In the past few years ebay's invested heavily in its operations outside the United States and now has sites in Korea, China and Mexico.

It's aim is to expand worldwide and with profits pouring in, it's got plenty of cash to keep growing.

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