eBay (1)

Rob Rochester
Pioneered the popularity of the online
• Selling everything from antiques to
One of the most important strategic
assists eBay had was the information it
gained by conducting auctions.
• Invaluable information for
the design of auctions
identifying service enhancements
Other business opportunities
• Including partnering with other services providers.
Pierre Omidyar
• In 1995 Founded AuctionWeb with the
idea of
Providing an Internet site where person-toperson trading could take place
• Buyers and sellers rushed to the site, and by
1997 AuctionWeb became eBay.
Meg Whitman
• Brought on to serve as president and
Impressive growth
By mid-2000
• eBay had
15.8 million registered users who traded items in
more then
4,320 categories
• On an average day
 4.3 million active auctions
 500,000 new items listed
 1.8 million visits with an average of 20 minutes
Estimated to
• Host 90% of online auctions
• Control 85% of the market
An online auction
Involved listing an item for sale with a
closing date and time.
• The seller
Provided a description of the item
• Most provided pictures
Could specify
• a minimum opening bid
• A bid increment
• A reserve price
 Not disclosed to the bidders
The transaction between seller and high
• Executed with out eBay’s involvement
eBay’s principle asset was its ability to
aggregate buyers and sellers on its
• Charged a small fee for listing and sales.
Used high levels of customer service.
• Its reputation helped maintain its leadership
among online auction sites.
“The key to eBay’s success is trust. Trust
between the buyers and sellers who make
up the eBay community. And trust
between users and eBay, the company”
Policing eBay
eBay relied on its community to help
police its site
• “the community is also self-policing, and users
frequently form ‘neighborhood watch’ groups
to help guard against misuse or violations of
the sites etiquette.”
eBay Sought to ensure the privacy of its
• eBay’s privacy policy was TRUSTe approved.
• eBay was a founding member of the Online
Privacy Association.
eBay’s revenue
• Revenue of 224.7 million
• Net income of 11 million
The first half of 2000
• Doubling of revenue from the previous year
• Net income increased to 17.9 million
• Market capitalization reached 30 billion
Reflecting its leading position in the online auction market
and its seemingly unlimited potential.
The end of 2000
• Market capitalization fell to 16 billion
Due to Market decline in high tech stocks
U.S. Supreme court
• U.S. supreme court decision (Feist Publications, Inc. v. Rural
Telephone Service Co., 499 U.S.,340) held that “facts”, even if
collected through “sweat and effort”, remained in the public
Earlier court decision had held that databases were protected by
copyright under the “sweat of the brow” doctrine.
• In Feist
The court affirmed the originality and creativity requirements and
stated that
• “all facts – scientific, historic, biographical, and news of the day… are
part of the public domain available to every person”
• An example:
 The telephone WhitePages can not be copyrighted because they
are simply an alphabetical list of names and numbers, whereas
the YellowPages can be copyrighted because the information is
arranged by category, which has a degree of originality.
• This ruling gave auction aggregators a legal basis for
extracting “facts” from eBay and other online auction sites.
Auction aggregators
Auction aggregators would
• Search internet auction sites
Extract data
• Provided the data to its users
 Created value by allowing customers to
comparison shop.
Bidder’s Edge
• The first Auction Aggregators appeared in
spring of 1999
• In September eBay declared that the listings
on its Internet site were its “property”
Prohibited auction aggregators from searching its
• Bidder’s Edge
Stopped its searches
• Took out a full page ad in the New York Times
protesting eBay's move.
• Other Auction Aggregators
Resumed listing eBay's items on their sites
• Seeing its self at a competitive disadvantage Bidder’s
Edge started again.
eBay attempted to work with auction aggregators
• Offered a small fee and a bounty for each user directed
to eBay’s site
5 auction aggregators took licenses
• Allowing them to query eBay’s system how a user would.
Prohibited copying of data.
• “this is a clear cut example of one business trying to get a
free ride off eBay’s success. What we've been trying to do is
reach out to these third parties and establish some
appropriate business guidelines.”
Auction Rover
• Agreed to eBay’s conditions
Had a separate eBay tab on its website.
• “we've taken a more pro-eBay approach. Our competitors
have taken a more, if you pardon the vernacular, ‘screw eBay!’
approach.” – Scot Wingo CEO of AuctionRover
Bidder’s Edge
Obtained data from nearly 100 online person-toperson and merchant auction sites.
• Providing users with
an overview of available items
Comparison information
Tracking services of items
Bidder’s Edge
• Items on eBay accounted for 69% of the Bidders Edge
Used a robotic program that daily copied approximately
80,000 pages
• Stored on Bidders Edge’s computers and updated reclusively
A query by a visitor to Bidder’s Edge’s website was then
answered by searching its rather then searching eBay’s
Bidders Edge
The problem with Bidders Edge
• Bidder’s Edge searched reclusively
The information it provided was:
• Stale
• inaccurate
• Bidder’s Edge accounted for about 1.4% of the
quarries received by eBay
A heavy load on eBay’s computers
eBay believed that those using Bidder’s
Edge and other auction aggregators were
not receiving the full experience of its web
site and the eBay community.
Fighting Robots
eBay used a robotic exclusion standard
and a robots.xtx file
• Notified those searching its site that robotic
searches were prohibited
Compliance was voluntary
• Search sites like Google and Yahoo respected the
• Had a security unit that detected any unusual
number of quarries form an IP number and
blocked those suspected of violating its
Bidder’s Edge used proxy servers to avoid eBay's IP
Intellectual property
Intellectual property law provided
protection for information though:
• patents
• trademarks
• copyrighting
Trade secrets
The Coalition Against Database Piracy
• Argued that the existing intellectual property laws provided
little protection for databases.
“Copyright law only protects a database to the extent that it is
creative in the selection, arrangements, or coordination of the
facts it contains. Copyright law does not shield the databases
factual content from thievery. Very few databases meet this
‘creative’ requirement because all the things that make a
database valuable and user-friendly – its comprehensiveness and
its logical order – are deemed to involve no ‘creative’ selection,
arrangement or coordination.”
• Also argued that the U.S. Anti Hacking Statute as well as state
contract and misappropriation laws provided inadequate
The Antihacking statue has “never been held to apply to a
published database at all – no matter what its format. Nor would
the statute apply in a situation where a database producer - like
eBay – makes information available over the Internet without a
password or firewall protecting it.”
State contract law applied only to signed agreements
“Misappropriation is an ill-defined state law doctrine and it does
not provide database creators with uniform, nationwide protection.
eBay’s alternatives
Ebay could attempt to establish through the courts
intellectual property rights to the data it generated from its
• Allowing eBay to block the Auction aggregators.
The Feist decision placed heavy burden on eBay to demonstrate
eBay could also seek a preliminary injunction and ultimately
a permanent injunction against Bidders Edge and other
auction aggregators.
• eBay recognized that pursuing a court resolution would be
both costly and time consuming
Decisions could be appealed.
Internet law guidelines were not set in stone.
eBay could also use technology to stop the auction
aggregators attempts to extract info form its database.
• The problem
A tech fix in the form of a firewall could make the site less
convenient for users.
It could also lead to a costly technology race.
July 1999
• eBay and eight other Internet Service
Providers formed NetCoalition.com
With the mission to be
• “the collective public policy voice of the world’s leading
Internet companies, NetCoalition.com is committed to
building user confidence in the internet through
responsible market-driven policies; preserving the open
and competitive environment that has allowed the
internet to flourish; and ensuring the continued vitality
of the Internet through active dialogue with
policymakers.” Meg Whitman explained, “We want to be
active participants in the dialogue that is addressing
the critical issues facing the burgeoning Internet
industry. As a group we can be a valuable resource and
a powerful educational tool for policymakers and the
H.R. 354
Reintroduced the “Collections of Information
Antipiracy Act”
• The bill has been redrafted to address concerns with the
earlier versions
• The judiciary committee reported
The bill would provide substantial protection to those who
collected information, including those who did so on the
Internet. Facts were not protected and remained in the
public domain.
• Effect of the bill was to overturn feist.
Support came from
Reed Elsevier
The American Medical Association
The New York Stock Exchange
H.R. 354 supporters
Online auction companies, Internet service
providers, and publishers were not the only ones
concerned about their databases.
• One of the largest most valuable databases was the
multiple listings service of real estate properties.
• Companies providing print databases also sought
The Coalition Against Database Piracy
• Formed to support H.R. 354 and against H.R. 1858
The CADP argued that
• H.R. 354 was pro-internet and pro-consumer.
 Created www.gooddata.org to provide information on the
• “H.R. 1858 only bars thefts that results in duplicate
databases. This allowed ‘free riders’ to avoid liability by the
simply contrivance of cutting and pasting the stolen data so
that the ‘new database’ is not a ’duplicate’ of the original – a
simple task today for anyone with a computer.
• “This data confirms what we have known all
along – the American people share the view
that database piracy is a serious problem and
that there is an urgent need to enact antipiracy legislation in congress…consumer access
to accurate information is being compromised
when anyone can copy and steal a privately
owned database with no fear of penalty.
Without protection, databases are in jeopardy
and consumers will lose access to trusted
information.” – Gail Littlejohn and Reed
H.R. 1858
“consumer and investor access to
information act of 1999”
• Focused on the value of information to
consumers and the benefits to Internet users
from being able to obtain comparisons of
information from different databases.
The bill would proscribe “the sale or distribution to
the public of any database that (1) is a duplicated of
another database collected and organized by another
person or entity; and (2) is sold or distributed in
commerce in competition with the other database.”
• Enforcement responsibility would be assigned
to the Federal Trade Commission
H.R. 1858 supporters
Argued that H.R. 354 would give too much
protection to databases, effectively creating data
• “the bill would mean they would have absolute
ownership right over something as basic as stock
quotes.” a spokes person for the Chamber of Commerce
said, “factual data is the nuts and bolts of the
information age. If you try to control its use, your going
to stifle commerce.”
Companies backing H.R. 1858
Research librarians
Telecommunications companies
The U.S. Chamber of Commerce
Consumers Union
NetCoalition.com believed
“as congress considers the database issue, it must balance
the objective of preventing database piracy with the
equally important objective of preserving legitimate access
to information, that does not conflict with the principles in
feist. Accordingly, additional database protection should be
narrowly crafted to address specific, defined problems.
NetCoalition.com believes that H.R. 1858 meets this test
and, against the background of the many existing forms of
protection, achieves the necessary balance between
protection and access.”
“The Internet is in fact a network of databases, and
information is made accessible through tables of routers
and a standardized system of IP addressing that enables
the Internet to work. If the original compilers of those
‘databases’ exerted monopoly control over, or prohibited,
downstream users of the information complied in those
databases, the future operation of the Internet would be
threatened.” – Frank Politano of AT&T
• Its database and the community it had
developed were important strategic assets for
Its biggest challenge ahead would be to protect those
assets while allowing information to flow freely on the
Bidder’s Edge and other Auction
• Needed legalisations to fall on their side to
allow for their businesses to continue.
“we’re no different from any other search engine.
Yahoo! And Lycos gather lots of information every
day from sites without exclusive permission. If eBay
is right and the courts agree, that would rip the guts

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