Meg Whitman At Ebay Inc.

9-401-024
REV: NOVEMBER 17, 2005

LINDA A. HILL
MARIA T. FARKAS

Meg Whitman at eBay Inc. (A)
In May 1999, Meg Whitman, president and CEO of eBay Inc.⎯the largest person-to-person
trading site on the Internet⎯reviewed the final details of the proposed acquisition of family-owned
Kruse International, an Indiana-based auctioneer of collector automobiles. Kruse participated inapproximately 40 car auctions each year and had developed extensive relationships with collectors
and dealers throughout the world. Whitman favored the acquisition because it would strengthen
eBay’s position in the auction market for high-end goods. Since eBay received a percentage of the
final sale price on any item sold on its site, higher-priced items resulted in higher revenues. If eBay
decided to gothrough with the deal, Whitman felt Wall Street would react positively. eBay had been
a Wall Street darling since it went public in September 1998; its valuation had increased from $700
million at the time of its initial public offering (IPO) to $24 billion by mid-May 1999⎯a 3,400%
increase in less than a year. While Whitman was pleased with the stock’s performance, Wall Street’s
highvaluation of eBay also put significant pressure on the company to grow. To date, eBay had lived
up to investors’ high-growth expectations; eBay’s net revenue grew from $604,000 in the first quarter
(Q1) of 1997 to $34 million in Q1 1999, and gross merchandise sales grew from $9 million in Q1 1997
to $541 million in Q1 1999 (see Exhibits 1 and 2). Furthermore, eBay’s vision⎯to be the world’s
largestonline personal trading community⎯suggested that the rapid pace of growth would
continue.
eBay attributed much of its success to a strong sense of community among its users. As Whitman
described it, eBay was a site “of the people, by the people, for the people.” For many “eBayers”⎯as
eBay users referred to themselves⎯eBay represented far more than a place to buy and sell goods. It
was a placewhere they could meet people with similar interests, discuss topics they cared about, and
share information using the company’s chat rooms, bulletin boards, and e-mail services. eBay’s
community had a distinct culture, based on trust, respect, autonomy, empowerment, and equality.
Industry analysts believed that eBay’s somewhat quirky but highly community-oriented culture had
led to its surge inpopularity; by Q1 1999 eBay had 3.8 million registered users—up from 88,000 in Q1
1997 (see Exhibit 3).
One analyst noted, “The three most important keys of [eBay’s]
success⎯community, community, community.”1 eBay’s internal company culture was designed to
mirror its external community culture. Employees were expected to be open and honest, to treat one

1 Shaun Andrikopolous, “eBay Inc.;Enabling an Army of Entrepreneurs⎯The Dominant On-Line Trading Community,”

BTAlex.Brown Research, October 27, 1998.
________________________________________________________________________________________________________________
Professors Jeffrey Bradach and Linda A. Hill and Nicole Tempest, Associate Director of the HBS California Research Center, wrote the original
version of this case,“Meg Whitman at eBay Inc. (A),” HBS Case No. 400-035, which is being replaced by this version by Professor Linda A. Hill
and Research Associate Maria T. Farkas. HBS cases are developed solely as the basis for class discussion. Cases are not intended to serve as
endorsements, sources of primary data, or illustrations of effective or ineffective management..
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