Legend has it Ebay started as a humble place for people to trade collectable Pez candy dispensers. That legend, created by Ebay's PR manager Mary Lou Song, was for a time quietly sanctioned by Ebay founder Pierre Omidyar. It seemed believable because it fits with the reality that most of what we use today in cyberspace -- the stuff that made people billionaires -- did not arise out of corporate R&D labs. They were the products of hobbyist who were in the right place at the right time.

Ebay was founded by Omidyar in 1995. He was an engineer and veteran of Silicon Valley start ups. While working at General Magic, he figured the net could turn the world into one big garage sale. His wife was an avid Pez collector and he knew the mind set. Ebay's creation coincided with the Beanie Babies craze. Big corporations lost hundreds of millions of dollars thinking people wanted to buy from them online. What people really wanted to do was buy pre-owned stuffed animals from each other. Word of mouth from satisfied Beenie Babies sellers and buyers got people thinking what else could be sold/bought on Ebay.

The company's name itself is a shortened version of a consulting business Omidyar used to own called "Echo Bay". Many people incorrectly assume "Ebay" is a reference to nearby San Francisco Bay. Omidyar would have named his auction company EchoBay but the domain name was taken. Ebay, however, was still available.

As Ebay grew, it made a policy of hiring its own users, especially for support/customer service positions. They preferred to hire "average" people, housewives, school teachers, bus drivers, etc. because those were the people actually using Ebay. It was a takes-one-to-know-one philosophy.

Ebay went public in September 1998. It's initial public offering was $18 a share and closed at $47.38 on its first day.

Ebay founder Omidyar was born in Paris. His parents relocated the family to Washington DC when he was a child. He graduated with a degree in computer science from Tufts University in 1988. He worked for Apple's Claris division and programmed MacDraw. In 1991 he co-founded his own company called Ink Development, where he created ecommerce software. In 1992, he joined General Magic.

Ebay's success helped spur on another technology that had been languishing for a few years, online payments. Financial institutions spent millions trying to set up "e-cash" systems but failed because they were too complex. To use them, a merchant needed to invest thousands in hardware and software. And if you were a small time operation, forget about getting these online payment companies to even return your call.

PayPal got around the technology/volume limits by allowing anyone with a credit card and an email address to send money to anyone with an email address. Small time sellers on Ebay quickly adopted PayPal as the preferred method of payment. To attract more users, PayPal gave each new customer $10, which many promptly spent on a $10 item at Ebay! This risk free introduction into the world of online auctions helped grow Ebay further.