WHERE THEY CAME FROM
When Pierre Omidyar launched AuctionWeb in 1995, the first item up for bid was a broken laser pointer, which sold for about $14. As the story goes, Omidyar called the buyer and reminded him that the laser pointer was broken. The buyer replied that he was a “collector of broken laser pointers.” A company name change and backing from venture firm Benchmark Capital followed, and the newly minted eBay quickly became an international phenomenon.

WHAT THEY DO
eBay has made billions by making it possible for people to buy and sell just about anything over the internet, from bizarre collectibles to used cosmetics to new cars. (In one of the stranger auctions, a Florida woman sold a grilled cheese sandwich for $28,000, claiming it bore the image of the Virgin Mary.) To keep its 220 million users honest, eBay pioneered a rating system based on buyer and seller feedback.

The acquisition-happy company also owns other related Web properties, including comparison-shopping site Shopping.com; online-payment service PayPal; internet-telephone service Skype; and Half.com, a marketplace for books, movies, and music that competes with Amazon.

WHAT THEY GOT RIGHT
The greatest success of eBay has been its growth. In 1998, eBay earned $47 million in revenue; in 2006, it generated nearly $6 billion. Despite early technological problems (including a 1999 computer crash that shut down eBay’s service for 22 hours and cost the company an estimated $4 million in lost fees), eBay has seemed unstoppable, maintaining a strong growth curve—even throughout the dotcom crash. That steady incline once led chief executive Meg Whitman to remark that eBay’s community of users were running the company so well that “a monkey could drive this train.”

WHAT THEY NEED TO FIX
Revenue jumped 31 percent in 2006, but eBay’s growth in the U.S. has slowed in the past few years, a trend that has rattled investors and lowered the company’s stock price. Though nearly half of eBay’s revenue is now generated outside the U.S., competition is mounting abroad. Yahoo in particular runs an online auction service in Japan and owns stakes in South Korean auction company Gmarket and Chinese e-commerce site Alibaba. Also, PayPal is facing pressure from Google Checkout, another online-payment service.

In 2006, in response to falling share prices, Whitman instituted a “rebalancing” plan: Fee hikes were implemented at eBay Stores (those customized sites where sellers can display all their goods) to improve the quality of products offered, or, as she put it, to inject the “magic” back into eBay. That effort seems to have worked, as it raised the value of both eBay’s goods and its shares.

Critics remain skeptical of the $2.6 billion acquisition of Skype that eBay completed in 2005. Skype’s revenue has not grown as quickly as eBay predicted it would, and eBay is only beginning to integrate Skype’s services into its main site.

WHAT’S NEXT
In 2007, expect the company to continue courting China’s 130 million-plus internet users. In one of several initiatives, eBay is partnering with Tom Online, a Chinese wireless-internet company, for a new auction site aimed at mobile-phone consumers. eBay also hopes to boost its revenue by combining Skype with its auction and PayPal services—allowing users to call each other with a simple click of the keys. —Clancy Nolan