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Taking bids on eBay
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July 17, 1998: 4:41 p.m. ET
Online auction company hopes to ride wave of hot Internet IPOs
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NEW YORK (CNNfn) - Who would have thought a company that hawks a Joe Camel limited edition beer stein for $19.99 on the Internet would become a hot commodity?
Online auction house eBay Inc. is counting on that to be the case. The company announced this week that it plans to file for an initial public offering.
And why not? It seems that every company even remotely related to the Internet launches a successful IPO.
Witness Friday's Broadcast.com Inc. (BCST) coming-out party. The online media programming company was priced at 18 and shot up as high as 74 -- 74 -- before midday trading.
In May, Broadcom Corp. (BRCM) made an impressive public debut, climbing 123 percent from its offering price of 24.
Industry watchers are expecting an auspicious debut from eBay, as well. That's partly because, unlike many Internet-related companies, eBay actually makes money. The company reported net earnings of $348,000 on $14.9 million in revenue in the first six months of 1998.
Part of eBay's profit-making potential arises from its Amazon.com-like model: The company doesn't take ownership of any of the products it buys.
"That means they'll never have an inventory problem," said Lise Buyer, an analyst at Credit Suisse First Boston.
Also, eBay conducts more than 500,000 simultaneous auctions in 846 categories, including computers, books, jewelry and trading cards.
Looking for a Titanic commemorative silver coin? How about a rare mechanized robot, for which bidding starts at $3,050?
Much of what can be traded on the site may sound frivolous, but investors probably will go with the view that 850,000 registered users can't be wrong. (eBay began the year with 340,000 registered users.)
"There's a tremendous amount of buzz around eBay," Buyer said. "eBay and the other online auction companies provide a brand of service that didn't exist before. There was no cost-effective way to buy and sell low-ticket items before. It's a real compelling business model."
eBay has a lot of competition, however. Onsale Inc. (ONSL) last year launched a successful IPO. Excite Inc. (XCIT) recently acquired Classifieds 2000, which is now the featured auction site on Excite's portal.
There's also First Auction, which is run by the Internet Shopping Network, a subsidiary of the Home Shopping Network.
eBay may have an advantage because of its lack of inventory, but it's still uncertain how successful this brand of electronic commerce will be in the end.
"The question for all the auction sites is, how big is the market for people who want to conduct these types of transactions?" Buyer said.
"Is it going to be like the Home Shopping Network? Is there a segment of the population that will spend hours and hours looking for deals on their computer, or will it appeal to a mass audience?" 
-- by staff writer John Frederick Moore
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