Book Review: The Perfect Store

"When the early history of the Web is contemplated centuries hence, Adam Cohen's detailed and thorough account of the founding and development of eBay will be among the books that people will turn to to truly understand one of the Internet's most important companies."
— Kara Swisher, Wall Street Journal columnist, as quoted on the back cover

Adam Cohen has written a very thorough company account, one that takes into account many diverse viewpoints.  Cohen is on the editorial board of The New York Times, and each section in the book seems to follows the inverted pyramid style of journalism.  There’s an eye-catching lead to pique the reader's interest, some background, quotes from sources, and finally, an analysis of  the topic’s significance.  One could imagine this book having been compiled from several articles in the Times.

Except that it isn't.  The Perfect Store was published in 2002, after eBay had already become an established pillar of capitalism.  In this way, it has a chance to apply some hindsight that isn't afforded to breathless scoops operating on Internet time.  For example, Cohen explores the feedback mechanism in detail, starting with the rampant abuse of the early days, when it was not tied to transactions.  He even examines the cultural aspects of eBay's global expansion.  For example, detail-oriented Germans often complained when they failed to receive feedback after completing a transaction.  Form emails had to be rewritten for the United Kingdom, as Britons considered the excited exclamation-laden emails to be insincere.

Cohen approaches eBay from several angles to give an all-around picture.  He delves into the company to examine its culture shift from the jeans-and-sneakers days, when each employee’s first task was to assemble his own office furniture from parts, to the arrival of the MBAs, to the world of dot-com megadeals with AOL and Yahoo.  He tracks the technical evolution of the site, from a collection of Perl scripts to a C++ enterprise-class application written under great tension as the previous site went down for hours at a time.

He gives us the usual story that appears in papers every Christmas, of small-business owners who've made a success of selling on eBay.  But he also digs into such things as eBay's founding myth, that Pierre Omidyar created eBay to help his fiancée trade PEZ dispensers.  Even now in 2004, the story of the PEZ dispensers comes up every once in a while in an eBay story.  But Cohen learns from Mary Lou Song, eBay's first full-time employee, that she in fact concocted the myth precisely because of its appeal and ability to get into print.

Controversial topics are dealt with in a balanced fashion.  The VERO program, which allows copyright owners to patrol eBay for auctions infringing on their rights, is one such case.  Cohen talks to both sides: to the mother of a died-young music star who aggressively ends auctions through VERO, but also to the outraged free-speech activists who made a sport of inserting red-flag keywords into unrelated listings.  This foreshadows as early as 1999 the massed power of individuals to attack entrenched interests, later to be demonstrated by such phenomena as Google bombing and distributed denial-of-service attacks on web sites.

Two major themes that persist throughout the book are eBay's responsiveness to customer interests and Omidyar's quest for a perfect market.  There's a lot of discussion of the give-and-take nature of eBay policies, of message board outrage, bannings of outspoken individuals who are later reinstated, and forums whose sole purpose is to rail against eBay. Cohen's tracking of eBay policies also highlight its function as a market.  As eBay grew, there developed a need to regulate such items as adult merchandise and firearms. Sociologically, eBay served as a microcosm of the offline society that it displaced.

Economically, the interaction of eBay prices with supply and demand makes it an irresistible research topic for economists, who previously had a much harder time getting ahold of data in the world of offline commerce.  Unusually for a business-related book, Cohen cites numerous scholarly papers, among which are:

• David Reiley's (formerly Lucking-Reiley) work on the monetary effects of eBay feedback on sellers [link to paper]. Reiley was a pioneer of online economic research, having analyzed USENET newsgroup auctions of Magic: The Gathering playing cards [link to paper] for his dissertation work – which got published in the American Economic Review.
• Landes & Posner, "The Economics of the Baby Shortage," Journal of Legal Studies 7 (1978), 323-48, a paper arguing for the sale of parental rights.  There is somewhat of an in-joke, as fellow Chicago faculty were going to auction off their baby, born one month hence.  This ties into the famous kidney that was listed for sale on eBay.
• Kembre McLeod, "'Happy Birthday, Screw You': The Collision of Copyright Law, the Folk Song Tradition, and the World’s Most Popular Birthday Song," presented at the International Communication Association’s 48th annual conference in Jerusalem, Israel, July 20-24, 1998.  McLeod, a communications professor at the University of Iowa, owns a trademark on "freedom of expression" as a magazine title and sold his soul in a jar on eBay.

The Perfect Store is a very engaging book, filled with lively anecdotes that illustrate the meteoric rise of eBay and the resulting social effects.  It's close enough to the events being portrayed to capture the excitement of the IPO and the feeding frenzy, as talented people left well-established companies for startups with particleboard furniture.  But also enough time has elapsed to put the events into perspective, to dig beneath the surface of the news stories, and even to bring in scholarly research.  Cohen studies the subject matter from many vantage points, and is so comprehensive that an eBay newbie might even discover some features of the site by reading this book.

At this time, eBay is still growing.  Maybe it will collapse at a later date, or maybe it will continue to prosper and there will be a much-expanded second edition ten years hence.  The Perfect Store delivers a great blend of technology and business, culture and regulation.  eBay leverages the Internet's status as the Great Leveler to put giant corporations on the same footing as mom-and-pop shops, enthusiastic collectors with people just looking to save a few bucks.