By Charles King, Pund-IT, Inc. July 15, 2015
There have been numerous news stories lately considering Amazon’s 20th anniversary, and with good reason. Since its inception in 1995, the company has been a pioneer in online shopping, initiating or driving many of the changes that we take for granted today. Along the way, Amazon has singularly impacted and changed retail organizations from Mom and Pop shops to multi-national corporations. Book sales were certainly the company’s first and highest-profile success, but its ambitions extended far beyond the best seller list.
However, Amazon wasn’t the only company in 1995 that leveraged the Internet to disrupt conventional business practices. In fact, two others that launched that year – craigslist.org and eBay – have arguably had as great an effect in altering the way that consumers and businesses regard and use online resources. In essence, 1995 saw all these companies help move the Internet from being a medium for exchanging information to one for exchanging goods and services.
A transitional year
Amazon, craigslist and eBay weren’t the only tech companies to mark 1995 as a transition point. Among many others were:
- America Online, the world’s largest pay-based Internet Service Provider (ISP), launched AOL.com and neared 5 million dial-up customers.
- On August 9, Netscape (whose browser owned about 80% of the market) enjoyed a singularly successful IPO that many consider the beginning of the dot.com boom/bust.
- Just two weeks later, Microsoft debuted Windows 95, which many consider the company’s most significant and successful product launch. The OS also included Internet Explorer, the browser that eventually put Netscape out of business (eventually purchased by AOL) and landed Microsoft in anti-trust litigation.
- Around that same time, Larry Page and Sergey Brin met at Stanford, became friends and eventually began the collaboration that resulted in the Google search engine.
So what were Amazon, craigslist and eBay up to in 1995?
- Though Amazon was incorporated (as “Cadabra”) in 1994, the company didn’t launch its online retail operations until July 1995. Focusing initially on music CDs, computer hardware and software, videos, and books (the five product classes founder/CEO Jeff Bezos felt were ideal for online promotion), within two months Amazon sales rose to $20,000 per week. The company publicly announced its services in October, in time to capture holiday purchases.
- What became eBay emerged in September 1995 as “AuctionWeb.” Hosted on founder Pierre Omidyar’s personal website, the auctions operated as a hobby to explore/develop what he considered a “perfect market.” After Omidyar’s ISP demanded he upgrade his service due to the high traffic volume, he began charging eBay users and hired his first employee.
- Early in 1995, software programmer Craig Newmark decided to launch a free email distribution list focusing on events/issues of interest to the San Francisco Bay Area tech community. In June, due to rapid growth and users leveraging the service for non-event postings and job listings, Newmark installed the majordomo mailing list manager. When users requested a Web interface a few months later, Newmark registered “craigslist.org” and launched the site early the following year.
Planned and unanticipated results
So how have the companies impacted and influenced business over the past two decades? In ways that were both planned and unplanned.
Amazon was initially the most conventionally organized and operated of the trio, and it also gained significant advantages from special circumstances, like the government’s suspension of sales tax collection that was initially designed to foster online businesses. CEO Bezos’ plans for delaying profitability (for up to five years) were controversial but allowed Amazon great latitude in pursuing, following and abandoning various strategies.
The company’s successes, particularly in selling books, consumer electronics and music CDs significantly disrupted those businesses and placed additional pressure on rivals struggling to adapt to online markets. As a result, once-dominant businesses like Borders Books, Barnes and Noble, The Good Guys, Best Buy and Tower Records are either gone or are a fraction of what they once were. Likewise, Amazon’s aggressive pricing and efficient delivery services triggered the closure or outright failure of many small, local businesses and outlets.
Amazon has made some significant, even spectacular mistakes – Kozmo.com, Askville.com, LivingSocial and the recent Fire smart phone are just a few. But its Web Services (AWS) business has become a dominant force in public cloud computing, a market that was on no one’s radar screen in 1995. The company has also demonstrated impressive resilience when it comes to challenges like being forced to collect state and local sales taxes. Amazon investors continue to demand higher profitability and punished the company after consecutive quarterly losses in 2014.
Craig Newmark’s vision of craigslist.org as an online space where people could come together and freely exchange information (the site was once described as an “Internet commune”) has remained remarkably true, despite various demands of users and outsiders. The sparse, text-intensive design isn’t much different today than it was two decades ago, though the number of categories and threads has certainly grown. The markets that craigslist serves have also broadened considerably; sites are available in nearly 600 cities/regions worldwide.
Newmark has also kept his operation small; the company was incorporated as a private, for-profit entity in 1999 but reportedly has fewer than 50 employees based in San Francisco. The site continues to reject advertising. Instead, revenues are derived from job and real estate postings (priced at $10-$75 per ad, depending on the market). According to reports, craigslist is both the leading classifieds medium anywhere and one of the world’s largest job boards, with billions of page views and tens of millions of unique visitors every month.
The impact of craigslist on local businesses, particularly newspapers that depend on local advertising/revenues, has been highly disruptive. At the same time these companies were struggling to contend with Internet-driven content and news sources, much of their advertising revenue migrated to free craigslist postings. This devastated many newspapers, sparking or fueling continuing industry consolidation. But craigslist has also benefitted many businesses, particularly freelancers and small organizations, by significantly lowering ongoing costs.
In addition, the company has not been uncontroversial. There have been ongoing complaints about refusal to censor or restrict sexually explicit content on the site. There are also occasional news stories about events such as robberies related to craigslist classified ads. The company’s response has been to note that the criminal exploitation of classified ads is nothing new or unique to craigslist, and to emphasize users should exercise the same care and responsibility online that they would in offline situations.
In 2004, craigslist became embroiled in an unwanted relationship with eBay which had acquired 24.8% of the company’s stock from a former employee. In 2008, eBay sued craigslist for changes in its bylaws, and the company countersued, claiming that eBay had used confidential information to develop a competing local classified ad site, Kijiji. Last month, eBay announced that it had sold its stake back to cragslist for an undisclosed sum and settled its litigation with the company.
eBay has come a long way since 1995, quickly expanding into global markets and piggy-backing on successful acquisitions, such as the 2002 purchase of PayPal. The company’s initial focus on collectables (at the time of its 1998 IPO, nearly a tenth of eBay auctions were for Beanie Babies) helped to expand demand for related markets. That helped foster business development for many dealers, resulting in rich, new opportunities.
But over time, eBay’s natural democratization of product access also led to a “flattening” of many or most of those markets. As items became readily available to larger numbers of potential buyers, some specialized businesses and regional markets became harder to sustain. Additionally, as eBay succeeded and grew, larger organizations began using the company’s site as a conduit. Though the diversity of products on eBay certainly continues to impress, larger dealers and companies tend to dominate some categories.
Like Amazon, eBay has also experienced a number of high profile failures, including a collapse of and quick exit from its business in China. The company has also made some unfortunate acquisitions (Skype being the largest of these, and the craigslist debacle described above being one of the most embarrassing). PayPal has also been something of a two-edged sword in terms of governance conflict claims. eBay’s effort to spin off PayPal which will reportedly be completed next week should quell those complaints.
Notable transitions or “inflection points” are typically only obvious in retrospect. That’s all to the good but by nearly every measure, 1995 marked a critical shift in commercial opportunities and use cases that helped make the Internet the force it continues to be today.
Many of these events were sparked by individuals who recognized how the world online could disrupt and evolve conventional business practices, or be used to fundamentally change and enhance the way people communicated and interacted. Amazon, craigslist.org and eBay were obviously not alone in this regard but they all deserve respect for the quality of those initial perceptions and what they have since achieved.
Which of the three will be available for further consideration in twenty more years is anyone’s guess. Disruption is generally better for revolutionaries than it is for the establishment, and how long individuals and organizations succeed depends on how well they navigate inevitable changes. That was certainly the case in 1995, and will also certainly be the same in 2035.
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