Chapter 2 Breakthrough: Opening up the auction market

Competitors dotBank and X.com

We originally planned to use the “Scotty” marketing program to declare PayPal’s leading position in the payment field, so we can imagine how surprised we were when we knew that another company was also competing with us towards the same goal. The week after the terrible press conference, six weeks after Confiniti released the payment platform, a copy of PayPal software appeared.

I heard about the software for the first time one morning while drinking a second cup of morning coffee in the well-stocked kitchen of Confiniti. I have been exhausted from work, and coupled with the drive to and from Los Angeles for several hours, my sleep time has been greatly reduced. I was looking for milk and cream in the refrigerator. I wanted to make another cup of coffee for refreshing. David Sachs and Luke Nosek strode across the hall, discussing a certain project intensely, which David Sachs called “DotBank Features”. From their tone, I can feel something unusual happened.

I rushed out of the kitchen with my coffee, walked through the small courtyard, returned to the table in the table tennis room, and anxiously typed “dotBank.com” into the browser. When I saw a refreshing blue web page appeared on the screen, my heartbeat seemed to stop. Because, dotBank’s service not only imitates PayPal’s basic payment function, users can enter the recipient’s email and then use a credit card to transfer money, but also copy PayPal’s practice of recommending users to get rewards-if the user registers or transfers dotBank If you recommend it to a friend, you can get a $5 reward-this is using the customer’s recommendation function.

I have been working at Confiniti for a week and a half, and I just started to feel complacent about the great ideas of PayPal products, because PayPal products not only provide personal-to-person payment services, but are also easy to operate on the website or on a handheld computer. , Extremely practical. With hundreds of new users registering every day, I can’t help but begin to believe that we are about to make history. However, suddenly another Internet company appeared and copied the ideas of Peter Thiel and Max Levchin, and I could only collapse in a chair with my head down.

Confiniti uses email as a unique authentication method, but its patents are still in the early stages of the application process. Any form of legal remedy will take several years to work. At present, it does not help. We can’t do anything. , Cannot prevent dotBank from entering the market.

dotBank not only copied PayPal in some ways, its service function is even better than PayPal. Although dotBank does not have software for handheld computers, it has two online functions that guarantee its growth prospects. First, the billing function allows users to send electronic invoices to third parties. dotBank can inform the recipient of the required amount by email, provide a series of instructions on how to use dotBank to pay the bill, and also provide a link to the dotBank website. Second, the group payment tool allows users to send bills to several people at once, and track who has paid. This intuitive way helps people more easily pay the annual fee of the club or the catering bill, and this is what we are prepared to work hard for Features developed by PayPal. These two major functions will make dotBank users much easier when dealing with others money, and in the process will attract those who do not use dotBank to their website.

Our competitors can provide such a powerful website, which makes our entire company into a panic, and the functions of dotBank can be copied. This is the only relief after seeing dotBank. Peter Thiel immediately turned his anger into urgent action and asked product manager Jamie Templeton to let the engineers act immediately. In fact, the billing function and the group payment tool are in Confiniti’s plan, but it was delayed because of the design of other functions first, and now it’s time to fight the day. Peter Thiel instructed Jamie Templeton to let engineers add dotBank functionality to PayPal’s website, and it should be completed before the Christmas holiday, which means there is less than a week left.

The programmers took Peter Thiel’s task very seriously and devotedly. Their devotion was something I couldn’t imagine in the first day of tragic service experience. This time, what Confiniti gave me was not the chaos of the first time. On the contrary, although the engineers, Jamie Templeton and Max Levchin still have some disputes about how to best implement the strategy. , But everyone knows the role they should play and puts in it with great enthusiasm. They face a challenge, and it is clear that the company needs to allow PayPal to maintain an advantage over the competition. This is different from the employees of Arthur Andersen-the tasks of Arthur Andersen employees seem to be randomly assigned by the senior management. And these young programmers know that they are facing an important task, and feel that they have the right to influence the way the work progresses, which enables them to unite closely and work hard together when dealing with threats from competitors.

However, just as our programming team was racing against the challenge from dotBank, another challenger, X.com, emerged from nowhere two days later. The company’s approach is as confusing as its name, and it has also released its own payment service. If dotBank’s payment service worries Peter Thiel, then X.com’s involvement in the payment service field made Peter Thiel annoyed, because before Confiniti moved to 165 University Street, ConocoPhillips Nidi and X.com are neighbors in the same building on the same street.

After Elon Musk sold an online map service company called Zip2 to Compaq for US$307 million1, he founded X.com in a small office in early 1999. This The office is connected to a bakery, and the bakery shares a space with Confiniti. Although there is no need for formal communication between the two companies, employees of the two companies often meet at the entrance and in the bathroom. Six months later, Confiniti changed places, and X.com officially expanded the space to the place Confiniti used before.

Although the name of X.com may be confusing, its original business plan has nothing to do with pornography or new humans. Its goal is to become a one-stop financial portal through which users can manage funds and investments. Elon Musk persuaded Bill Harris, the former CEO of software developer Intuit, to lead X.com, which caused widespread media attention, and Bill Harris told The Wall Street Journal that there were hundreds of A start-up company invited him to serve as CEO, but he chose X.com because he believed that X.com is “a brand new piece of white cloth that can write new rules for the financial services industry.” 2

At the end of 1999, X.com also caused another wave. It released a S&P 500 index fund with no fees and no minimum investment. This is the only fund of its kind in the industry. This loss-making product of 3X.com is seen as a way to attract new users, and these new users have the potential to further purchase other products of X.com, including bonds, money market funds, interest-bearing checking accounts and low-year Credit line with interest rate. At the time, X.com was clearly aspiring to become a financial services supermarket, but Confiniti never saw any signs that X.com might be interested in emulating PayPal’s personal-to-person payment service.

But it’s different now. Last month, X.com quickly established an email-based payment function in the existing bank account service, so that X.com has transformed into a strong competitor to us. X.com’s banking function allows users to fill out checks, withdraw money at ATMs, and enjoy a $500 credit facility. It provides more financial services than our only payment service. Moreover, in order to attract users, X.com provides every new account opener with a reward of $20, which is twice that of PayPal. X.com’s referral reward is also $10, which is the same as PayPal. However, X.com’s referral process is simpler. Users can forward a specially customized URL link via email. As long as someone clicks on the link and registers, then the referrer’s account There will be an extra referral fee.

Like dotBank, X.com has designed a variety of distinctive payment services to stimulate the growth of the number of users. PayPal is on the verge of an enemy, and it is clear that the loser will die ugly.

A million-dollar expansion plan

Our CEO Peter Thiel often said that growth is the most important goal for companies like Confiniti. He insisted that only when we realize a kind of “network effect” can we create a successful payment service, and that an internally connected interactive system must give those people who voluntarily join some value to exist. The more people participating, the greater the network effect, because all members can interact. Therefore, when attracting people to join a large, existing network, it is necessary to give members a huge value, and when they withdraw, they must pay a huge price. In essence, this network can retain members and contain potential competitors. develop.

For example, the telephone is a typical network. The first two telephones used by Alexander Graham Bell and Thomas Watson provided little value, but showed a new technology. However, in the following century, as the number of telephones proliferated, the value of owning a telephone increased greatly, because the number of people and companies that could be reached using the telephone increased dramatically. The more people who have a phone, the more people who want to have a phone. Nowadays, telephones are everywhere, and mobile phones are also very popular.

Similarly, the benefits of using a payment service like PayPal will increase as the number of users increases. If there are only a few people in the world receiving payments through PayPal, then spending the time to create an account is of no use at all. However, if millions of people use PayPal, the importance of creating an account is huge. Robert Metcalfe, the father of Ethernet and the founder of 3Com, proposed a so-called “Metcalfe’s Law” to help people understand the power of the network. He believes that the value of a network is equal to the square of the number of users. In other words, if the number of users of a network is twice that of competitors, its value is four times that of competitors. 4

Peter Thiel firmly believes that it is very important to rapidly expand the scale of Internet users. Therefore, although he was very calm in dealing with the failure of the “Scotty” promotion event, he was calm in the face of the competition between dotBank and X.com. There is nothing left. He urged the engineers to add dotBank’s billing and group payment functions to PayPal before Christmas, and then copy X.com’s customized referrer link function. Peter Thiel’s performance makes people feel that in those stressful days in mid-December, the future of PayPal is uncertain. The engineers also acted urgently, striving to complete the task before Christmas.

The marketing team also received a call from Peter Thiel to take countermeasures against our competitors. We adhered to the user acquisition plan that Luke Nosek made at the beginning of the month, but accelerated the progress. Due to the emergence of new competitors, my little puzzle has a place in the big puzzle of online direct mail marketing. After inquiring about more than 20 opt-in subscription service providers, I chose a mailing company that can provide a mailing list of “early adopters” with technical preferences. These people include handheld computer users and some College Students.

I wrote the email promotion copy very much like “Scotty”. This time I took the practical route. Although the writing may not be good, this is the first thing I did except that Confiniti asked each employee to send money to the people in his address book 8 weeks ago. This is a significant marketing effort. With the emergence of two major competitors, I know that the management will pay great attention to the results of the first project I am responsible for in the company.

The development is much better than I expected. The next day, the daily user data update by Jamie Templeton showed that our user volume has surged, several times the normal level. Over 1,000 new registered users overnight, my colleagues were dumbfounded. This gratifying result attracted the attention of Peter Thiel. He called Luke Nosek, David Sachs, and me, and let us discuss it in his simple office.

“How much does it cost to acquire each user?” Peter Thiel started straight to the point and immediately asked the relevant data because he believed that data was necessary to make a decision.

“Each account is less than $20, but the cost will drop in the next few days, because more and more people will read emails and sign up to use it.” I said.

“Very good,” Peter Thiel replied, leaning back on the back of his chair, calculating silently in his head. When he spoke again, his words shocked me, “We need to scale up quickly. How soon can you spend $1 million?”

“One million?” I couldn’t believe my ears. In order to reimburse a small amount of US$5, the managers require their subordinates to submit two forms and attach invoices. For those who are used to this approach, someone suddenly asks him to spend US$1 million. This is really a new challenge. I said I need to research it quickly before replying to him.

“How about spending it in two weeks?” Peter Thiel smiled at me, but I could see that he was serious.

This impromptu meeting was over, and when I left his office I knew I had a new job on hand. In the next few days, I tried to understand the user status of any well-known website-based direct mail service organization I could find. I try to buy mailing lists of “early adopters” (opinion leaders in the group), but each email address only costs 5 to 10 dollars, so I think American tech geeks add up to more than Peter. · The huge sum of money authorized by Teal. I need additional target groups, but choosing these groups is not easy. We are a new company, and the market research ability is still relatively lacking. In order to complete Peter Thiel’s order to quickly increase the user base, I have to select new users by myself.

I immediately thought of the online auctioneer. Ironically, I have never bid online, let alone take the time to sell things. But like all Internet observers, I am truly aware that online auctions are fast becoming a popular cultural phenomenon. Following the successful IPO of eBay, a leader in the online auction industry, in September 1998, the industry has received extensive media attention. Recently I noticed that even my non-technical friends are turning to auctions to find bargains and rare collectibles.

This has always prompted me to click on the eBay website. I used to think that auctions only apply to collectibles like Doudoubaby and Phoebe Fairies, but after a quick glance at the website, I found that my original impression was completely misunderstood—the website’s sales were all-encompassing, including books, Clothes, videos, and even computer equipment. This simple, brightly colored website is generating a lot of business and at the same time attracting a large user base. From this point of view, these users can greatly benefit from PayPal’s person-to-person payment service.

Unlike users of large e-commerce sites such as Amazon.com, users of eBay cannot make purchases with credit cards. Most eBay sellers either only work part-time and occasionally sell goods, or the amount of transaction records is too small to meet the requirements for commercial credit card applications, which means that buyers usually have to mail a check or money order to the seller based on the bid amount. . It takes a certain amount of time to mail the receipts, plus the time it takes to withdraw the check personally, which means that the successful bidder will have to endure about a week before receiving the photographed baby. For Internet service providers, this is a time-consuming and labor-intensive process, and PayPal can significantly improve this process.

Although I intuitively think that auction users need the instant payment service provided by PayPal, this is not to say that PayPal also needs these auction users. In fact, a member of the management told me that online auction traders are not good PayPal users. Compared with handheld computer users and college students, the sellers and buyers of auction sites are not technically proficient. They are too cautious and generally do not register, let alone deposit any remaining funds in their PayPal accounts. If I spend a lot of money to obtain information about auction users, it may help Peter Thiel achieve his ambitious marketing goals, but it will also make me a target of public criticism. They will accuse me of buying user information that is not a company at all. needs.

While gathering information to help me decide whether it is worth the bet, I stumbled upon the message board on the eBay website. There are hundreds of discussion messages from community members on the message boards, covering multiple topics, many of which are related to business. After reading these messages, I think these users are more mature than you think. They can not only understand how to use PayPal’s services, but also actively use PayPal. If Peter Thiel wants to achieve rapid user growth, then these eBay user groups are good targets. I decided to include auction users in the event. If my instincts are wrong then I will apologize.

Later this week, the data came in very gratifying. The speed of auction user registration is about the same as that of tech-lovers, so in subsequent campaigns for million-dollar users, I listed them as fixed targets.

When the bell rang in 2000 and people all over the world were celebrating the millennium, PayPal was fully fired. Referral rewards on the PayPal website, new software features, and advertising campaigns by the marketing team have all contributed to daily registrations. In less than two months after the service was released, we had more than 10,000 registered accounts. . Like everyone in the company, I’m just doing my best to fulfill my duties, hoping to get the registered account growth that Peter Thiel is pursuing. When I did that, I didn’t know what the results of my little deviant approach would bring.

The temptation to recommend bonuses

Luke Nosek and David Sachs are a pair of very different personalities in the PayPal team. Luke Nosek moved from Poland to Chicago when he was a child. He is very outgoing and creative. He focuses on things like his curly hair, often jumping from one place to another without warning. Many smart people seem to value opinions more than people, but Luke Nosek is different, he is more interested in people around him. Luke Nosek graduated from the Department of Computer Science at the University of Illinois at Urbana-Champaign. He is obsessed with technology. Whether talking with engineers or strategists, he is just as relaxed and comfortable. This is the main reason why Max Levchin found his former alumnus when he founded Confiniti-he believed that Luke Nosek could be the intermediary needed for communication between business and technical people in the company. 5

And David Sachs focused on the main points, many points. Everyone in the company knows that he will suddenly come up and have an in-depth conversation with you. He has short black hair, gold-rimmed glasses, and has a lot of body language when speaking. He always makes people think he is very engaged, especially in the less formal office of Confiniti. He is not as interested in social as Luke Nosek. Although he loves movies, the legal professional spends an amazing amount of time at work. He rarely leaves the office before 3 in the morning, but he shows up again at 11 in the morning.

Considering the very different styles and habits of these two men, most of us think that Luke Nosek and David Sachs are squeezed into a small office to be laughable. Although the two vice presidents differ greatly in their ways of doing things and their personalities, they have nurtured the most important concept of PayPal in this approximately 3 square meter office. Soon after my marketing work started, David Sachs received an email from a user asking for permission to use the PayPal logo. David Sachs clicked on the link in the email and logged into an auction page on eBay. The user created a PayPal banner ad and displayed it in his auction. This banner ad has the PayPal logo and a link to our website. Obviously, this seller believes that adding this homemade title to his list of auction items can easily earn an extra $10 referral bonus from PayPal.

After David Sachs saw the seller’s auction page, he had the idea and called Luke Nosek over. The two studied together and realized that the seller not only turned his auction into a mode of accepting offers, but also created an advertisement for PayPal. After a quick search, they found that there was more than one seller with the PayPal logo in the auction list. David Sachs entered “PayPal” into eBay’s search engine and found that several thousand of eBay’s nearly 4 million product listings mentioned our services.

They found that adding PayPal links to eBay auctions is easy. The top of the eBay auction list is very standard, including the subject of the auction, the seller’s rating and the highest bid, but the main content of the list can be set by the seller. Sellers can design unique background images for their displays through simple HTML (hypertext markup) editing. Product descriptions may be long and detailed, often occupying a few screens, or they may be concise and clear, with only a few words.

Most sellers who often sell things on eBay have a template to describe their products, because when sellers publish dozens or even hundreds of products on eBay, using a fixed template can reduce the trouble of approval. In addition to saving time, doing so will make the seller’s products consistent in form and sense, which is crucial for small businesses selling on eBay, who expect to develop their own brands and consumer groups.

While browsing the website, David Sachs found that eBay sellers were using different ways to integrate PayPal into their product descriptions. Most sellers added a link to our homepage in the product description, a few sellers copied the PayPal logo, and some sellers even spent a lot of money to describe how to register and use PayPal in detail. These sellers see PayPal as a convenient way to pay and are happy to let buyers use PayPal to pay. If the person browsing the seller’s product list also read the instructions on PayPal and decides to register to use it, then it is certainly not a bad thing to get an extra $10 referral fee.

David Sachs also found that PayPal is also a hot topic in the eBay discussion forum. There are many speeches. Some people think that PayPal is very practical, while others are full of doubts: Is PayPal safe? How can I cash it out? How much referral fee have you earned? What happens to my money if PayPal goes bankrupt?

A few weeks after I took a bet and offered that huge sum of money to auction users, David Sachs stumbled upon evidence that PayPal is becoming the mainstream trading tool for eBay’s online community. Even though our management team initially wanted to avoid this user group, but thanks to PayPal’s easy-to-use service, Confiniti’s generous referral bonus and my marketing efforts, we have planted the seeds of success on eBay. Now All we have to do is to help the seeds grow.

Take advantage of eBay

“This is the Internet.” Luke Nosek said solemnly. At this moment, he was standing in Confiniti’s only conference room, drawing quickly on the whiteboard. It was a Saturday afternoon in mid-January 2000. He called about 10 people in charge of marketing in the company to hold an emergency meeting.

Luke Nosek randomly clicked dozens of blue dots around the whiteboard with one hand, while waving his other hand. “People on the Internet are scattered everywhere,” he said, adding some blue dots, then drawing lines between the dots to connect them together, and explaining his thoughts to the confused employees. “There are some people here who communicate with other people in the group – there are more people here, and they also communicate with each other, but the problem is that these small groups are scattered in different places on the Internet.” He took a step back and looked at A small cluster of points and lines.

“Our model requires PayPal to rely on a kind of viral growth-spreading virally from one person to another when people pay each other, but this is tricky because people are scattered.” Speaking of which, Lu K Nosek was already very excited, waving his arms passionately.

I realized that he might be pulling away, so I started to lose my mind. I think this kind of overtime is best worth it. I have already regretted letting my girlfriend Beatrice stay at my desk alone and endure the boring suffering. Since I joined Confiniti, the days of rest have become fewer and fewer, and it takes a long time to have holidays. So, I don’t think that listening to the vice president talk about some abstract questions is a good choice to spend Saturday.

But Luke Nosek is right, and his views are crucial.

“I drew the entire Internet, but now let’s look at eBay alone.” Luke Nosek kept poking the center of the whiteboard with the blue marker in his hand. While he was speaking, dozens of blue dots overlapped to form a dense ball. “This is the most intensive place of people-to-person communication on the Internet. Netizens use this website. So, if PayPal wants to develop rapidly and occupy the entire Internet, then the fastest way is to start with eBay!”

Luke Nosec continued to explain, “Since dotBank and X.com are competing with Confiniti, we need to find the fastest way to expand PayPal’s user base. If we increase the number of users before our competitors If there are enough, the huge network effect will make all opponents out of the game, because if payment services like PayPal are already ubiquitous, then potential users will not waste time going to different service providers to register multiple accounts. But If we fail and other service companies start faster than us, then we will probably never catch up.”

Although there is no definition of how many users are considered large enough, management does agree that in the short term, getting users is much more important than getting profits. We don’t have to worry about whether eBay users will use PayPal accounts to save large amounts of balances. We only need to pay attention to eBay, a popular shopping site, because it obviously needs faster and more convenient way of person-to-person transactions. We will use the eBay market to build PayPal’s payment network on the basis of it.

“In the next few months,” Luke Nosek continued, “All our work focuses on eBay. In terms of marketing, all our direct mail customers should be users of online auctions. In addition, because we It is not possible to advertise directly on eBay’s website, so we have to place our banner ads and magazine ads in other places where eBay users appear.”

“In terms of software engineering, we have to suspend other projects in progress.” At this time, Jamie Templeton knew what effect this would have on the morale of the engineering staff, so he complained. Luke Nosec continued: “We must make it easier for sellers who recommend registered users to get referral bonuses. To this end, we will design a tool that sellers can use to add a PayPal recommendation logo to all transactions. This way anyone who sees the seller’s display will know PayPal, and all they have to do is click on the logo to register.”

At the time, some people in the conference room might not fully understand it, but Luke Nosek’s vivid description accurately demonstrated eBay’s huge scale and influence. As of the end of 1999, eBay had been established for 4 years and had 10 million registered users. A year ago, this number was only 2.2 million. From 6 to the second half of 1999, analysts estimated that eBay had 3 million auction items on display every day, accounting for 70% of the nearly US$4.5 billion online auction market. GomezAdvisors (an authoritative e-commerce evaluation company in the United States) predicts that by 2001, the size of the auction market will increase to $15.5 billion, and this growth seems to accelerate. 7

The starting point for eBay to achieve such a huge success is very low. On the weekend of Labor Day in 1995, Pierre Omidyar (Pierre Omidyar) founded an auction website called AuctionWeb. At this time, he did not know that this was the beginning of the e-commerce giant eBay. As a simple hobby. 8 Pierre Omidyar is cautious about large companies entering the Internet. He wants to build a website that allows small people to have the opportunity to trade on a level playing field. He advertised in several newspapers announcing the content of his services. By mid-September 1995, there were a total of 30 items for sale on his website. When Pierre Omidyar successfully sold one of his broken laser pointers on the website, he realized for the first time that AuctionWeb is a viable business model, so he soon began to charge the seller 1% Cost, which made his just-starting company immediately profitable.

With the further development of the company’s services, Pierre Omidyar strives to promote a sense of community among users. He believes that business should coexist with the community. To achieve this, he created a message board so that users can talk directly and answer each other’s questions. Pierre Omidyar said that his company firmly believes in “human nature is good”, he allows users to use this platform to make new friends, but always remember to “treat others as yourself.” 9 Fortunately, this kind of hippie-capitalist ode to the goodness of human nature did not prevent Pierre Omidyar from making rules for the website. In order to encourage community members to trade according to the rules, he established a user feedback system to publicly show that the transaction failed. Report.

Pierre Omidyar’s website became a growth company, and the company has achieved tremendous development in the following years. After that, the company changed its name, had an experienced CEO, and publicly issued shares. eBay and Pierre Omidyar’s own businesses are already very different, but they still retain some of the original community characteristics. At the end of 1999, eBay’s visits ranked 13th among all websites. Compared with other e-commerce sites, netizens who log on to eBay have been online for longer and will visit more frequently. 10

Peter Thiel, David Sachs, Luke Nosek, and Reid Hoffman decided to start my marketing campaign on eBay, a behemoth community auction site, and bet the future of PayPal on eBay. If we can make our services beyond dotBank and X.com through eBay, we will continue to reform the payment field and ultimately “rule the world.” But if the bet loses, we have no retreat-if we fail, we will be benevolent.

Reached the 100,000 user level

Confiniti quickly mobilized up and down. It was as significant as Fieldlink leaving Palm. Overnight, we shifted the focus of PayPal from payment between friends to online auction transactions.

Although we failed miserably in the “Scotty” marketing incident for not being able to concisely describe the purpose of PayPal, we now have a vital message to deliver. The company’s only HTML designer thoroughly studied the PayPal website and added a big link “Auction Payment” at the top of the homepage, which was placed under the PayPal logo. He also added a new auction tab to the website navigation to explain the benefits of using PayPal to pay for buyers and sellers. A few weeks ago, bills, group payments, and Palm handheld functions were still critical to our future, but now they are included in the “personal payment” section, which reflects their decline in importance.

The marketing team will fully release the efforts of acquiring customers to auction users. Kenny Howell summarized and listed more than a dozen auction-related service agencies on a list. These agencies are mainly specialized websites such as Numismatists.com for niche markets, and the ambitious mini-markets such as BoxLot. For eBay-style websites, you need to ask them about the quotation of the advertising location and so on. Jennifer Zhang advertised in various collectible magazines, and I continued to spend the $1 million through direct mail (after maxing out every direct mail sender, I ended up with about $600,000 that I didn’t spend).

Jamie Templeton and engineers began to study the auction logo insertion tool, because we hope that eBay sellers can add clickable HTML logos to the auction through the insertion tool, which will make it easier for them to explain PayPal to bidders. This clickable logo provides a more effective way for sellers. In addition to encouraging successful bidders to use our service, sellers also have the opportunity to earn the $10 referral fee from all visitors. Sellers use their displays to train buyers to use PayPal; and if buyers use our service to pay, they will in turn ask the seller why they haven’t used PayPal. PayPal customers in the eBay community will attract new users for us-this is the most basic form of viral growth.

Within a few days, the engineer completed the auction logo insertion tool, this tool is called AutoLink (automatic link), because it can automatically link to the existing eBay auction page and add a PayPal logo at the bottom, the user can go to the PayPal website Activate this feature on. The eBay website requires users to log in before they can update the auction page, so AutoLink requires PayPal customers to submit their eBay username and password in order to activate the PayPal logo-this is the only trap.

This requirement does not hinder consumers from using automatic links, because since they trust PayPal to manage their money, they feel that they can also trust PayPal to insert a logo for them. This feature is very popular, and its impact quickly became apparent. We use eBay’s search tool to search for the keyword PayPal every day to estimate how many auctions have accepted our service. In the beginning, about 1%~2% of auctioneers used PayPal, but soon this number began to grow rapidly. We call it the “display share”. By February, the “display share” rose steadily to about 6%.

When we began to implement the auction strategy to quantify our share in the new market, PayPal reached an important milestone-at the end of January, we had the 100,000th user. In the countdown phase to reach 100,000 users, our receptionist posted a large “thermometer” made of white fine art paper on the wall of the hall. Every day, she filled part of the “thermometer” with a red marker. The entire company watched us slowly approach the 100,000 mark at the top. When PayPal finally reached the top, we held a party with 6 cakes-the first cake had “1” written on it, and the others had “0” on it.

Although 100,000 users may be one step away from our unclear goal of “large enough”, this is still a huge achievement. Eight weeks have passed since Luke Nosek introduced me to the “World Domination Index” during my induction interview, and PayPal’s registered account has grown 40 times.

Unfortunately, our success in winning users was only a short-lived one. X.com has been observing every change of our website, and soon joined eBay together. Our competitors quickly created their own HTML logos for auction sellers, and banner advertisements for their services began to appear on some auction sites, which Kenny Howell called to contact the other day. X.com also updated the content of its website homepage, weakening the “one-stop financial service” publicity to highlight its auction payment function.

X.com’s decision to copy Confiniti’s actions is also reasonable. We copied the functions of dotBank a month ago. In addition, even if the X.com team itself cannot find the value of joining eBay, before we take the absolute lead, Elon Musk’s company understands what Confidini’s calculations are. In the online world, only a few hundred lines of code and a few pages of HTML can disrupt an entire enterprise. The ability to adapt to competitive changes is the key to survival. In the next few years, I experienced this again and again.

dotBank wisely developed billing and group payment functions 6 weeks ago, but this time it decided not to join Confiniti in the eBay melee. I don’t know if the company has insufficient execution ability, lack of funds, or failed to see the importance of creating a payment network on eBay, anyway, dotBank has not implemented any action to enter the auction market. dotBank only provides users with a few website logos and whitewashes the recommended items to make people think that new users can receive a $500 registration reward. 11 We check PayPal’s share of eBay’s display every day and find that X.com has started to grow, only lagging behind PayPal by 2%~3%, and dotBank is not searchable on eBay at all. We are not surprised about this. .

Now, in the battle for eBay, PayPal’s only competitor is X.com, and we decided to preemptively.

eBay acquires Billpoint

Both Confiniti and X.com have revised their strategies, hoping to increase their share on eBay, but when these two companies did so, they had not yet established formal links with the auction giant. This is not a big problem, because eBay tends to build the website into an open market, which means that as long as the tools and third-party services used by consumers do not improperly or hinder the operation of the website, then eBay does not care. Pierre Omidyar’s ideas coincide. Pierre Omidyar does not want strong players to gain advantages that little people can’t have. He believes that eBay should be a level playing field where all buyers and sellers can compete fairly.

But we have reason to suspect that this fair arena will not always exist for PayPal. In May 1999, eBay announced the acquisition of a credit card company called Billpoint. At the time of the acquisition, Billpoint was still a startup company and was in the product testing phase. Mike Wilson, the head of eBay’s product development department, appreciates Billpoint very much and believes that it can speed up online transactions by cutting currency exchange time.

However, providing support for credit card payments will also expose eBay to a risk previously only borne by users-transaction fraud. If one party makes a transaction error or involves fraud, then eBay’s fund income will be at risk. Of course, entering the field of auction payment means that Confiniti will also face this risk. Since we value customer growth, we should face this risk as we move forward.

As a publicly listed company, eBay has been proud of its profits since its first month of operation, and it needs to ensure that risks are minimized. “Billpoint and other companies have developed related technologies that can detect fraud in this area.” Mike Wilson said in order to stabilize investors and the media: “We think this is a small risk, and we will manage and avoid it carefully. “12

Mike Wilson, as eBay’s chief engineer (he was later dismissed for failing to report some key technical issues to CEO Meg Whitman13), did not fully elaborate on the risks that eBay faces. After several lengthy website operation interruptions, eBay’s focus is on improving the stability of the website, while at the same time developing some tools that can deal with risks (not to mention upgrading Billpoint to fit eBay’s auction business). For eBay, it is labor intensive and time consuming. Shortly after the acquisition and development, eBay shut down Billpoint’s website. More than eight months have passed, eBay did not provide any information on when sellers on eBay’s website can use the credit card system supported by Billpoint or whether they can use the credit card system supported by Billpoint.

David Sachs does not believe that payment competition from eBay should be an obstacle to entering the auction market. “They may not launch that kind of service in a few months.” He once told me of Billpoint, “By then we may have millions of users.” David Sachs and other management emphasized Need to pay more attention to current rivals like X.com and dotBank instead of worrying about future competitors that have not yet emerged. The way to defeat the opponent is very simple, is to surpass them in scale.

Cyberbot Buyer Program

“I thought of how to kill X.com and let more sellers start accepting PayPal.” Luke Nosek told me across the table. At first, I was really frightened by Confiniti’s free environment. Now I have adapted and started to realize that Confiniti’s informal culture greatly encourages all employees to comment. In fact, the culture here does not just allow employees to dare to think, but requires them to dare to think. Everyone is racking their brains to figure out how to make PayPal better. In this case, employees can’t just be perfunctory. However, although everyone uses this free culture to incubate new ideas from time to time, no one is as prolific as my boss.

“There is no reason for auction sellers not to use PayPal.” Luke Nosek continued, “Using PayPal is faster than using a check to make money, and if buyers register, they can also get a referral reward of $10 per person. I bet PayPal will definitely increase their profits!” He paused, “Well, if you can make five or six dollars from selling a Doudoubab that costs $20, then the profit is already substantial. So, if you make more money. For 10 dollars…”

“Well, you said you thought of a way to win the seller.” I interrupted him, trying to pull him back from the world of gadgets. Although there are many differences between Luke Nosek and I, we have been able to talk very well over the past two months, and I admire his talent very much. His creativity and unconstrained ability far surpass me, but he seems to cherish my left-brained way of thinking and often discuss ideas with me.

“Oh, that’s right. All we need to do is start shopping on eBay and stick to PayPal.”

“But there are more than 3 million auctions on eBay-we don’t have that much money!” I retorted.

“Well, we don’t have to buy every product,” Luke Nosek replied, “There are many sellers selling multiple products at the same time. We don’t want to buy all of their products, all we have to do is from each seller Buy a product and suggest that they use PayPal.”

“Then what do we do? How can we buy from every seller on eBay?”

“Well, there are many ways we can try. First of all, have you heard of Webfarm in Asia?”

I shook my head.

“Oh my God! The web farm is great. All the employees of the web farm just need to sit in front of the computer all day long and register for a “paid browsing” site like AllAdvantage. If you keep the toolbar open when you browse these sites, then you You can get 10 cents per hour. The toolbar will flash advertisements, and the money these websites pay you is the advertising fees from advertisers. Therefore, the people who run these online farms let employees browse the website every day. Just collect money from companies that pay for browsing. In fact, these accounts belong to web farms. Moreover, because it is in Asia, web farms only need to take a small part of the income from paid browsing to employees, thus gaining huge amounts of money. Profit.”

Luke Nosek paused to catch his breath, and took advantage of this gap to ask him: “Then you want us to create an online farm to buy eBay products?”

“Yes, but we don’t have to build our own online farm, we can use the existing farm.” At the thought of PayPal being openly associated with a digital sweatshop, I couldn’t help frowning, Luke Nosek noticed When I reached my expression, I casually mentioned another plan, “Or, we can build a’bot’.”

“A’bot’?”

“A web robot is a script that can retrieve certain products on the eBay website.” Luke Nosek smiled patiently and explained simple network terms to me, a newbie on the Internet. “When the product is found, it will As hard as a real person to bid successfully, and use PayPal to pay, the seller may even think that he is dealing with a real person.”

“In other words, network robots are just like humans, can they use PayPal to buy goods?”

“Yes, that’s it!” Luke Nosek said.

“What if the seller doesn’t want to accept PayPal?” I asked, emphasizing this small problem that Luke Nosek sometimes ignores.

“Well, this is indeed a problem,” he admitted, “we have to think about it.”

We came up with the answer in less than a day-cyber robots will buy merchandise for charities. Our charity robot verifies its identity with the seller before bidding, and sends an email stating that it is collecting items that can be donated, but it can only be paid with PayPal. The email also told the seller that if he doesn’t mind trading with the computer program and accepts PayPal, then he can reply to the email, and the robot will automatically place the order. We think that most sellers will accept it because it is a win-win for them-bidding from web robots allows them to participate in charity while ensuring that the auction price is higher. In our view, even if our web bot did not win the bid, at least the seller had access to PayPal.

Admittedly, this is a bit radical, but the idea of ​​being a charity cyberbot is still worth a try. We want to leave more room for display between PayPal and X.com, so that this marketing campaign will not be easily detected by competitors and difficult to replicate. Although somewhat aggressive, this plan will benefit from funding charity, and this feature will also allow Confiniti to avoid criticism for using robots on eBay.

eBay itself is quite disgusted with Internet robots. In 1997, Onsale, an auction site run by Silicon Valley veteran Jerry Kaplan, used web robots to directly collect user email addresses from eBay sites to send users promotional information. In response to this humiliation, eBay explicitly prohibits the activities of cyberbots and has set up a “defense mechanism to prevent cyberbots” on the website. 14eBay prohibits Internet robots not only because competitors steal information, but also because the purpose of Internet robot scripts is to quickly select page content to include data, which puts immense pressure on eBay’s already loaded website. Even for the purpose of observing trends or collecting market data, allowing friendly third parties to participate in some projects may also endanger the fragile stability of the eBay website.

This makes the bets of charity robots particularly critical. If eBay finds out about our web robots, it will naturally prohibit PayPal from appearing on its website, which will hinder our “auto-link” function. But if eBay fails to detect it, then robots can allow us to occupy a favorable position in the competition and build a payment network.

Identify charity partners

Although eBay might disagree, Luke Nosek got everyone else in management to approve the benefits of this plan. Management believes that X.com or dotBank may catch up with PayPal, which is much more serious than eBay’s punishment of us for cyberbots. This project became important when Max Levchin announced that he would go out in person. Confiniti’s chief technology officer generally spends his time on security and network stability, and Jamie Templeton and engineers are responsible for specific issues. But this time, he wants to create this web robot himself.

Max Levchin spoke softly, but Confiniti knew his technical genius well and only assigned him jobs worthy of his talent. In this startup company, Max Levchin is already a veteran employee. In his previous business ventures, he could work non-stop for 48 hours. He seemed willing to deal with such a cool and somewhat dangerous project. However, it is not easy to develop our own secret weapon. To obtain data from another company’s website, especially a large dynamic website like eBay, the software we need must deal with many variable factors, such as missing pages, broken links, and changes in page flow. renew. Cyberbots also need to interact seamlessly with humans and avoid any misunderstandings, so as to protect Confiniti from criticism.

When Max Levchin set out to study robots, Luke Nosek asked me to find a charitable organization willing to accept a large number of Pokemon cards, comic books, and ceramic frogs, because these items would soon flood in. My first choice is the American Red Cross. This is a well-respected organization, and people are eager to fund it, but this national charity seems unsure whether it should go to an unknown online company that is not sure how much to donate. Cooperation, this is also expected. A current affairs commentator introduced me to a local branch. Through a strange, nonchalant call, I persuaded the head of the suspicious branch to agree to receive all kinds of gadgets that were about to be mailed. In this way, Confiniti has a partner in the charity world.

After confirming the involvement of the Red Cross, we conducted some tests to activate the charity cyberbot, and Max Levchin continued his research. Jennifer Zhang created a company account named “charityrobot@paypal.com” and contacted dozens of auction sellers. We pretended to be an automated robot and asked the seller for permission to place an order. A large number of sellers are happy to help charitable organizations, and more orders will increase their prices.

While weird eBay orders filed in, another email alias of Jennifer Zhang also brought a much-needed relaxed atmosphere to our intense work. Jennifer Zhang would occasionally forget to switch between the simulated electronic account and his own account. As a result, colleagues would receive long and detailed emails with the alias “PayPal Charity Robot” (ThePayPalCharityRobot). Even Max joked that he was working manually. With outstanding achievements in intelligence, I couldn’t help laughing.

New competitor PayMe

As we continued to develop PayPal’s secret weapon, the competitive situation in the online payment market changed again. At the end of February, another new company also joined the melee, which once again shocked our young company.

PayMe is not actually a new face on the Internet. Since December 1998, PayMe.com has been providing services. 15 This emerging website recommends collection agents to visitors for free to help organizations solve their billing problems. But the new service provided by PayMe.com is very different. Its target customers are college students who ask their parents for money. PayMe has launched its own free account, which allows you to send money as long as you have an email address. Although from a technical level, PayMe did not have any major breakthroughs, but it has caused a greater impact on us than other companies, because PayMe is funded by Idealab, which is the owner of Idealab Capital Partners, and Idealab Capital Partners is Confiniti is one of the major investors in venture capital in January.

The CEO and founder of Idealab, Bill Gross, initially created an all-round incubation base with the goal of “transforming innovative thinking into a successful company.” 16Idealab was founded in 1996 and is located in Pasadena, California. It claims to have created a perfect management algorithm that can transform people’s ideas into actual businesses. Or, as its website puts it, “As long as an idea takes shape, Idealab will share its market-tested knowledge and expertise with start-up companies to support the initial growth and development of the company.”

By the beginning of 2000, Idealab seemed to have achieved some gains. The companies in its incubation base included many online companies that were about to succeed. For example, eToys, an online toy store, was said to have more market share than Toys’RUs. Big; DotTV, a URL registration company that serves “.tv” domain names; and NetZero, a free Internet service provider that supports online TV coverage including NBA. Bill Gross is the trustee who helps the California Institute of Technology manage its assets. He set up Idealab’s office in Silicon Valley and drafted the company’s listing plan.

Although in a strict sense Idealab has never provided Confiniti with management guidance or support, Peter Thiel welcomes it to participate in the second round of venture capital due to its recognized reputation and popularity. But now it seems that our partner Idealab seems to be satisfied with the information obtained in the research, so he decided to make a big bet on another payment service startup company.

Like X.com two months ago, PayMe also set off a media frenzy. The founder of PayMe, Dan Griggsby (DanGrigsby) touted his service as a technological breakthrough that solved the “awkward situation of collecting debts from friends”, and Idealab also proudly said that PayMe was the first one that its Silicon Valley branch helped establish. a company. 17

Peter Thiel saw this as a partner’s betrayal of us. In response, he pressured Bill Gross to either close the new business or sell the Confiniti shares held by Idealab back to Confiniti. Finiti. But Bill Gross refused and continued to maintain the identity of our company’s shareholder, but he was alienated from the company’s people, and at the same time he continued to own another company, a competitor to our start-up company.

Dropout entrepreneur

Competition in the online payment field has intensified, and Confiniti’s ranking continues to rise.

On December 10, I officially became the 27th employee of this company. At that time, I didn’t know my specific division of labor. At that time, Confiniti had only been established for 12 months. Two months later, near the end of February 2000, our number of employees had reached 50, and when a new colleague arrived in the office, we no longer counted him as the first person to join the group.

Most of the new employees have joined the customer service team. As PayPal’s daily registration volume has soared from hundreds to thousands, customer inquiries have evolved from a stark to a scourge. Although we try to keep the website as simple as possible, customers still contact Confiniti for help in every detail, mentioning security issues such as how to bind a credit card to a PayPal account and whether our service has been hacked.

If a large number of e-mails and phone calls are not enough to prove that we need more customer service staff, then more data is beginning to become a strong proof. At my desk in the old ping-pong room, I noticed that there are always angry account holders at the nearby reception. Encountered difficulties in supporting the situation. On a sunny afternoon, an old man wearing blue jeans, brown boots and a high-brimmed hat came to our hall with strides and said loudly: “Hello! My wife and I just came from Arizona. We want to withdraw the money from PayPal.” Soon someone came out of the CEO’s office and gave the old man a check. Then the next day, we took the office address off the website.

In order to “rule the world”, we are not just recruiting customer service personnel. In order to attract much-needed software engineers, Max Levchin placed an eye-catching advertisement in the Stanford Student Daily. The ad said: “Tuition fees are rising? Let mom send you the money by E-mail.” Below the slogan is the PayPal logo and a more provocative question: “A cool startup and the company is very Is the value of Niu’s preferred stock options worthy of dropping you out? We are waiting for you to join!”

Although this advertisement only attracted a few engineering students to apply for summer jobs, it did have an impact in other departments. One day at noon that week, a history junior, Paul Martin, came to the office and wanted to meet Peter Thiel. Paul Martin is a native of Arkansas, blond, blue-eyed, tall, and muscular. He is the business manager of the “Stanford Review” and a long-distance runner on the Stanford University track team. He wanted to tell Peter Thiel to come to the company for an internship in the summer, but his job search experience was similar to mine, and he couldn’t find where Peter Thiel was. Because we have met through friends from the “Stanford Review” before, and others have come, so we can at least get to know the company, so I invited him to dinner with me at noon.

“Look at it,” I handed him a chart showing a sharp increase in users. “This table is the total number of PayPal users. When I first came to the company, our number of users was only about 2,000, but we achieved today’s Achievement.”

“Wow, that’s amazing,” he said, and then studied silently with the chart.

“Moreover, this number is still growing.” I continue to say, I enjoy this opportunity to let me express my intentions. “You see, our system is driven by viral growth. Our service is easy to use, and each customer will help us develop more customers. We have a $10 referral bonus to encourage users to make their friends Also create a PayPal account. The cost of doing so is much lower than acquiring customers through TV advertising and mass media, and it is a good way to help people understand our services.”

I’m talking about viral growth, network effects, and the potential for PayPal to disrupt the currency market, and Paul Martin listened carefully. 10 weeks ago, Peter Thiel said “ruling the world” at a company meeting, and I’m actually telling Paul Martin about my own understanding of “ruling the world”, but I didn’t realize it when I said it. .

After lunch, we finally tried to find Peter Thiel. After finding him, Paul Martin talked to him about the internship, and then I gave Paul Martin a business card and he went back to school.

When I was woken up by the phone early the next morning, I had forgotten the things of the previous day. “Hello, Eric, this is Paul.” Paul Martin said on the other end of the phone in a southern voice, “I have been thinking about what you said yesterday, and I want to get involved.” I didn’t expect him to be involved in lunch. When I had this feedback on my remarks, I am very grateful for this. Obviously I have become an effective mobilizer for the company, but I did not expect my agitation effect to be so good, because he said: “I want to quit school and start now. full time job.”

To my surprise, he told me that his family and girlfriend supported his decision. I was stunned. I didn’t know how to tell him. On the other side of the phone was a young man from rural Arkansas. I think he borrowed all his tuition from Stanford. His knowledge of PayPal came from me, and this was enough to make him decide to drop out of school and make a desperate move. Although Stanford’s policy for re-registration is very flexible, dropping out of a top school in the world and joining a startup company that hasn’t yet made any profits is a big gamble.

“Then you try it.” I told him.

At about midnight that day, Paul Martin came over to meet Luke Nosek. Luke Nosek seemed a little worried about recruiting an inexperienced person to join the marketing team, but because of my recommendation, Luke Nosek decided to talk to him. Before Paul Martin arrived at the company, I had already gone home, because I usually started working 14 hours a day very early, and strived to leave the company before 10 o’clock in the evening, so that I could squeeze an hour to be with Beatrice , And then take a little sleep. And Luke Nosek is a night owl, and he doesn’t think it’s weird to interview early in the morning.

Paul Martin successfully conquered Luke Nosek, he got a job and quickly became a 21-year-old college dropout, which was a crucial decision for both Paul Martin and PayPal.

Burning money mode

Although the growth of PayPal is accelerating and I am optimistic, the future of the startup Paul Martin joined is still up in the air. After us, many online companies have also joined the online payment market, which makes the competition extremely fierce. On eBay, our daily search shows that X.com’s display share is greatly increasing, only a few percentage points behind us, and the development of our secret weapon “charity robot” is progressing slowly, using robots to select random ones on the eBay website Auction items are much more difficult than initially expected.

In addition, we still have funding issues. Although we raised $23 million in the previous month, our rapid growth in the number of users means that we have to pay more than $100,000 in rewards to users every day. At the same time, the return of funds to the PayPal system is very small, because most payees withdraw funds as soon as they are in place. To make matters worse, since few users leave their balances in their accounts, most users use credit cards to pay, so Confiniti has to pay a 2% fee to the credit card association for every transaction. Every time someone signs up and uses PayPal, we lose some money.

All of this means that although Confiniti will not run out of funds in the short term, our model of burning money will not go far. If PayPal wants to survive, it needs to develop the network “large enough” and eliminate its opponents as soon as possible.

Related Posts