Peerless leader

Perceptive, adaptable, and remarkably low-key, eBay chief executive Meg Whitman rides e-tail's hottest segment - the global garage sale called peer-to-peer.

As one of the world's richest people, Meg Whitman could travel by corporate jet, a preferred perk of many business executives. Most of the time, though, she chooses to take commercial flights. It's a way to meet her customers.

"If I'm in an airport wearing an eBay hat or eBay T-shirt, people will come up to me and ask me if I work for eBay. When I tell them 'yes,' they say: 'I want to tell you, my feedback rating is 936.' Before they tell me their name, before they tell me what they sell, it's their feedback rating. It is a really important part of eBay's chemistry," she says, explaining that the customer-community approval process - through which eBay users rate one another's reliability - is what makes her online-auction business tick. EBay, she says, is a company driven by self-worth.

America's most pragmatic chief executive is happily at play in the Elysian fields of electronic commerce. A child of privilege, she sits in her open cubicle in San Jose, Calif., surrounded by family photos, Beanie Babies, Mr. Potato Head figures, and dozens of other mementos collected along a more than 20-year course through corporate America. One item stands out: a yellow hard hat with "Whitman" stenciled across the front.

The hat lends an anomalous bricks-and-mortar feel to the world's most audacious Internet company, one whose nine-year trajectory has been far steeper than those of Microsoft, Dell, Amazon, or Wal-Mart. By charging a 35-cent listing fee and a small percentage for transactions, the company has grown sevenfold since she took the helm in 1998. It facilitated the exchange of nearly $24 billion in goods and services last year, nearly doubling its 2002 revenues to $2.17 billion in 2003. This year $3 billion is within reach. Its registered customers are expected to surpass 100 million worldwide. In a sign that her board credits Whitman, it more than doubled her salary this week, to $2.19 million.

The company's growth has been compared with New York City's rise from an 18th-century fur trading settlement to a commercial powerhouse connected to the western markets by the Erie Canal. By harnessing the Internet, eBay might be more precisely considered a commercial cyclotron, accelerating and expanding business even into tiny, obscure corners of the world.

More than 20 million items are listed on eBay at any given time. A car sells every minute. More than 175 million searches are conducted daily. Some 10 million bids every 24 hours result in about $900 worth of goods and services exchanged every second.

From her collection-filled cubicle, Ms. Whitman is at the epicenter of this cyclotron. She is also eBay's one true bit of brick and mortar. Widely viewed as hard-nosed, she is also called humble - a characteristic that contrasts with the arrogance of some contemporary CEOs. This customer-service specialist seems uniquely qualified to run a firm at which the customers really are the company.

"EBay's extraordinary rise and built-to-last staying power can be directly linked to Meg's quality of leadership, insight, galvanized experience, and skills," says Howard Schultz, chief executive officer of Starbucks, the coffee giant he's run since 1987. He recently ended five years of service on eBay's board of directors, a tenure Mr. Schultz calls "the highlight of my business career."

"She represents both the emotional and rational side of the brand," says venture capitalist Bob Kagle, who helped recruit Whitman for eBay. "She is an active and fair listener, and tough-minded and competitive." Says Mary Meeker, a Morgan Stanley Internet analyst: "Meg personifies emotional intelligence, emotional IQ. She has worked with a significant number of people in her life. She has been in on a significant number of decisions and situations. She's processed a lot. It is the multitude of experiences that has shaped her and it cannot be underestimated." [Editor's note: The original version misstated Meeker's company affiliation and omitted several words in her quote.]

Just a few years ago, before Whitman's face appeared on the cover of every business magazine, you might have recognized her even though she bore no signature look save the efficient page-boy; a round, open face hosting a generous smile; and mirthful eyes that radiated a sense that she welcomes entertainment. You might have thought soccer mom/business exec - and been accurate.

Meg Whitman grew up the youngest of three children in an affluent family in Cold Spring Harbor, N.Y., on the northern coast of Long Island. Her father made a polite living loaning money to businesses that put up their accounts receivables as collateral. Her mother was, she says, a "stay-at-home mom." Both parents traced their lineage to Boston Brahmins. Whitman attended Cold Spring Harbor's highly rated public high school. She played field hockey, tennis, and basketball. She swam competitively and earned superb grades.

But it was near the end of her senior year that something surprising and seminal occurred. Her mother joined a women's delegation to China headed by actress Shirley MacLaine. It was one of the first such missions to visit after the nation reopened its doors to the West.

"When my mother came home after this great adventure, she told me what this experience taught her. She realized she could do anything she wanted and she wanted me to recognize that I could do the same," Whitman recalls. "It was a formative experience for both of us."

Whitman attended Princeton, intending to become a physician. "But organic chemistry got in the way," she recalls, smiling. She majored in economics, graduated in 1977, and enrolled at Harvard Business School that autumn. Her classmates included Elaine Chao, now US secretary of Labor; Gary Marshall, chairman and CEO of PepsiCo; Ronald Sargent, CEO of Staples; and John Thain, CEO of the New York Stock Exchange.

At Harvard she also met Griffith Harsh IV, who was finishing medical school. Three years later, after she earned her MBA and had worked on consumer branding at Procter & Gamble (with Steve Case, who would later run America Online) Whitman and Mr. Harsh married.

When Harsh, an aspiring brain surgeon, took his residency at the University of California at San Francisco, Whitman joined the San Francisco office of Bain & Company as a management consultant. She brought with her a P&G brand sensitivity, but it was her time in the field that forged what became her greatest strength - the ability to listen to customers and process their needs and desires into action.

For the next decade, as she was raising two children, Whitman moved upward in marketing positions, always advocating for customers as the driving forces for success. As a senior vice president for marketing consumer products at Disney, she helped open theme stores overseas, where she experienced language, social, and business-culture barriers that would again have to be reckoned with as eBay expanded its reach.

She was also served well by her own flexibility. In 1992, as she was hitting stride with Disney, her husband was offered a key post at the prestigious Massachusetts General Hospital in Boston. He went, and Whitman followed, becoming president of Stride Rite shoes. She resurrected the failing Keds brand and then took a calculated risk. She joined Florists Transworld Delivery (FTD) a more than 80-year-old under-the-radar cooperative of florists who were frustrated by their lack of market reach. But even as president and CEO, the process of forming a network among loose confederations of florists who jealously guarded their own turfs and business models was akin to dragging cats to the bathtub.

After just over a year, she left to join Hasbro's preschool division, where she took charge of global marketing and management of the Mr. Potato Head brand and the Playskool brand that had been losing money fast. The task wasn't just brand growth; it meant a total turnaround. She was delighted by the challenge. So were her two sons, ages 13 and 10. Their mom had the coolest job. She was in charge of toys.

Meanwhile, on the opposite coast, a little Internet auction enterprise that began in a San Jose townhouse had morphed into a runaway business for its founder, Pierre Omidyar. A computer programmer, Mr. Omidyar had casually launched AuctionWeb on his personal Web page in 1995 just to test and develop his own programming skills.

Within two years, the firm, renamed eBay, had 300,000 users and 40 employees. It had sidestepped two efforts to purchase it, both by newspaper giants who visualized an avenue for online classified ads. And it had fended off competition and also acquired $5 million in venture funding.

Then Whitman's and Omidyar's paths crossed. EBay needed adult supervision.

"We went through the normal exercise, with 50 names on the list of potential candidates. And when we whittled it down to five, it was clear that Meg - mostly because of her brand and customer experience - stood head and shoulders above everybody else," recalls Omidyar, now worth more than $10 billion, according to Forbes magazine. "I remember her listening to our explanations of the business and she said: 'It looks like the experience people have with each other helps define your brand.' She was intuitive about us. She got us right away."

"She [understood] the powerful economics," adds Mr. Kagle, the venture capitalist. "And even more important, she 'got' immediately the emotional and community side of the brand.... She also understood that Pierre had created something special and that his wisdom would continue to be a huge asset," he says. "In my experience, most prospective or newly installed executives are interested in running their own show and creating their own history. Meg got Pierre just as she got the company. That, to me, displayed amazing maturity."

After performing as much due diligence as possible, Whitman and her family moved west and she joined eBay. She brought in experienced managers, added to her board Starbucks's Mr. Schultz and Scott Cook, an old colleague from Bain, and the eventual cofounder of Intuit.

Whitman then struck a strategic partnership with AOL, a move that fended off would-be rivals, including Microsoft, Yahoo, and Amazon. Within six months, she helped take the company public. More than 75 employees became millionaires. Omidyar and Jeff Skoll, his president, reached into the billions, and Whitman's net worth topped $1 billion.

A year later, in an incident that would become the reason Whitman includes a hard hat among her decorations, she and eBay hit their nadir. Shortly before 7 p.m. on Thursday, June 10, 1999, eBay's site went down - and stayed down. Millions of eBayers around the globe saw their dealings suspended, including companies in that community for whom eBay handles the bulk of their distribution. The site had crashed before, but each time, the engineering team had been able to resuscitate it. But this had all the signs of a meltdown.

Whitman had been monitoring the situation from home before driving to eBay's headquarters at 4 a.m. "I did the only thing I knew how to do - be there." Being there, among the bewildered engineers and IT vendors would prove to be a defining moment in her career. Cots were set up in the conference room. Tables were loaded with soap, towels, deodorant, shaving cream, shampoos, and conditioner. The war room atmosphere at eBay had the look of a long night that nobody knew how to end.

"If I was there, then the best people from the vendors would be there," Whitman says. "I could call Scott McNealy at Sun, which ran our servers, or Ray Lane at Oracle, or Mark Leslie at Veritas and say: 'I really need you.' " Whitman also saw this as the right moment to leap out of her comfort zone. "I'd go to meetings and hear about technology-platform architectures, things I didn't understand. Obviously, it was time I learned."

She doesn't shy away from holding others to that same level of accountability. "She's the most down-to-earth executive I've ever worked for," says an executive who interacts with Whitman almost daily. "But when she asks, you'd better have your answers, your numbers, and your recommendations ready."

The site came up, but crashed again, throughout the weekend. When the site would allow, the eBayers at headquarters could log in and hear from the community of customers, people who might be just one click away from defecting. But the preponderance of feedback was not a howl of indignation, but sympathy and offers of help. Ebay's center, its community, had held. But for how long?

"On Monday, the site came up but was not working," Whitman recalls. "Pierre arrived and came into the operations room. One look at us and he could tell what we'd been through nonstop over the weekend. I went up to him and said: 'What if they can't fix this?' " Whitman recalls. "Pierre, who is the calmest individual in the world, said: 'Usually, when it gets this bad, they're just a couple of hours from figuring it out.' "

Whitman was not completely reassured. But she held out hope. "Sure enough, two hours later, a 24-year-old Oracle tech adviser came running in and said: 'I've got it! I've got it!' " Whitman says, still sounding emotional nearly five years later. "We've come a long way from 1999," she adds quickly. "Technology was our Achilles' heel, and now it is our core competence."

But the transition wasn't as smooth as she makes it sound. In the four months following the site blowup, heads rolled at eBay. New technology protocols were put in place. "I learned more about technology than I could have learned in 10 years," Whitman says. "It was total immersion." Her handling of the crisis also honed some of Whitman's own core competencies.

"She quickly found issues with the leadership of the technology team," Omidyar says. "This likely would have evolved into what our engineering team looks like today, it's just too bad it had to come to a head so quickly.''

Whitman can work in just about any time frame, observers say. "Meg lives to make crisp, fast-moving decisions," says Mr. Cook. "But she [also] listens, she explores, and obsesses about the community. And it is this community that makes the eBay you see. For instance, they recently opened an empty store on the site [an experimental, designated area online that could be "stocked" with a selection of goods]. The community filled it. They decided what is for sale."

The community also pushed the firm to buy PayPal for $1.5 billion in 2002, a move that has given eBay an infrastructural barrier against competition, from say, a resurgent Yahoo, Microsoft, and search-engine powerhouse Google, which has been testing Froogle, its own e-commerce platform. A recent downplaying of Froogle has prompted speculation that Google - said to be on the brink of going public - is not ready to do battle with eBay.

But Whitman is taking nothing for granted. She arises at 6 a.m. every workday, works out for 30 minutes, stretches, showers, and has breakfast with her husband and two sons, whom she usually drives to school. She's usually in the office by 8:30 a.m. checking in with her executive staff in cubicles surrounding her own. She then reads e-mail from eBay's sellers and buyers and monitors the support groups.

"You have to have a sense of what issues are hot in the community," she says firmly. "A cardinal sin is not knowing what the community's concerns are. Even worse, initiating something here without consulting the community." She cites the decision to ban gun sales (something the business would have done regardless of the community reaction) and something seemingly trivial, such as introducing a star system without consulting the community - a move that caused an uproar.

"The beauty of this business ... is that when you ask 10 questions, you get 4,000 answers," she says. "So we do a lot of synthesizing. We are also trying to stay focused and continue to solidify our brand. We want PayPal in every market in the world. But as far as the competitive landscape [is concerned], any online or offline place where you choose to spend money other than eBay is a competitor."

Ebay's size and efficiency, of course, make it a target for scrutiny. Its aggressive policing of companies it views as misusing information from its auctions, along with its perceived toughness in setting the prices "third-party" firms pay to interact with it, have led critics to charge that it verges toward monopoly control of the auction realm.

Supporters counter that the marketplace will provide its own checks on eBay's expansion. Language barriers, currency issues, even customs will present problems for eBay's globalization. Security is still an issue (a California man recently pleaded guilty to money laundering for using fake identities to inflate bidding on $450,000 worth of fake paintings he listed on the site). Whitman understands these problems and knows they are solvable. Remarkably, humility seems to accompany that knowledge.

"We're a different company every three months," she says. "I ask myself from top to bottom, do we have the right people in the right place at the right time...? I even ask myself if I'm the right person for the right time."

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