By her own admission, Margaret Whitman will never be mistaken for a nerd. So it's no wonder that many people raised an eyebrow when the Harvard MBA and former head of Hasbro's preschool divison, joined Internet auction startup eBay in early 1998. Yet she quickly proved her technology mettle. When eBay's site crashed for 22 straight hours and remained unstable for weeks in the hot Internet summer of 1999, Whitman dug in. She sat in on technical meetings and did all-nighters to help uncover problems with Sun Microsystems computers and Oracle database software, catching only a few hours' shuteye on an office cot. Not only did the problems get fixed, the site now sets the Web's gold standard: On average, it goes down only a few seconds per month.
In the years since Whitman's trial by fire, eBay's (EBAY) online marketplace has exploded into the one blockbuster Internet success story to date. Revenues rose 62%, last year, to $1.1 billion. That's its cut from nearly $15 billion in gross sales from member auctions of everything from baseball cards to catering trucks.
Profit growth has been accelerating, too: Earnings jumped 172% last year, to $249 million. "Over the past three years, eBay's track record has been nothing short of spectacular," enthuses Derek Brown, an analyst with San Francisco investment bank Pacific Growth Equities (neither Brown nor his company has any financial relationship with eBay).
BIG STRIDES. As Whitman herself is quick to note, eBay's success comes as much from its 31 million active buyers and sellers as from executive brilliance. Members not only decide for themselves what to trade but they also handle all the inventory and shipping, and much of the commercial interaction -- which explains the juicy 80%-plus gross profit margins. The secret, says Whitman, "is the community of users who have built eBay."
Yet the 47-year-old alumna of Disney (DIS), Hasbro (HAS), FTD.com (FTDI), and Stride-Rite has also made her mark at eBay. She has pushed for changes to improve the user experience -- sometimes over the objections of some of eBay's very vocal sellers.
For example, she moved the site beyond its auction roots, urging merchants to sell at fixed prices as well as at auction. Fixed-price trade now accounts for about 26% of gross sales, attracting new kinds of buyers and speeding the pace of commerce on the site. And last year, eBay bought payment processor PayPal, whose billing software lets buyers avoid sending checks in the mail and results in instant payments to merchants.
"VELVET-GLOVE TOUCH." Whitman is no pushover on executive row, either. She once sold the entire contents of a ski home on eBay -- and immediately began requiring fellow execs to sell a certain number of items monthly on the site so they can detect problems firsthand. And Chief Financial Officer Rajiv Dutta says Whitman doesn't take it lightly when execs don't deliver on promises: "She will completely chew them out." Or dump them. During the site crashes, she hired one technology chief, then canned him when things didn't get fixed fast enough.
Still, the collegiality that created and sustained eBay also shows in Whitman's management style, according to those who see her at work. "She has an amazing velvet-glove touch," says Sun (SUNW) CEO Scott McNealy, who worked closely with Whitman to fix eBay's site crashes. "Instead of making me angry, she made me want to do just about anything we could to solve her problem. And that's what we did."
Whitman's tough-love approach will be tested more forcefully in coming years. Rivals such as Amazon.com (AMZN), whose own marketplace is growing like a weed, and even such upstarts as search engine Google, could steal some of eBay's thunder. The still-freewheeling nature of eBay's marketplace, which has led to increasingly public incidents of fraud, could scare away potential sellers and buyers. And it remains to be seen how much of a mainstream shopping site eBay can grow into, since much of its merchandise consists of consumer and corporate castoffs.
FISHING FOR ACQUISITIONS? Dealing with those challenges doesn't leave Whitman much time for other pursuits beyond spending time with her two boys and husband, a neurosurgeon at Stanford University. The only other boards she sits on are at Procter & Gamble (PG), where she was brand manager from 1979 to 1981, and at Princeton University.
She also loves fly-fishing, a hobby she occasionally manages to indulge on the road by sneaking away from industry conferences. Such spontaneity fits in well with her life at eBay. The big difference between it and other companies, she says, is that decisions have to be made in hours instead of days or weeks.
Whitman won't be slowing her pace any time soon. Indeed, one of her biggest challenges comes from the very speed of eBay's ascent. With its stock trading around $100, near a four-year high, as of May 28, the company's market value stands at $31 billion -- nearly four times that of Sears Roebuck (S). That makes for a nice premium with which to acquire complementary companies, such as established overseas auction sites -- eBay has stakes in three already.
It'll take more such moves to justify the company's high-octane price-earnings ratio of 99 based on 2002 profits. More than just ensuring that her site runs smoothly, Whitman will have to concentrate on bringing in new buyers and sellers for years to come. By Rob Hof, with Peter Burrows, in San Mateo, Calif.