Burgess COMMENTARY

Peter Burgess

Shocking Expose Reveals eBay's Shameless Efforts to Steal Craigslist's 'Secret Sauce' ... Pando.com reports on another ugly Silicon Valley 'success' story.

Photo Credit: Image by Shutterstock, Copyright (c) Gil C.

Silicon Valley likes to think of itself as inventing the future, but sometimes its fortunes are made the old-fashioned way: through deceit, plunder, lying and outright theft.

That is the storyline in a detailed investigative report from Pando.com, a website covering the valley, describing how eBay and its founder, Pierre Omidyar, hijacked a slew of trade secrets for the giant online auction and retail website from Craigslist.com, the humble classified ads website. These acts helped eBay launch its own online classified ads market, Craigslist said.

What makes the Pando.com report by Mark Ames so intriguing is that once upon a time when Internet startups were more altruistic, Craigslist was a real Silicon Valley outlier. Its founders, Craig Newmark and Jim Buckmaster, didn’t really want to make money with every online transaction. They were more interested in building an online community that had shared values where people helped each other out.

In contrast, eBay, according to the extensive trail of litigation spanning a decade, was more concerned with making money. Sure, Omidyar was known in corporate circles as a benevolent entrepreneur, creating and posting ethical codes of conduct on eBay and talking the same values-laden talk as the Craiglisters. But somewhere along the line, according to Pando, eBay executives, including Omidyar, concluded that their path to prosperity was through acquiring Craigslist.

Omidyar charmed his way into a seat on the Craigslist board, according to the documents, and eBay eventually acquired about one-quarter of the company. Then, apparently unbeknownst to Craigslist, Omidyar and eBay used that perch to literally datamine Craigslist’s operation, copying thousands of pages of user information that could help eBay design its own website—Kijiji.com—to compete with Craigslist.

What’s intriguing about this story is that the Craigslist founders believed Pierre Omidyar was cut from the same counter-cultural cloth as they were, and this belief persisted long into the charade. Omidyar, if the lawsuit documents are correct, behaved like a double agent, being friendly to the Craiglisters in public, while plotting privately with eBay execs to steal Craigslist’s business.

Silicon Valley is filled with lawyers who will draw up nondisclosure agreements, non-competitive agreements and the like. But it is still an arena where personal contacts and relationships can matter more than computer code. It’s almost painful to read how eBay execs derided the Craigslisters as babes in the digital woods—innocent and easily duped. Similarly, it appears the Craigslisters were naïve and wanted badly to believe that Omidyar and the other eBay executives they were dealing with were honest and shared their values.

But now they know better. The Pando.com report is filled with backstabbing details: after Omidyar was forced off the Craigslist board, he threatened the company’s founders that eBay would “acquire 100 percent of Craigslist whether it took decades and, if necessary, over Newmark’s and Buckmaster’s dead bodies.”

By then, this Silicon Valley fight had become a bad soap opera because eBay owned more than a quarter of Craigslist's stock—and eBay wasn’t going to give any back. If anything, they wanted to own all of the company and kept saying so. Meanwhile, Craigslist’s founders didn’t want to admit they had a business partner who was like a treasonous family member trying to steal the family jewels.

“Mr. Newmark and Mr. Buckmaster were taken aback by eBay’s behavior, and feared that they had a wolf in sheep’s clothing in their midst. However, they still had tremendous respect for the moral compass of Mr. Omidyar, and craigslist tried to review in good faith even extreme proposals made by eBay, particularly since many of the proposals were couched in terms of community service.” —Craigslist v. eBay, Fourth Amended Complaint

The litigation between Craigslist and eBay is ongoing. Both companies are great successes. Their founders and executives are famous in business circles and beyond. Meg Whitman, eBay’s former CEO, was a Republican candidate for governor in California in 2010, after much of the chicanery between eBay and Craigslist occurred. Whitman became Hewlett-Packard’s CEO after losing to Democrat Jerry Brown.

But the lesson here is akin to a morality play about capitalism and ethics. As a Delaware judge summarized in one of many rulings on this multifaceted dispute, “For most of its history, Craigslist has not focused on ‘monetizing’ its site… It might be said that eBay is a moniker for monetization, and that Craigslist is anything but.”

That’s the crux of it. If you want to do something in Silicon Valley that has some value outside the capitalist cannon—such as creating a true community—then beware! Not only is it apparently old-fashioned, naïve and simplistic to promote community values and digital tools to create that culture, it’s also dangling red meat to circling sharks who pose as good guys when they’re not.

Steven Rosenfeld covers national political issues for AlterNet, including America's retirement crisis, democracy and voting rights, and campaigns and elections. He is the author of 'Count My Vote: A Citizen's Guide to Votin