eBay is the world’s largest online auction company, with sales jumping 52% to nearly $806 million during the 3rd quarter of 2004. In the 2005 fiscal year, its total revenue rose to $4.5 billion. eBay (Research)'s stock rose $1.20 to $92.56 in after-hours trading, according to INET, after falling about 1 percent during regular trading on Nasdaq.1 At the end of the 1st quarter of 2006, eBay reported having 192.2 million registered users and new listings that totaled a record of 575.4 million, 31% and 33% increases over the 147.1 million and 431.8 million reported the previous year, respectively.2 eBay has also expanded to Australia, Austria, Belgium, Canada, China, France, Germany, Hong Kong, India, Ireland, Italy, Latin America (through its investment MercadoLibre.com), Malaysia, the Netherlands, New Zealand, Poland, the Philippines, Singapore, South Korea, Spain, Sweden, Switzerland, Taiwan, the United Kingdom, and the United States.

To handle the large volumes of users and transactions, eBay has chosen to build their company, not on strict regulations and hard-to-obtain membership, but on trust and community. It is these values that enabled it to become a success in the market and it is intent on meeting its company goal through five basic values3:

• We believe people are basically good.
• We believe everyone has something to contribute.
• We believe that an honest, open environment can bring out the best in people.
• We recognize and respect everyone as a unique individual.
• We encourage you to treat others the way you want to be treated.

In order to help stay true to these values, eBay has implemented the Feedback System to better ensure positive business transactions and facilitate trust among users. With the growth in online business, users of online commerce sites have come to rely heavily on the ratings and comments of sellers, vendors, and manufacturers given by users who have previously had transactions with them.

The feedback system is a great concept, with good policies and extensive system development. The very nature of such a service implies that it is a reliable way to evaluate whether a transaction with an individual or small business is worth your time, energy, and money. Feedback, therefore, is a key component for building an individual’s online reputation. It is the most important aspect of your reputation, because it is composed of comments and ratings by people who have traded with you.

But just really how effective is eBay’s feedback system when it comes to building real trust and community among members? Theoretically, such a system should make frauds and scams nonexistent. In reality, there are not. Although the feedback system is useful in many ways, is it really as reliable as so many people claim it is?

This project is aimed to research how effective eBay’s feedback really is.

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