JUST BEFORE MEG WHITMAN TOOK OVER

as eBay's chief executive in 1998, the staff games of Nerf-ball soccer were ended: They had to put her cubicle somewhere. The two-and-a-half-year-old online auction site had 50 employees and revenue of $6 million in the first quarter of that year. Whitman still works in a cubicle, as do all eBay executives. But she's now a billionaire, and the company has 9,000 workers. Quarterly sales exceed $1 billion, and the company's market value of $50 billion rivals that of Merrill Lynch.

Yet Wall Street has punished eBay this year, sending its shares down 37 percent, to a recent $37, as revenue growth from online auctions has slowed to an annual rate of "only" 19 percent in the maturing U.S. market. To promote growth, eBay is venturing into new business and aggressively expanding its operations overseas, with a particular eye on China's 100 million Internet users. Whitman's modest goal: "to revolutionize trade on a global scale."

Despite her buttoned-down resume Harvard MBA; Bain & Co. consultant; marketing executive at Procter & Gamble, Hasbro and Disney Whitman has managed to preserve much of the zany dot-com ethos from eBay's utopian early days. Conference rooms have names like Hula Hoop and Mr. Potato Head, and while the indoor soccer field is gone, employees can play Foosball and Pac-Man at the office. Whitman even gamely posed with a photo of a gnarled Doritos chip that one eBay seller claimed looked like her. SmartMoney articles editor Jack Otter caught up with Whitman on eBay's San Jose, Calif., campus.

SmartMoney: EBay is the dominant Internet auction service, and as you add users around the world, you become increasingly attractive to shady characters. What are you doing to combat fraud?

Meg Whitman: It is core to our company to have a safe and well-lit place to do business. Trust is at the heart of the eBay marketplace. So we work very hard to keep the bad guys off the site. Well over 1,000 people at eBay, of our 9,000, work in the trust and safety area. Of course, the No. 1 fraud-fighting vehicle is our feedback, where buyers and sellers rate each other. It was the initial trust-based mechanism on eBay, and it still is. And we run a number of fraud models, not unlike the credit card companies, to identify listings that could potentially be fraudulent and get them off the site before a transaction closes.

SM: What sorts of things tip you off?

MW: It varies by category. But obviously, if you're a brand-new seller with little feedback, with a high-value item, we want to look at that more carefully than we would look at someone with 10,000 positive feedback points, who'd been on the site for four years, who'd sold hundreds of high-value items.

SM: What have you personally sold on eBay?

MW: Mostly I sell things that my children have outgrown. Sporting equipment, clothes, things like that things we no longer need in the house.

SM: You seem to go further than most CEOs when it comes to serving your customers.

MW: It's not actually the traditional company customer relationship. It's a partnership where we are building something together. Every employee knows that and understands that at a very instinctual level and thinks all the time how do we build a better site to empower both buyers and sellers and help them be successful doing what they love? The tagline for our advertising in the United States is "The Power of All of Us," and that's fundamentally the way we think about our community of users.

SM: At eBay you don't have annual reviews, you have quarterly reviews. And bonuses are paid every three months. Why?

MW: It's a legacy from the earliest days of this company. Our environment changes incredibly rapidly, the opportunities change incredibly rapidly, and sometimes, our operating style and priorities have to change quite rapidly. The senior executives get half their bonus on a quarterly basis, half on an annual basis, because things change so quickly and we wanted to position the company to be able to respond.

SM: What have you learned at eBay that could be applied at other companies?

MW: Many companies operate from more of a command-and-control environment they decide what's going to happen at headquarters and have the organization execute. That doesn't work here because it's the community of users who really have control.

So we enable, not direct. We think of our customers as people, not wallets. And that has implications for how we run the company. We partner with our customers and let them take the company where they think it's best utilized.

The fact that used cars is our largest category is a good example. We would not have sat in a conference room and said, "Hey, how about used cars?" So what can be learned that is extensible to other companies is [to ask] what are your customers doing with your products that maybe you didn't anticipate that they would do? How do you think of your customers as your research and development lab, as opposed to having an R&D lab at headquarters?