PayPal seeded its two-sided market by bidding on eBay auctions

In 1999, eBay was the obvious place for a peer-to-peer payment startup to find users, because eBay auctions were exactly the kind of stranger-to-stranger transaction that needed a payment method neither party had to trust the other for.

The standard fix for a marketplace cold start — advertise to build awareness on both sides simultaneously — is slow and expensive, and PayPal had no leverage to make eBay itself endorse or integrate the service. PayPal needed sellers to feel demand for PayPal that hadn't organically arrived yet.

PayPal's team built an automated script that crawled live eBay auctions, emailed sellers directly asking them to accept PayPal, and then placed real bids on their listings insisting on paying with PayPal — winning some of those auctions and actually paying for the items, which were later given to charity. Sellers who received a real bid conditioned on accepting PayPal experienced concrete, immediate demand for the service, not a hypothetical pitch, and started offering PayPal as an option so as not to lose out on buyers.

Scripted real bids on eBay auctions, insisting on PayPal, so sellers felt concrete demand and enabled it, seeding the market one transaction at a time.

Sellers experienced real, immediate demand from actual bids, not a pitch they could ignore.

Winning bids gave sellers a direct incentive to accept PayPal for that sale.

Once sellers set up PayPal for one sale, they kept it enabled, permanently seeding adoption.

This converted a slow two-sided awareness problem into concrete transactions, bypassing eBay's cooperation.

To break a cold start, become a real customer of the platform you're trying to grow on, manufacturing concrete demand instead of advertising abstractly.

PayPal ended 1999 with fewer than 10,000 users, passed 100,000 by the end of January 2000, crossed 1 million within a few months after that, and reached roughly 5 million users by that summer — a trajectory PayPal's own early leadership and later industry retrospectives describe as driven primarily by an embeddable payment button for sellers and a $10-per-referral cash incentive, with the eBay auction-bidding bot serving as an early, narrower tactic that seeded real seller adoption before those larger mechanisms scaled.