January 3, 2005, 12:00 AM

Out of the Skunkworks

How Holly MacDonald-Korth engineered the launch of Overstock Auctions in less than a year.

Determined do-it-yourselfers have been known to build anything from treehouses to airplanes, given the desire, a willingness to educate themselves about the task, and a certain fearlessness about plunging into the unknown.

The same formula works for building a business, too. That explains how Holly MacDonald-Korth, marketing analyst and self-educated IT whiz, engineered the launch of the recently-debuted Overstock Auctions at Overstock.com Inc. in less than a year.

‘I love auctions’

“I love auctions,” says MacDonald-Korth, who recently was appointed vice president of auctions at Overture after guiding auctions from their skunkworks beginnings in a corner of the company’s warehouse to fully-realized site that links to Overstock.com’s home page. With both enthusiasm and smarts, the 29-year-old MacDonald-Korth has been such a quick study that Overstock.com CEO Patrick Byrne has called her the company’s “secret weapon.” It’s one reason he recruited her from a job as analyst with the Federal Reserve when Overstock Auctions were still nothing more than an idea with no timeline attached.

It was a major segue from MacDonald-Korth’s original plan. “I thought I was going to work on Wall Street,” says the Detroit-area native, who graduated with a degree in business administration from the University of Miami in 1999 after taking time off to work with her father at his investment banking firm.

After interviewing with a few investment banks post-college, she instead opted for the Fed and a position with the agency’s Board of Governors. New York was still on MacDonald-Korth’s to-do list, however, and when she put out feelers for a new job more than a year later, she re-connected with Byrne. They’d met previously through friends while she was still at the University of Miami, once spending an evening at the unlikely venue of a Miami nightclub talking economics. After a day and half of interviews in New York, MacDonald-Korth was sold on Overstock, its business model and its prospects. Wall-Street’s loss was to be Overstock’s gain: MacDonald-Korth left Washington D.C. for Overstock’s Utah headquarters four years ago and has been there ever since.

A niche

Byrne’s frequent habit has been to hire people whom he believes will contribute, then let them find their own niche in the company, and MacDonald-Korth was no exception. “I was hired to come in and see where I fell,” she says. Because her job at the Fed had been data-intensive, she initially landed as an analyst in the marketing department, where she set about establishing marketing metrics for Overstock.com. In working with online analytics, she began to develop a knowledge of IT systems and eventually moved to Overstock’s IT department. Soon after she arrived there to solve a minor business problem handed off to IT to resolve, MacDonald-Korth personally wrote an application to fix it, using basic scripting language she’d learned at the Fed.

That got her a job offer within IT as an in-house programmer-if she’d teach herself the programming language Overstock used. Not a problem: “I went out and bought a book about it, read it, got one assignment and did it, and then I got more, and that’s how I became a programmer,” she says. Within a year, she took that knowledge back to the marketing department and a job as marketing director. Responsible for handling Overstock’s portal advertising deals, she managed the metrics, helping to figure how to make the ad programs profitable, and in the process helped move the operations of the marketing department onto a more scientific basis.

Overstock Auctions started to take shape in the late fall of 2003. A career path discussion with Byrne coincided with his sense that the time was right to move auctions at Overstock off the back burner. A regular eBay shopper and, like Byrne, an admirer of eBay’s business model, MacDonald-Korth saw opportunities to differentiate Overstock Auctions from eBay’s offer. She lobbied for and got the job of building the auction business from the ground up.

Quitting the marketing department, she set up shop with a handful of other Overstock staffers in a corner of the company’s warehouse. Familiar with online auctions as a buyer, her first priority in developing Overstock auctions was learning how to sell online. She and the team moved desks, shelves, and most of any merchandise returned to Overstock by customers to their warehouse office and quietly started selling the items on eBay, under MacDonald-Korth’s personal handle. “We started this business on eBay just like someone probably would start it in their garage. I really wanted to understand all the problems a small business would face,” she says.

Co-existence

Within four months, the experiment had created an eBay power seller and was bringing in revenues of about $30,000 per week. In February 2004, MacDonald-Korth and Sam Peterson, Overstock Auctions CTO, used that experience to begin writing the requirements for building the auction site. To expedite their time to market, they secured an outsourced development team for the initial programming, eventually hiring developers in house to help finish the job.

Overstock Auctions debuted in September, with the strategy of giving online buyers and sellers an alternative to the auction space’s dominant player. “Our goal is not to get people to leave eBay, but to look at us too,” says MacDonald-Korth. “Our other goal is to get people who haven’t been auction customers to become auction customers.”

To address both of those objectives, Overstock Auctions seeks to leverage synergies it believes it shares with eBay-a degree of overlap between online users who shop Overstock.com and those who shop eBay-while at the same time taking care to differentiate itself from eBay on a number of significant points. For example, it offers listing fees that it says are 30% lower than eBay’s, and it offers discounts on listing fees for volume sellers, which eBay does not.

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