Alex Tew, a student from Cricklade in Wiltshire, England, conceived The Million Dollar Homepage in August 2005 when he was 21 years old. Following on from his A Levels at Sexey's School, Bruton, he was about to begin a three-year Business Management course at the University of Nottingham, and was concerned that he would be left with a student loan that could take years to repay. As a money-raising idea, Tew decided to sell a million pixels on a website for $1 each; purchasers would add their own image, logo or advertisement, and have the option of including a hyperlink to their website. Pixels were sold for US dollars rather than UK pounds; the US has a larger online population than the UK, and Tew believed more people would relate to the concept if the pixels were sold in US currency. In 2005, the pound was strong against the dollar: £1 was worth approximately $1.80, and that cost per pixel may have been too expensive for many potential buyers. Tew's setup costs were €50, which paid for the registration of the domain name and a basic web-hosting package. The website went live on 26 August 2005.
The homepage featured a Web banner with the site's name and a pixel counter displaying the number of pixels sold, a navigation bar containing nine small links to the site's internal web pages, and an empty square grid of 1,000,000 pixels divided into 10,000 100-pixel blocks. Tew promised customers that the site would remain online for five years – that is, until at least 26 August 2010.
Because individual pixels are too small to be seen easily, Pixels were sold in 100-pixel "blocks" measuring 10 × 10 pixels; the minimum price was thus $100. The first sale, three days after the site began operating, was to an online music website operated by a friend of Tew's. He bought 400 pixels in a 20 × 20 block. After two weeks, Tew's friends and family members had purchased a total of 4,700 pixels. The site was initially marketed only through word of mouth; however, after the site had made $1,000, a press release was sent out that was picked up by the BBC. The technology news website The Register featured two articles on The Million Dollar Homepage in September. By the end of the month, The Million Dollar Homepage had received $250,000 and was ranked Number 3 on Alexa Internet's list of "Movers and Shakers" behind the websites for Britney Spears and Photo District News. On 6 October, Tew reported the site received 65,000 unique visitors; it received 1465 Diggs, becoming one of the most Digged links that week. Eleven days later, the number had increased to 100,000 unique visitors. On 26 October, two months after the Million Dollar Homepage was launched, more than 500,900 pixels had been sold to 1,400 customers. By New Year's Eve, Tew reported that the site was receiving hits from 25,000 unique visitors every hour and had an Alexa Rank of 127, and that 999,000 of the 1,000,000 pixels had been sold.
On 1 January 2006, Tew announced that because the demand was so great for the last 1,000 pixels, "the most fair and logical thing" to do was auction them on eBay rather than lose "the integrity and degree of exclusivity intrinsic to the million-pixel concept" by launching a second Million Dollar Homepage. The auction lasted ten days and received 99 legitimate bids. Although bids were received for amounts as high as $160,109.99, many were either retracted by the bidders or cancelled as hoaxes. "I actually contacted the people by phone and turns out they weren't serious, which is fairly frustrating, so I removed those bidders at the last minute", said Tew. The winning bid was $38,100, placed by MillionDollarWeightLoss.com, an online store selling diet-related products. Tew remarked that he had expected the final bid amount to be higher due to the media attention.The Million Dollar Homepage made a gross total of $1,037,100 in five months. After costs, taxes, and a donation to The Prince's Trust, a charity for young people, Tew expected his net income to be $650,000–$700,000.