eBay Inc. — 2009
In August 2009, eBay Inc. formed a partnership with General Motors enabling hundreds of GM dealers in California to help consumers negotiate purchase of new GM cars and trucks through the eBay online marketplace. Nearly all of California’s 250 GM dealers took part in the program so consumers could visit Web pages like gm.ebay.com and chevy.ebay.com to browse new 2008 and 2009 GM vehicles, ask dealers questions, and figure out financ-ing. This program marked a shift for San Jose, California-based eBay, since most of the vehicles sold on eBay Motors—a site that sells various types of vehicles and auto parts— had historically been used.
For the second quarter of 2009, eBay’s profit fell 29 percent and revenue declined 4 percent as the company continued its turnaround strategy in a harsh climate for consumer spending. These weak results were, however, better than analysts expected. For that quarter, eBay reported nice growth in both their PayPal and Skype business segments, which offset decline in their Marketplaces business segment. EBay also that quarter announced they would spin off and make an initial public offering of their Skype business segment in the beginning of year 2010.
How did the idea of selling practically anything to anyone, anytime, anywhere start? Surprisingly, it all began with Pez candy! One evening in September 1995, Pierre Omidyar, the founder of eBay, and his wife were discussing their desire to contact other Pez collectors. To solve the problem, Omidyar created an online auction in the form of a sole proprietorship business. As a result, eBay was created over the Labor Day weekend by Pierre, a computer programmer, who devised a code that enabled and ran the eBay auction Web site from his home computer. Later in May 1996, eBay was incorporated in California and became public on September 24, 1998. The first eBay auction was also conducted on Labor Day. As of 2008, eBay has a 14 percent share of global e-commerce with 86.3 million active users.
EBay, the first virtual online business community, empowers entrepreneurial indi-viduals to become e-commerce business owners. EBay.com offers a sense of community to buyers and sellers that is sustained by communication and high transaction rates on a wide selection of goods/services (eBay.com, 2006). EBay’s popularity is due to the value offered to its users. EBay provides a “faster, easier, safer online commerce experience” (eBay, 2006, p. 7). EBay’s global networked community of buyers and sellers interact 24/7 in a secure and trusted global marketplace. E-commerce is supported by eBay’s proprietary Skype VoIP technology, which allows free telephone calls using a broadband Internet con-nection to any telephone number. Skype is available in 28 languages in over 225 countries (eBay, 2006). EBay’s e-commerce platform also provides full support for the buying process (registration, bidding, management of outbids, item listing, and transaction close), community bulletins, chat, a proprietary product search engine, purchase protection pro-grams, customer support, value added services for auction users, a personal home page that includes tailored information, and fully automated merchant services. EBay’s success is sustained through communication and trust (eBay 2006).
EBay Inc. encompasses eBay.com, the online marketplace, PayPal, which refers to the online payments platform, and Skype, the Voice over Internet Protocol (VoIP) offered by eBay’s subsidiary Skype Technologies S.A. Corporate revenues are earned primarily from three business segments: (1) Marketplaces, (2) Payments, and (3) Communications. The Marketplaces segment generates revenues from listings and fees paid by sellers; the Payments segment revenues are generated from fees paid by merchants for payment process-ing services through PayPal and Bill Me Later. The Communications segment generates usage revenues from Skype VoIP for connection to traditional fixed and mobile telephones under eBay’s subsidiary Skype Technologies S.A. Communications fees are assessed either on a subscription basis or per minute charge for “SkypeOut minutes.” Additional revenues are also earned from advertising and revenue-sharing contracts with third parties that provide transaction services to eBay and PayPal account users.
In 2008, eBay.com generated approximately $59.7 billion in gross merchandise revenues with consumer electronics accounting for the largest percentage of trade at $6.0 billion or 17 percent, as indicated in Exhibit 1. PayPal earned approximately $30.4 billion of net total payment revenues directly from eBay.com transactions, which represented approxi-mately 51 percent of PayPal’s net Total Payment Volume during 2008 and 9 percent of global e-commerce transactions revenue (eBay.com 2009a). Why is eBay so popular?
The eBay Marketplace
EBay transformed the Internet and the way many of us shop and do business worldwide. EBay’s marketplace, or “marketspace,” is an online virtual trading platform for the sale of goods and services by a community of users that comprises individual buyers and sellers, as well as small business owners. EBay provides the virtual marketplace auction where the market determines the price of items sold. EBay offers millions of items for trade through auction-style and fixed-price trading in 39 markets and boasts 86.3 million active global users as of 2008. In 2007, eBay sold nearly $60 billion goods, which equates to worldwide eBay users trading more than $1,900 worth in goods every second. As of December 31, 2008, eBay Inc. employed approximately 16,200 people.
EXHIBIT 1 eBay Gross Merchandise Volume by Category eBay
Annualized 4th Quarter 2008 Gross Merchandise Volume by Category
Consumer Electronics $6.90 17.51%
Computers $3.60 9.14%
Clothing & Accessories $5.00 12.69%
Home & Garden $3.80 9.64%
Collectibles $2.40 6.09%
Books/Music/Movies $2.60 6.60%
Sports $2.60 6.60%
Business & Industrial $2.10 5.33%
Toys $2.40 6.09%
Jewelry & Watches $2.20 5.58%
Camera & Photo $1.60 4.06%
Antiques & Art $1.20 3.05%
Coins & Stamps $1.20 3.05%
Tickets & Travel $1.80 4.57%
By 2009, eBay has attained customized local sites across four major areas of the world in the following regional markets:
World Market Regional Markets
Asia Pacific Australia, China, Hong Kong, India, Malaysia, New Zealand, Philippines, Singapore, South Korea, Taiwan
Europe Austria, Belgium, France, Germany, Ireland, Italy, Netherlands, Poland, Spain, Sweden, Switzerland, United Kingdom
North America Canada, United States
Latin America Argentina, Brazil, Chile, Colombia, Ecuador, Mexico, Peru, Uruguay and Venezuela, Costa Rica, the Dominican Republic, and Panama
Vision and Mission
What is eBay’s plan? Although eBay Inc. does not have a formal mission or vision state-ment, the following statements can be found in eBay’s yearly annual reports.
We intend to achieve our mission of creating the world’s online marketplace by improving and expanding across three main areas: categories, formats, and geogra-phies (2005 Annual Report)
We intend to achieve our mission of creating the world’s leading e-commerce franchise by building upon our core Marketplaces business and building our adjacent businesses. (2006 Annual Report)
We intend to continue to work toward our mission of creating the world’s lead-ing ecommerce franchise by investlead-ing in our core Marketplaces segment and continu-ing to build our adjacent Marketplaces businesses. (2007 Annual Report)
eBay Inc. (EBAY)
EBay common stock is traded on the Nasdaq Global Select Market exchange under the ticker symbol EBAY. As of February 11, 2009, there were approximately 4,800 common stock owners. To date, eBay has never paid a cash dividend on stock and specifically states that there are no anticipated cash dividends forthcoming in the future. The stock price for 2005 through 2009 ranged from a high around $60 per share to a low near $10. Year-end stock price values were $58.17 at 2004, $43.22 as of 2005, $30.07 by 2006, $33.19 in 2007, and 13.96 at the end of the calendar year 2008.
Business Segment I: Marketplaces, Platforms, and ServicesEBay Inc.’s Marketplaces platforms and services segment includes eBay.com, StubHub, Online Classifieds, Online Advertising, Shopping.com, and Rent.com.
Buyers and sellers enjoy trading among a wide selection of goods and services in a secure, trusted, and efficient commerce environment. Listings of items for sale have exceeded 140.0 million per day. The key to success is eBay’s user support, such as announcements, bulletin boards, customer support, personal pages, and more. EBay’s Marketplaces plat-form brings buyers and sellers together through fully automated online Web sites 24/7. As of December 2008, approximately 516,000 online storefronts were listed in locations across the globe. The Marketplaces platform is the core online commerce platform eBay.com. Other marketplaces platforms consist of classified Web sites, StubHub, Shopping.com, Half.com, and Rent.com.
A Trusted Online Community
To facilitate trading with unknown partners on the Internet, eBay Inc. provides a trusted and safe trading environment by offering the following services: Feedback Forum, Safe Harbor Program, Verified Rights Owner Program, Customer Support, Value-Added Tools and Services, and Loyalty Programs.
Feedback Forumprovides feedback, comments, and ratings on other users that can be viewed by potential users when considering a purchase. Information is recorded up to 12 months and provides color-coded star ratings. EBay recently adopted a policy that no longer permits sellers to leave negative feedback. The SafeHarbor Program provides guidelines for resolving disputes among parties. Complaints are investigated and offenders may receive warnings that are posted to users. Violators may be suspended from either bid-ding on or listing items for sale. The Verified Rights Owner Program enforces intellectual property owners’ rights by allowing owners to request the removal of listings that contain infringements. This program protects intellectual property and reduces counterfeit trade. EBay has also expanded specific Customer Support efforts, such as online self-help fea-tures to increase efficiency of trades. EBay offers both “pre-trade” and “post-trade”
Value-Added Tools and Servicesto facilitate faster and safe trading and collections. Examples of value added service tools include a calculator, shipping and UPS labels, PayPal, and so on. Lastly, Loyalty Programs that provide cash back buyer rewards coupons were selectively distributed to recognize large buyers to sustain customer loyalty.
StubHub is a leading U.S. ticket marketplace that allows users to buy and sell tickets to sporting, events, theater, and other entertainment events.
EBay Inc. also offers online classified advertisements to members in hundreds of cities and regions of the world, such as the Netherlands, Germany, and so on. Online classifieds help people meet, share ideas, and offer goods/services at a local city or regional level.
Online advertising, mailing, and other services are offered to eBay’s strategic part-ners and members. In 2008, eBay launched an advertising service that enables third parties to advertise their eBay listings and eBay stores on eBay Web sites.
Acquired by eBay Inc. in 2005, Shopping.com is an online comparison shopping site that offers comparisons on millions of products and product reviews. Shopping.com is available in the United States, the United Kingdom, France, Germany, and Australia. Revenue is earned from advertisers and retailers who pay a fee for directing shoppers to their own sites.
Rent.com, acquired by eBay in 2005, is the most visited online apartment listing ser-vice with over 20,000 listings in the United States. Rent.com lists apartment availability, rental costs, virtual tours, roommate searches, and more. Revenue is earned from landlords who pay a fee for renters who find apartments through Rent.com.
EBay plans to expand the Marketplaces segment by focusing on customers to improve the buyer’s experience and reduce seller costs by enhancing products and ser-vices, improving online trust and safety, enhancing customer support, extending product offerings geographically and into new categories, and developing retention strategies.
Business Segment II: Payments
EBay’s Payments segment is composed of PayPal and Bill Me Later transaction services.
PayPalwas founded in December 1998 and acquired by eBay Inc. in 2002. PayPal is a recog-nized global leader in online payment solutions with 70 million active accounts. PayPal gener-ated $60 billion in net total payment volume in 2008, an increase of 27 percent over 2007. PayPal has captured 15 percent of U.S. e-commerce and 9 percent of global e-commerce trade. International business processing accounted for 45 percent of PayPal’s total revenues for 2008. Higher fees earned on international transactions have provided eBay with higher rev-enues and gross margins in comparison to revrev-enues from domestic transactions.
Bill Me Later,acquired by eBay Inc. in 2008, offers consumers instant credit at the point of sale through over 1000 online U.S. merchants. Retailers that offer the Bill Me Later service include: Borders, Continental Airlines, Fujitsu, JetBlue, Overstock, QVC, Toshiba, Toys “R” Us, and Walmart.com. Because Bill Me Later is not a chartered financial institution, an arrangement with CIT Bank allows Bill Me Later to extend credit to customers. When a con-sumer makes a purchase on credit, CIT Bank initiates a concon-sumer loan at the point of sale. Bill Me Later then purchases the consumer’s loan from CIT Bank. Bill Me Later earns revenues from interest on the outstanding balances, late fees, and transaction fees.
EBay’s management seeks to become the number-one online payment solution. EBay plans to focus on improving the customer experience, enhancing security, expanding product offerings, enhancing buyer and seller protection programs, adding innovative features, and expanding its sales channels. Global expansion and increased revenues are to be gained by integrating PayPal with eBay.com listings and other Marketplaces businesses. Expansion into international markets and more currencies is expected to improve the ease and efficiency of cross-border transactions and grow both the Marketplaces and Payments segments.
Business Segment III: Communications
The Communications segment is composed of Skype, which was founded in 2003 and acquired by eBay in 2005. Skype is the world’s fastest-growing Internet communication software platform. As of 2008, Skype had approximately 405.3 million registered users worldwide. Skype headquarters are located in Luxembourg, with global offices in Europe, the United States, and Asia. EBay’s proprietary Skype technology has been downloaded more than a billion times. Why? Skype allows buyer/seller communications 24/7 in a secure and trusted community that is supported by free unlimited Internet voice and video communication to over 225 countries in 28 languages. Interestingly, nearly 11 million Skype downloads are to mobile devices.
Skype revenue is earned through premium services such as making/receiving domes-tic or international calls to and from landline and mobile phones, voicemail, call forward-ing, and personalization, such as ringtones. As of December 2008, Skype had acquired 370 million users, a 51 percent growth over the same time a year ago. Registered sub-scribers are expected to reach 500 million by 2012 and revenues are anticipated to double by 2011. In 2008, Skype users logged approximately 16 billion minutes in a single quarter, an increase of 54 percent from the prior year. Large volumes are also easily supported by Skype software. At any given point in time there may be 300,000 simultaneous calls and over 100,000 information queries per second. Overall, Skype accounted for 6 percent of international worldwide calling minutes in 2007. Business calls represent 30 percent of current Skype usage and 25 percent of calls also use video technology.
EBay Inc. plans to implement a customer management program that emphasizes acquiring new users and upgrading current Skype users to premium products. Future plans include expanding Skype’s desktop product to mobile user devices and other Web-based devices. Plans include also offering solutions to a more diverse business user and enhanc-ing the Skype’s current platform for greater revenues because the worldwide communica-tions market is expected to grow by 5.5 percent annually with U.S. Web conferencing expected to grow 14.1 percent from 2008 through 2011 (eBay.com 2009). EBay’s prior expenditures were focused on traditional wired routes; however, 50 percent of expendi-tures are now in the wireless telecommunications sector.
The success of eBay and Amazon are built on similar customer-centric entrepreneur-ial business models that focus on customer-driven value creation. Examination of the strategies, business models, and customer benefits of eBay and Amazon reveals a common emphasis on relationship value and customer-focused solutions. The focus of eBay’s busi-ness strategy is to compete on price, product selection, and services. However, growth of eBay has slowed and market share has declined in some segments. The Payments segment competes against other online payment services and offline payment methods, such as cash, check, money order, and established credit card merchants. The Communications segment faces competition from local telephone or cable companies and other VoIP providers. Furthermore, eBay anticipates the need for substantial resource investments in technology and marketing in order to remain competitive.
Highlight: Marketplaces Competition
Competition is expected to increase in the future because barriers to entry in this segment are low and new online sites can be launched at a nominal cost. Competitors include tradi-tional department, warehouse, discount, and general merchandise stores, emerging online retailers, online classified services, and other offline and online home shopping networks such as Wal-Mart, Target, Sears, Macy’s, J.C. Penney, Costco, Office Depot, Staples, OfficeMax, Sam’s Club, Amazon.com, Buy.com, AOL.com, Yahoo! Shopping, MSN, QVC, and Home Shopping Network. Companies such as Google Base and Microsoft Live Expo also offer similar online services and classified ads.
Highlight: Skype Competition
Competition is intense in communications services and subject to rapid technological change. Traditional communications companies offer bundled services, such as cable or satellite television, along with internet and voice communications services. The poten-tial also exists for Skype technology to become obsolete. Lastly, the resources of exist-ing competitor firms are larger and as a result, competitors could weather an economic downturn.
Amazon, a leading online retailer, reported net revenues of $19.2 billion as of year end 2008. From 2007 to 2008, sales grew at a rate of 29 percent (as indicated in Exhibit 2), even in a declining economic environment. Amazon has initiated alliances with partners EXHIBIT 2 Amazon Gross Profit by Region
Year Ended December 31
Gross Profit by Region: 2006 2007 2008
(in millions) Gross Profit:
North America $ 1,525 $ 2,031 $ 2,495
International 931 1,322 1,775
Consolidated $ 2,456 $ 3,353 $ 4,270
Gross Profit Growth Rate:
North America 20% 33% 23% International 21 42 34 Consolidated 20 37 27 Gross Margin: North America 26.0% 25.1% 24.4% International 19.2 19.6 19.9 Consolidated 22.9 22.6 22.3
to gains sales by referring customers to Amazon.com through several other online mar-keting channels such as: (1) syndicated store programs, (2) sponsored searches, (3) portal advertising, and (4) e-mail campaigns (Amazon.com, 2006, p. 37). Amazon also gener-ates fees from online auctions and web hosting for business e-commerce. Amazon stgener-ates their success is based on: the ability to attract buyers and sellers; the volume of transac-tions, price, and selection of goods; customer service; brand recognition, community cohesion, interaction, and size; system reliability; delivery and payment reliability; Web site convenience and accessibility; level of service fees; and quality of search tools (eBay, 2006).
Weak global economic conditions, in addition to the mortgage and worldwide credit-related financial crisis, are expected to limit revenue growth, particularly in the Marketplaces segment, which is closely tied to consumer purchase patterns.
Given that eBay conducts approximately 45 percent of its business outside the United States, profitability is also affected by currency exchange rates. Specifically, PayPal uses fixed exchange rate conversions and holds assets in foreign currency denominations. If the U.S. dollar weakens against foreign currencies, transactions conducted in foreign currency denominations will increase and inflate revenues, operating expenses, and net income. Alternatively, financial measures will be negatively impacted by a rise in the value of the U.S. dollar.
In response to the weak economy, eBay undertook a 10 percent reduction in its workforce with the elimination of 1,000 jobs in 2008 and incurred $49,000 in restructuring costs. In the same year, eBay acquired Bill Me Later and announced an anticipated second acquisition of a vehicle classified ad site, eBay Motors.
Bill Me Later Risk
Although Bill Me Later accounts are funded by CIT Bank, Bill Me Later is responsible for all functions related to the account. Bill Me Later initially funds consumers’ loans using cash from business activities and a line of credit. As a result of the global financial crisis, eBay’s available line of credit was reduced. If credit availability is further reduced, Bill Me Later may not be able to extend credit to customers. Future profitability depends on the ability to manage credit while attracting new profitable consumers. EBay’s Bill Me Later has significant exposure to consumers’ potential default on loans.
Political and Legal Environment
Sales Tax and Other Taxes
EBay Inc. does not collect taxes on the sale of goods or services. However, legislation is in effect which requires collection of taxes beginning after December 31, 2010. This new legislation may cause a reduction in trading activity that would negatively affect several business segments. In addition, tax compliance will increase costs.
Long-term Contractual Obligations
EBay is involved in long-term contractual agreements with firms that provide marketing, cus-tomer support, and technology. If revenue significantly declines, eBay may not be able to meet contractual obligations. EBay recently increased its fee structure for its Marketplaces busi-ness, which may negatively impact the number of new customers and revenue from existing users. Any reduction in trading would also spillover to a reduction in PayPal revenues.
Pirated or Counterfeit Items
ruled that eBay may owe penalties from illegal listings of counterfeit and stolen goods. These events may also negatively affect eBay’s reputation. In order to halt illegal activity, eBay has indicated that it may need to invest a substantial amount of resources.
Legislation has also been proposed to prohibit sharing of certain information over the Internet, such as comments provided by customers in eBay’s Feedback Forum. This limitation would adversely affect eBay’s ability to provide a reliable and secure community that shares purchase information and aspects of trades with other members of eBay’s Marketplaces seg-ment. Furthermore, as of October 2008 certain transactions on eBay.com purchased using PayPal are protected for the full purchase price in the event that the buyer does not receive the goods. This may result in greater losses and write-offs incurred by eBay Inc.
Security Breach and Identity Theft
Breaches in data security are on the rise. EBay’s Korean subsidiary experienced a data breach that affected the majority of its 20 million users. Approximately 141,000 users have filed litigation. In Korea, courts have granted “consolation money” to plaintiffs. Significant resources are needed to upgrade security and insurance policies may not be adequate enough to cover potential losses.
Expansion of eBay both in the United States and internationally has placed a significant strain on management, operations, and financial resources. Particular areas that are strained include the following:
• Web Site Usability. Growth in the number of products and Web site features has caused the site to become less user-friendly.
• Web Site Stability. Increased volume and greater complexity requires additional expensive investments in hardware, software, and personnel.
• Customer Account Billing. Transaction-processing and revenue collection becomes more difficult as the number of transactions increase and consumers default on loans.
• Customer Support. Customer support is challenged from greater trade activity and an increased number of users.
EBay’s challenges include realizing the anticipated synergistic benefits of recent acquisi-tions and recouping goodwill costs that have inflated the purchase price of acquired busi-nesses. For example, the $1.4 billion goodwill associated with the purchase of Skype must be recouped.
EBay experienced a downward trend in revenues, ending the 2008 year with an unimpressive performance. Total net revenue for the 2008 year increased 11 percent to $8.5 billion; however, this is a decrease in prior revenue growth of 29 percent experienced from 2006 to 2007. On a positive note, eBay’s operating margin of 24 percent showed a return to the 24 percent to 32 percent range experienced over the years 2004 to 2008 after a dip to 8 percent in 2007. EBay claims that increased costs are due to greater customer support and Web site operations costs (28 percent increase), payment processing (24 percent increase) and Skype telecommunication costs (28 percent increase). Exhibit 3 shows eBay’s consolidated income statement.
With regard to segment revenues, the Marketplaces segment reported only a 4 per-cent increase in revenue growth from 2007 to 2008, as opposed to the 24 perper-cent growth from 2006 to 2007. Overall profitability was supported by other segments. The Payments segment earned a 25 percent increase in revenue over 2007, although this is a decrease in the 34 percent growth rate experienced from 2006 to 2007. The third business segment, Communications, reported strong growth of 44 percent from 2007 to 2008, albeit lower than the 96 percent growth reported from 2006 to 2007. Revenue growth details for each eBay segment are provided in Exhibit 4.
EXHIBIT 3 eBay Consolidated Income Statement
Year Ended December 31 5 Year
2006 2007 2008
of Income: (in thousands, except per share amounts)
Net revenues $ 5,969,741 $ 7,672,329 $ 8,541,261
Cost of net revenues 1,256,792 1,762,972 2,228,069
Gross profit 4,712,949 5,909,357 6,313,192
Sales and marketing 1,587,133 1,882,810 1,881,551
Product development 494,695 619,727 725,600
General and administrative 744,363 904,681 998,871
Provision for transaction
and loan losses 266,724 293,917 347,453
Amortization of acquired
intangible assets 197,078 204,104 234,916
Restructuring — — 49,119
Impairment of goodwill — 1,390,938 —
Total operating expenses 3,289,993 5,296,177 4,237,510
Income from operations 1,422,956 613,180 2,075,682
Interest and other income, net 130,017 154,271 115,919
Interest expense (5,916) (16,600) (8,037)
Income before income taxes 1,547,057 750,851 2,183,564
Provision for income taxes (421,418) (402,600) (404,090)
Net income $ 1,125,639 $ 348,251 $ 1,779,474
Net income per share:
Basic $ 0.80 $ 0.26 $ 1.37
Diluted $ 0.79 $ 0.25 $ 1.36
Weighted average shares:
Basic 1,399,251 1,358,797 1,303,454
Diluted 1,425,472 1,376,174 1,312,608
Source:eBay 10K SEC Filing; Annual Report (2009), eBay.com.
EXHIBIT 4 eBay Net Revenues by Segment and Geography (in thousands, except percent changes) Net transaction revenues
Marketplaces $ 3,864,502 21% $ 4,680,835 1% $ 4,711,057
Payments 1,401,824 31% 1,838,539 26% 2,320,495
Communications 189,110 93% 364,564 44% 525,803
Total net transaction revenues 5,455,436 26% 6,883,938 10% 7,557,355 Marketing services and other revenues
Marketplaces 469,788 45% 683,056 28% 875,694
Payments 38,706 128% 88,077 (6)% 83,174
Communications 5,811 197% 17,258 45% 25,038
EXHIBIT 5 eBay Percentage Change in Expenses for Years 2006–2008
Change from Change from
Year Ended December 31 2006 to 2007 2007 to 2008
% Change in
Expenses 2006 2007 2008 in Dollars in % in Dollars in %
2006 - 2008 (in thousands, except percentages)
Cost of net revenues $1,256,792 $1,762,972 $2,228,069 $506,180 40% $465,097 26% Sales and marketing 1,587,133 1,882,810 1,881,551 295,677 19% (1,259) (0)% Product development 494,695 619,727 725,600 125,032 25% 105,873 17% General and administrative 744,363 904,681 998,871 160,318 22% 94,190 10% Provision for transaction
and loan losses 266,724 293,917 347,453 27,193 10% 53,536 18%
Amortization of acquired intangible assets 197,078 204,104 234,916 7,026 4% 30,812 15% Restructuring — — 49,119 — — 49,119 100% Impairment of goodwill — 1,390,938 — 1,390,938 100% (1,390,938) (100)%
Interest and other
income, net 130,017 154,271 115,919 24,254 19% (38,352) (25)%
Interest expense 5,916 16,600 8,037 10,684 181% (8,563) (52)%
income taxes 421,418 402,600 404,090 (18,818) (4)% 1,490 0%
Source:eBay 10K SEC Filing; Annual Report (2009), eBay.com.
EXHIBIT 4 eBay Net Revenues by Segment and Geography (in thousands, except percent changes)—continued
Net transaction revenues
services and other revenues 514,305 53% 788,391 25% 983,906 Total net revenues $ 5,969,741 29% $ 7,672,329 11% $ 8,541,261
Net Revenues by Segment:
Marketplaces $ 4,334,290 24% $ 5,363,891 4% $ 5,586,751
Payments 1,440,530 34% 1,926,616 25% 2,403,669
Communications 194,921 96% 381,822 44% 550,841
Total net revenues $ 5,969,741 29% $ 7,672,329 11% $ 8,541,261
Net Revenues by Geography:
U.S. $ 3,108,986 20% $ 3,742,670 6% $ 3,969,482
International 2,860,755 37% 3,929,659 16% 4,571,779
Total net revenues $ 5,969,741 29% $ 7,672,329 11% $ 8,541,261
EXHIBIT 7 eBay Consolidated Balance Sheet
CONSOLIDATED BALANCE SHEET December 31, 2007 December 31, 2008
(in thousands, except par value amounts) ASSETS
Cash and cash equivalents $4,221,191 $3,188,928
Short-term investments 676,264 163,734
Accounts receivable, net 480,557 435,197
Loans receivable, net — 570,071
Funds receivable and customer accounts 1,513,578 1,467,962
Other current assets 230,915 460,698
Total current assets 7,122,505 6,286,590
Long-term investments 138,237 106,178
Property and equipment, net 1,120,452 1,198,714
Goodwill 6,257,153 7,025,398
Intangible assets, net 596,038 736,134
Other assets 131,652 239,425
Total assets $15,366,037 $15,592,439
LIABILITIES AND STOCKHOLDERS’ EQUITY Current liabilities:
Accounts payable $156,613 $170,332
Funds payable and amounts due to customers 1,513,578 1,467,962 Accrued expenses and other current liabilities 951,139 784,774
Deferred revenue and customer advances 166,495 181,596
Income taxes payable 111,754 100,423
Borrowings under credit agreement 200,000 1,000,000
Total current liabilities 3,099,579 3,705,087
Deferred and other tax liabilities, net 510,557 753,965
Other liabilities 51,299 49,529
Total liabilities 3,661,435 4,508,581
EXHIBIT 6 eBay Supplemental Operating Data on Business Segments Year Ended December 31
2006 2007 2008
(in millions) Supplemental Operating Data:
Gross merchandise volume $52,474 $59,353 $59,650
Net total payment volume $35,800 $47,470 $60,146
Registered Users 171.2 276.3 405.3
SkypeOut Minutes 4,095 5,650 8,374
Source:eBay 10K SEC Filing; Annual Report (2009), eBay.com.
EXHIBIT 7 eBay Consolidated Balance Sheet—continued
CONSOLIDATED BALANCE SHEET December 31, 2007 December 31, 2008
(in thousands, except par value amounts)
Common stock, $0.001 par value; 3,580,000 shares authorized; 1,350,219 and 1,282,025 shares
outstanding 1,458 1,470
Additional paid-in capital 8,996,303 9,585,853
Treasury stock at cost, 107,522 and 188,200 shares (3,184,981) (5,376,970)
Retained earnings 4,190,546 5,970,020
Accumulated other comprehensive income 1,701,276 903,485
Total stockholders’ equity 11,704,602 11,083,858
Total liabilities and stockholders’ equity $15,366,037 $15,592,439
Source:eBay 10K SEC Filing; Annual Report (2009), eBay.com.
For the quarter ending July 30, 2009, eBay’s Payments division reported $669.3 million in revenue, an increase of 11 percent year over year. The growth was driven by continued momentum in PayPal Merchant Services and the contribution made by Bill Me Later. EBay’s Marketplaces division reported $1.26 billion in revenue, a 14 percent year-over-year decline. The revenue drop was attributable to the impact of the stronger dollar and the lingering weak economy with high unemployment. Approximately 57 percent of Marketplaces revenue, however, came from markets outside of the United States. In eBay’s Communications seg-ment, Skype contributed $170.0 million in revenue for the quarter, representing 25 percent year-over-year growth. Skype added 37.3 million registered users during the quarter and ended the period with more than 480.5 million registered users.
The future for eBay is anything but certain. The company needs a clear strategic plan.
eBay Inc. John Donahoe President eBay Inc. Sr. VP Human Resources eBay Inc. Sr. VP Platform eBay Inc. Sr. VP & General Counsel eBay Inc. Sr. VP Corporate Communica-tions eBay Inc. Sr. VP Finance & Chief Financial Officer eBay Marketplaces President PayPal President
EXHIBIT 8 Organizational Chart