eBay 1999 Annual Report Download - page 18

•community cohesion and interaction;
•system reliability;
•customer service;
•reliability of delivery and payment by users;
•brand recognition;
•website convenience and accessibility;
•level of service fees; and
•quality of search tools.
Some current and potential competitors have longer company operating histories, larger customer bases and
greater brand recognition in other business and Internet markets than eBay does. Some of these competitors also
have significantly greater financial, marketing, technical and other resources. Other online trading services may
be acquired by, receive investments from or enter into other commercial relationships with larger, well
established and well financed companies. As a result, some of the Company’s competitors with other revenue
sources may be able to devote more resources to marketing and promotional campaigns, adopt more aggressive
pricing policies and devote substantially more resources to website and systems development than the Company
is able to do. Increased competition may result in reduced operating margins, loss of market share and diminished
value of the eBay brand. Some of the Company’s competitors have offered services for free and others may do
this as well. The Company may be unable to compete successfully against current and future competitors.
In order to respond to changes in the competitive environment, the Company may, from time to time, make
pricing, service or marketing decisions or acquisitions that could harm the business. For example, the Company
implemented an insurance program that generally insures items up to a value of $200, with a $25 deductible, for
users with a non-negative feedback rating at no cost to the user. New technologies may increase the competitive
pressures by enabling the Company’s competitors to offer a lower cost service. Some Web-based applications
that direct Internet traffic to certain websites may channel users to trading services that compete with the
Company.
Although the Company has established Internet traffic arrangements with several large online services and
search engine companies, these arrangements may not be renewed on commercially reasonable terms. Even if
these arrangements are renewed, they may not result in increased usage of the eBay service. In addition,
companies that control access to transactions through network access or Web browsers could promote the
Company’s competitors or charge eBay substantial fees for inclusion.
The land-based auction business is intensely competitive. B&B competes with two larger and better known
auction companies, Sotheby’s Holdings, Inc. and Christie’s International plc, as well as numerous regional
auction companies. To the extent that these companies increase their focus on the middle market properties that
form the core of B&B’s business, its business may suffer. Kruse is subject to competition from numerous regional
competitors. In addition, competition with Internet based auctions may harm the land-based auction business.
Although Billpoint’s business is new, several new companies are beginning to enter this market and large
companies, including banks and credit card companies, may become competitors.
Issues Related to the Listing or Sale by Users of Unlawful Items
The law relating to the liability of providers of online services for the activities of their users on their service
is currently unsettled. The Company is aware that certain goods, such as firearms, other weapons, adult material,
tobacco products, alcohol and other goods that may be subject to regulation by local, state or federal authorities,
have been listed and traded on its service. The Company may be unable to prevent the sale of unlawful goods,
or the sale of goods in an unlawful manner, by users of its service, and the Company may be subject to
allegations of civil or criminal liability for unlawful activities carried out by users through its service. In order to
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