eBay 1999 Annual Report Download - page 25

(1) Includes the results of operations for the Company’s predecessor sole proprietorship from September 1995
to December 1995. The sole proprietorship had no revenues and insignificant expenses prior to January 1,
1996.
(2) See Note 2 of Notes to Consolidated Financial Statements for a description of the method used to compute
basic and diluted net income per share, respectively.
(3) Represents the aggregate sales prices of all goods for which an auction was successfully concluded
(i.e., there was at least one bid above the seller’s specified minimum price or reserve price, whichever is
higher).
Item 7: Management’s Discussion and Analysis of Financial Condition and Results of Operations
Overview
eBay pioneered online personal trading by developing a Web-based community in which buyers and sellers
are brought together in an efficient and entertaining format to buy and sell almost anything. The eBay service
permits sellers to list items for sale, buyers to bid on items of interest and all eBay users to browse through
listed items in a fully-automated, topically-arranged, intuitive and easy-to-use online service that is available
seven-days-a-week. The Company has extended its online offerings to include regional and international trading,
autos, ‘‘premium’’ priced items and has acquired Billpoint, a provider of online billing and payment solutions.
During 1999 eBay also expanded into the traditional auction business with its acquisitions of Butterfield &
Butterfield and Kruse International.
Substantially all of the Company’s revenues come from fees and commissions associated with online and
offline trading services. Online revenue is derived from placement and success fees paid by sellers as eBay does
not charge fees to buyers. Sellers pay a nominal placement fee and by paying additional fees, sellers can have
items featured in various ways. Sellers also pay a success fee based on the final purchase price. To date, online
advertising on the eBay website and online payment solutions provided by Billpoint have not made significant
contributions to net revenues although the Company expects both of these sources of revenue to increase in the
future. Offline revenue is derived from a variety of sources including sellers’ commissions, buyers’ premiums,
bidder registration fees, and auction related services including appraisal and authentication. eBay expects that
the online business, including the Billpoint service, will continue to drive the majority of revenue growth in the
foreseeable future.
Acquisitions
Butterfield & Butterfield
On May 28, 1999, eBay acquired Butterfield & Butterfield Auctioneers Corporation, a Delaware corporation
and all affiliated entities under common control including: Butterfield Credit Corporation Inc., 111 Potrero
Partners, LLC and HBJ Partners, LLC (collectively ‘‘B&B’’ or the ‘‘B&B Companies’’). The aggregate
consideration exchanged for the merger was 1,327,370 shares of eBay common stock. The merger has been
accounted for as a pooling of interests. In April 1999, B&B withdrew its registration statement for its initial
public offering. Accordingly, in the second quarter of 1999, the Company recorded a charge of approximately
$2.6 million related to the costs of the withdrawn offering. Such amounts are included in merger related costs on
the consolidated statement of income.
Kruse International
On May 18, 1999, eBay acquired Kruse, Inc. (d/b/a Kruse International) and all affiliated entities under
common control including; Auburn Cordage, Inc., ACD Auto Sales, Inc., Reppert School of Auctioneering, Inc.
and Classic Advertising & Promotions, Inc., each an Indiana corporation (collectively, ‘‘Kruse’’ or the ‘‘Kruse
Companies’’). Kruse International was founded in 1971 and operated as a sole proprietorship until it was
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