eBay 1999 Annual Report Download - page 33

Our failure to manage growth could harm us
We currently are experiencing a period of significant expansion in our headcount, facilities and
infrastructure and we anticipate that further expansion will be required to address potential growth in our
customer base and market opportunities. This expansion has placed, and we expect it will continue to place, a
significant strain on our management, operational and financial resources. The areas that are put under severe
strain by our rate of growth include the following:
●The Website. We must constantly add new hardware, update software and add new engineering
personnel to accommodate the increased use of our website. This has reduced our margins. If we are
unable to increase the capacity of our systems at least as fast as the growth in demand for this capacity,
our website may become unstable and may cease to operate for periods of time. We have experienced
periodic unscheduled downtime. Continued unscheduled downtime could harm our business and also
could anger users of our website and reduce future revenues.
●Customer Support. We must expand our customer support operations to accommodate the increased
number of users and transactions on our website. If we are unable to hire and successfully train
sufficient employees or contractors in this area, users of our website may have negative experiences
and current and future revenues could suffer.
●Customer Accounts. Our revenues are dependent on prompt and accurate billing processes. If we are
unable to grow our transaction processing abilities to accommodate the increasing number of
transactions that must be billed, our ability to collect revenue will be harmed.
We must continue to hire, train and manage new employees at a rapid rate. The majority of our employees
today have been with us less than one year and we expect that our rate of hiring will continue at a very high
pace. If our new hires are not good hires, or if we are unsuccessful in training and integrating these new
employees, our business may be harmed. To manage the expected growth of our operations and personnel, we
will need to improve our transaction processing, operational and financial systems, procedures and controls. Our
current and planned personnel, systems, procedures and controls may not be adequate to support our future
operations. We may be unable to hire, train, retain and manage required personnel or to identify and take
advantage of existing and potential strategic relationships and market opportunities.
We may not maintain profitability
We believe that our continued profitability will depend in large part on our ability to do the following:
●maintain sufficient transaction volume to attract buyers and sellers;
●manage the costs of our business, including the costs associated with maintaining and developing our
website, customer support and international expansion;
●increase our brand name awareness; and
●provide our customers with superior community and trading experiences.
We are investing heavily in marketing and promotion, customer support, further development of our
website, technology and operating infrastructure development. The costs of these investments have reduced our
margins and are expected to remain significant into the future. In addition, we have significant ongoing
commitments in some of these areas. As a result, we may be unable to adjust our spending rapidly enough to
compensate for any unexpected revenue shortfall, which may harm our profitability. The existence of several
larger and more established companies that are rapidly enabling online sales as well as new companies, many of
whom do not charge for transactions on their sites and others who are facilitating trading through other pricing
formats (fixed price, reverse auction, group buying, etc.) limits our ability to raise user fees in response to
declines in profitability. In addition, we are spending in advance of anticipated growth, which may also harm our
profitability. Our historic growth rates are not sustainable and we expect in the near term that our costs,
particularly those related to site operations, customer support, payments, other infrastructure and our
international, regional and premium initiatives, will continue to increase. In view of the rapidly evolving nature
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