eBay 1999 Annual Report Download - page 40

Several states have proposed legislation that would limit the uses of personal user information gathered
online or require online services to establish privacy policies. The Federal Trade Commission also has recently
settled proceedings regarding the manner in which personal information is collected from users and provided to
third parties. Changes to existing laws or the passage of new laws intended to address these issues could directly
affect the way we do business or could create uncertainty in the marketplace. This could reduce demand for our
services, increase the cost of doing business as a result of litigation costs or increased service delivery costs, or
otherwise harm our business. In addition, because our services are accessible worldwide, and we facilitate sales
of goods to users worldwide, foreign jurisdictions may claim that we are required to comply with their laws. As
we expand our international activities, we will become obligated to comply with the laws of the countries in
which we operate. Compliance may be more costly or may require us to change our business practices or restrict
our service offerings relative to those in the United States. Our failure to comply with foreign laws could subject
us to penalties ranging from fines to bans on our ability to offer our services.
In the United States, companies are required to qualify as foreign corporations in states where they are
conducting business. As an Internet company, it is unclear in which states we are actually conducting business.
Our failure to qualify as a foreign corporation in a jurisdiction where we are required to do so could subject us
to taxes and penalties for the failure to qualify and could result in our inability to enforce contracts in those
jurisdictions. Any new legislation or regulation, or the application of laws or regulations from jurisdictions whose
laws do not currently apply to our business, could harm our business.
Our business has been seasonal
Our results of operations historically have been somewhat seasonal in nature because many of our users
reduce their activities on our website during the Thanksgiving and Christmas holidays and with the onset of good
weather. Both B&B and Kruse have significant quarter to quarter variations in their results of operations
depending on the timing of auctions and the availability of high quality items from large collections and estates.
B&B typically has its best operating results in the traditional fall and spring auction seasons and has historically
incurred operating losses in the first and third quarters. Kruse typically sees a seasonal peak in operations in the
third quarter. Seasonal or cyclical variations in our business may become more pronounced over time and may
harm our results of operations in the future.
We are dependent on the continued growth of online commerce
The business of selling goods over the Internet, particularly through personal trading, is new and dynamic.
Our future net revenues and profits will be substantially dependent upon the widespread acceptance of the
Internet and online services as a medium for commerce by consumers. Rapid growth in the use of and interest in
the Internet and online services is a recent phenomenon. This acceptance and use may not continue. Even if the
Internet is accepted, concerns about fraud, privacy and other problems may mean that a sufficiently broad base
of consumers will not adopt the Internet as a medium of commerce. In particular, our website requires users to
make publicly available their e-mail addresses and other personal information that some potential users may be
unwilling to provide. These concerns may increase as additional publicity over privacy issues on eBay or
generally over the Internet increase. Market acceptance for recently introduced services and products over the
Internet is highly uncertain, and there are few proven services and products. In order to expand our user base,
we must appeal to and acquire consumers who historically have used traditional means of commerce to purchase
goods.
There are many risks associated with our international operations
We are expanding internationally. We recently acquired alando, a leading online German personal trading
platform, and began operations in the United Kingdom and, through a joint venture, in Australia. In February
2000, we further expanded into Japan. Expansion into international markets will require management attention
and resources. We have limited experience in localizing our service to conform to local cultures, standards and
policies. We may have to compete with local companies who understand the local market better than we do. We
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