eBay 1999 Annual Report Download - page 45

amount of traffic. If the Web continues to experience increased numbers of users, increased frequency of use or
increased bandwidth requirements, the Web infrastructure may be unable to support the demands placed on it. In
addition, the performance of the Web may be harmed by increased users or bandwidth requirements.
The Web has experienced a variety of outages and other delays as a result of damage to portions of its
infrastructure, and it could face outages and delays in the future. These outages and delays could reduce the level
of Web usage as well as the level of traffic and the processing transactions on our service. In addition, the Web
could lose its viability due to delays in the development or adoption of new standards and protocols to handle
increased levels of activity or due to increased governmental regulation. The infrastructure and complementary
products or services necessary to make the Web a viable commercial marketplace for the long term may not be
developed successfully or in a timely manner. Even if these products or services are developed, the Web may not
become a viable commercial marketplace for services such as those that we offer.
Our business is subject to online commerce security risks
A significant barrier to online commerce and communications is the secure transmission of confidential
information over public networks. Our security measures may not prevent security breaches. Our failure to
prevent security breaches could harm our business. Currently, a significant number of our users authorize us to
bill their credit card accounts directly for all transaction fees charged by us. We rely on encryption and
authentication technology licensed from third parties to provide the security and authentication technology to
effect secure transmission of confidential information, including customer credit card numbers. Advances in
computer capabilities, new discoveries in the field of cryptography, or other developments may result in a
compromise or breach of the technology used by us to protect customer transaction data. Any such compromise
of our security could harm our reputation and, therefore, our business. In addition, a party who is able to
circumvent our security measures could misappropriate proprietary information or cause interruptions in our
operations. An individual has claimed to have misappropriated some of our confidential information by breaking
into our computer system. We may need to expend significant resources to protect against security breaches or to
address problems caused by breaches. Security breaches could damage our reputation and expose us to a risk of
loss or litigation and possible liability. Our insurance policies carry low coverage limits, which may not be
adequate to reimburse us for losses caused by security breaches.
We must keep pace with rapid technological change to remain competitive
The market in which we compete is characterized by rapidly changing technology, evolving industry
standards, frequent new service and product introductions and enhancements and changing customer demands.
These market characteristics are worsened by the emerging nature of the Internet and the apparent need of
companies from a multitude of industries to offer Web-based products and services. Our future success therefore
will depend on our ability to adapt to rapidly changing technologies, to adapt our services to evolving industry
standards and to continually improve the performance, features and reliability of our service. Our failure to adapt
to such changes would harm our business. In addition, the widespread adoption of new Internet, networking or
telecommunications technologies or other technological changes could require substantial expenditures to modify
or adapt our services or infrastructure.
We need to develop new services, features and functions in order to expand
We plan to expand our operations by developing new or complementary services, products or transaction
formats or expanding the breadth and depth of services. We may be unable to expand our operations in a cost-
effective or timely manner. Even if we do expand, we may not maintain or increase our overall market
acceptance. If we launch a new business or service that is not favorably received by consumers, it could damage
our reputation and diminish the value of our brand. We anticipate that future services may include pre-and post-
trade services, including the following:
●the scanning and uploading of photographs of listed items;
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