eBay 2001 Annual Report Download - page 24

probable, revenues are deferred until the obligation or uncertainties are resolved. Third-party advertising
revenues, including barter transactions, totaled 1%, 3% and 11% of our consolidated net revenues for the
years ended December 31, 1999, 2000 and 2001, respectively.
Third-party advertising revenues may be aÅected by the Ñnancial condition of our customers and by
the success of online promotions in general. Recently, the industry pricing of online advertisements has
deteriorated. Our third-party advertising revenue is dependent in signiÑcant part on the performance of
AOL Time Warner, Inc.'s, or AOL's, sales force, over which we do not have control. Reduction in third-
party advertising, whether due to softening of the demand for online advertising in general or particular
problems facing parties with whom we have contractual arrangements, would adversely aÅect our operating
results. Unlike our online auction transaction revenues, third-party advertising revenues are derived from a
highly concentrated customer base. During the year ended December 31, 1999, third-party advertising
revenues were derived from approximately 10 customers. During the years ended December 31, 2000 and
2001, third-party advertising revenues were attributable to approximately 20 customers each year. We
continue to view our business as primarily transaction driven and we expect third-party advertising
revenues in future periods to decrease as a percentage of total net revenues, and possibly in absolute
dollars.
End-to-End Services and Promotions Revenues
Our end-to-end services and promotions revenues are derived principally from contractual arrange-
ments with third parties that provide transaction services to eBay users. To date, the duration of our end-
to-end services and promotions contracts has ranged from one to three years. End-to-end services and
promotions revenues are recognized as the contracted services are delivered to end users. To the extent
that signiÑcant obligations remain at the end of a period or collection of the resulting receivable is not
considered probable, revenues are deferred until the obligation or uncertainty is resolved. End-to-end
services and promotions revenues were 0%, 7% and 4% of our consolidated net revenues for the years
ended December 31, 1999, 2000 and 2001, respectively.
Similar to our third-party advertising revenues, our end-to-end services and promotions revenues may
be aÅected by the Ñnancial condition of the parties with whom we have these relationships and by the
success of online services and promotions in general. Additionally, end-to-end services and promotions
revenues are also concentrated among a small customer base. During the year ended December 31, 1999,
end-to-end services and promotions revenues were negligible. End-to-end services and promotions revenues
were derived from approximately 10 customers in 2000 and from approximately 20 customers in 2001. We
expect end-to-end services and promotions revenues in future periods to decrease as a percentage of total
net revenues and possibly in absolute dollars.
Provisions for Doubtful Accounts and Authorized Credits
Provisions for doubtful accounts and authorized credits to sellers are made at the time the related
revenue is recognized based upon our historical experience. We perform ongoing credit evaluations of our
customer accounts and maintain allowances for probable doubtful account and credit losses. We also
perform ongoing evaluations of authorized credits granted to sellers for fee discounts and incomplete
services. The provision for doubtful accounts is recorded as a charge to operating expense, while the
provision for authorized credits is recorded as a reduction of revenues. Historically, such amounts have
been within our expectations. However, unexpected or signiÑcant future changes in trends could result in a
material impact to future statements of income and cash Öows. During the years ended December 31,
1999, 2000 and 2001, provisions for doubtful accounts and authorized credits totaled $9.3 million,
$18.2 million and $25.2 million, respectively.
Legal Contingencies
In connection with certain pending litigation and other claims, we have estimated the range of
probable loss and provided for such losses through charges to our income statement. These estimates have
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