eBay 2001 Annual Report Download - page 55

companies that control access to transactions through network access or Internet browsers could promote
our competitors or charge us substantial fees for inclusion.
Although Billpoint's business is focused primarily on providing a payment solution for eBay users,
several new companies also provide their payment services both to our users and to a much broader range of
customers, such as online and offline businesses. Some of these competitors compete aggressively by offering
free services and significant promotional incentives. These competitors include large companies, including
banks and credit card companies, who are beginning to enter this space and have longer operating histories,
significantly greater financial, technical, marketing, customer service and other resources, greater name
recognition and/or a larger base of customers than we have. These include: c2it offered by Citigroup; Yahoo!
PayDirect offered by Yahoo!; PayPal, Inc.; Check Free; ProPay; Amazon.com Payments; Payingfast;
SendMoneyOrder.com; and MoneyZap and BidPay offered by Western Union. We also compete with
traditional payment methods, which are used by a majority of our customers, such as credit cards, checks,
money orders and Automated Clearing House (ACH) transactions.
Half.com competes directly with online and oÉine retailers in its product categories such as
Amazon.com, which oÅers a directly competitive service, as well as with traditional oÉine and online
sellers of new and used books, videos and CD's, consumer electronics, sporting goods and other products.
The oÉine auction business is intensely competitive. ButterÑelds competes with two larger and better-
known auction companies, Sotheby's Holdings, Inc. and Christie's International plc, as well as numerous
regional auction companies. To the extent that these companies increase their focus on the middle market
properties that form the core of ButterÑelds' business or in the western U.S., its business may suÅer. Kruse
is subject to competition from numerous regional competitors. In addition, competition with Internet-based
auctions may harm the land-based auction business.
Our business is dependent on the development and maintenance of the Internet infrastructure.
The success of our service will depend largely on the development and maintenance of the Internet
infrastructure. This includes maintenance of a reliable network backbone with the necessary speed, data
capacity and security, as well as timely development of complementary products, for providing reliable
Internet access and services. The Internet has experienced, and is likely to continue to experience,
signiÑcant growth in the numbers of users and amount of traÇc. If the Internet continues to experience
increased numbers of users, increased frequency of use or increased bandwidth requirements, the Internet
infrastructure may be unable to support the demands placed on it. In addition, the performance of the
Internet may be harmed by increased number of users or bandwidth requirements or by ""viruses,''
""worms'' and similar programs. The Internet 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 Internet usage as well as the level of traÇc and the
processing transactions on our service.
Our business is subject to online commerce security risks.
A signiÑcant barrier to online commerce and communications is the secure transmission of
conÑdential information over public networks. Our security measures may not prevent security breaches.
Our failure to prevent security breaches could harm our business. Currently, a signiÑcant number of our
users authorize us to bill their credit card accounts directly for all transaction fees charged by us.
Billpoint's users routinely provide credit card and other Ñnancial information. We rely on encryption and
authentication technology licensed from third parties to provide the security and authentication technology
to eÅect secure transmission of conÑdential information, including customer credit card numbers. Advances
in computer capabilities, new discoveries in the Ñeld of cryptography or other developments may result in a
compromise or breach of the technology used by us to protect customer transaction data. A number of
websites have reported breaches of their security. Any 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. We may
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