eBay 2001 Annual Report Download - page 73

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eBay Inc.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Ì (CONTINUED)
Revenue recognition
Our net revenues are derived from fees associated with the delivery of online and oÉine services.
Online services revenues are derived from online marketplace transactions, third-party advertising and end-
to-end services and promotions. OÉine services revenues are derived primarily from oÉine auction
transactions at our ButterÑelds and Kruse subsidiaries.
Online auction transaction revenue primarily comes from listing, feature, and Ñnal value fees paid by
sellers, as well as Ñnal value fees paid by buyers for ""premium'' priced items. Listing and feature fee
revenues are recognized ratably over the estimated period of the auction while revenues related to Ñnal
value fees are recognized at the time that the transaction is successfully concluded. A transaction is
considered successfully concluded when at least one buyer has bid above the seller's speciÑed minimum
price or reserve price, whichever is higher, at the end of the transaction term. Provisions for doubtful
accounts and authorized credits to sellers are made at the time of revenue recognition based upon our
historical experience.
Our third-party advertising revenue is derived principally from the sale of online banner and
sponsorship advertisements for cash and through barter arrangements. To date, the duration of our banner
and sponsorship advertising contracts has ranged from one week to three years, but are generally one week
to three months. Advertising revenues on both banner and sponsorship contracts are recognized as
""impressions,'' which are the number of times that an advertisement appears in pages viewed by users of
our websites, are delivered or ratably over the term of the agreement where such agreements provide for
minimum monthly or quarterly advertising commitments or such commitments are Ñxed throughout the
term. Barter transactions are valued based on amounts realized in similar cash transactions occurring
within six months prior to the date of the barter transaction. To the extent that signiÑcant delivery
obligations remain at the end of a period or collection of the resulting account receivable is not considered
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 (""AOL'') 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 highly
concentrated among a small 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.
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
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