eBay 2004 Annual Report Download - page 60

the user-provided content on our site. Our liability for such claims may be higher in jurisdictions outside the
U.S. where laws governing Internet transactions are unsettled. If we become liable for information provided by
our users and carried on our service in any jurisdiction in which we operate, we could be directly harmed and
we may be forced to implement new measures to reduce our exposure to this liability. This may require us to
expend substantial resources or to discontinue certain service oÅerings, which would negatively aÅect our
Ñnancial results. In addition, the increased attention focused upon liability issues as a result of these lawsuits
and legislative proposals could harm our reputation or otherwise impact the growth of our business. Any costs
incurred as a result of this potential liability could harm our business.
Customer complaints or negative publicity about our customer service could diminish use of our services.
Customer complaints or negative publicity about our customer service could severely diminish consumer
conÑdence in and use of our services. Breaches of our customers' privacy and our security measures could have
the same eÅect. Measures we sometimes take to combat risks of fraud and breaches of privacy and security
can damage relations with our customers. These measures heighten the need for prompt and accurate
customer service to resolve irregularities and disputes. EÅective customer service requires signiÑcant personnel
expense, and this expense, if not managed properly, could impact our proÑtability signiÑcantly. Failure to
manage or train our customer service representatives properly could compromise our ability to handle
customer complaints eÅectively. If we do not handle customer complaints eÅectively, our reputation may
suÅer and we may lose our customers' conÑdence.
Because it is providing a Ñnancial service and operating in a more regulated environment, PayPal, unlike
eBay, must provide telephone as well as email customer service and must resolve certain customer contacts
within shorter time frames. As part of PayPal's program to reduce fraud losses, it may temporarily restrict the
ability of customers to withdraw their funds if those funds or the customer's account activity are identiÑed by
PayPal's anti-fraud models as suspicious. PayPal has in the past received negative publicity with respect to its
customer service and account restrictions, and is the subject of purported class action lawsuits and state
attorney general inquiries alleging, among other things, failure to resolve account restrictions promptly. If
PayPal is unable to provide quality customer support operations in a cost-eÅective manner, PayPal's users may
have negative experiences, PayPal may receive additional negative publicity and its ability to attract new
customers may be damaged. Current and future revenues could suÅer, or its operating margins may decrease.
In addition, negative publicity about or experiences with PayPal's customer support could cause eBay's
reputation to suÅer or aÅect consumer conÑdence in eBay as a whole.
Acquisitions could result in operating diÇculties, dilution and other harmful consequences.
We have acquired a number of businesses in the past, and have recently completed or announced the
acquisitions of Marktplaats.nl, a classiÑed listing site in the Netherlands, and Rent.com, an Internet classiÑed
site focused on the apartment and rental housing industry. We expect to continue to evaluate and consider a
wide array of potential strategic transactions, including business combinations, acquisitions and dispositions of
businesses, technologies, services, products and other assets, including interests in our existing subsidiaries and
joint ventures. At any given time we may be engaged in discussions or negotiations with respect to one or more
of such transactions. Any of such transactions could be material to our Ñnancial condition and results of
operations. There is no assurance that any such discussions or negotiations will result in the consummation of
any transaction. The process of integrating any acquired business may create unforeseen operating diÇculties
and expenditures and is itself risky. The areas where we may face diÇculties include:
‚ diversion of management time, as well as a shift of focus from operating the businesses to issues of
integration and future products;
‚ declining employee morale and retention issues resulting from changes in compensation, reporting
relationships, future prospects, or the direction of the business;
‚ the need to integrate each company's accounting, management information, human resource and other
administrative systems to permit eÅective management, and the lack of control if such integration is
delayed or not implemented;
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