eBay 2004 Annual Report Download - page 64

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Sports: Academy Sports, Bass Pro Shops, Big 5, Cabela's, Dick's Sporting Goods, Golf-
ClubExchange.com, Golfsmith, GSI Commerce, Performance Bike, Play It Again Sports, REI, The Sports
Authority, SportsLine.com, and TGW.com; and
Toys: FAO Schwarz, KB Toys, Toys R Us, and Zany Brainy.
Our international websites compete with similar online and oÉine channels in each of their vertical
categories in most countries. In addition, they compete with general online e-commerce sites, such as Quelle
and Otto in Germany, Yahoo-Kimo in Taiwan, Daum in South Korea, TaoBao and 1pai, a partnership
between Sina.com and Yahoo! in China, and Amazon in the U.K. and other countries. In some of these
countries, there are online sites that have much larger customer bases and greater brand recognition than we
do, and in certain of these jurisdictions there are competitors that may have a better understanding of local
culture and commerce than we do.
The principal competitive factors for eBay include the following:
‚ ability to attract buyers and sellers;
‚ volume of transactions and price and selection of goods;
‚ customer service; and
‚ brand recognition.
With respect to our online competition, additional competitive factors include:
‚ community cohesion, interaction and size;
‚ system reliability;
‚ reliability of delivery and payment;
‚ website convenience and accessibility;
‚ level of service fees; and
‚ quality of search tools.
Some current and potential competitors have longer company operating histories, larger customer bases
and greater brand recognition in other business and Internet sectors than we do. Some of these competitors
also have signiÑcantly greater Ñnancial, marketing, technical and other resources. Other online trading services
may be acquired by, receive investments from, or enter into other commercial relationships with larger, well-
established and well-Ñnanced companies. As a result, some of our competitors with other revenue sources may
be able to devote more resources to marketing and promotional campaigns, adopt more aggressive pricing
policies and devote substantially more resources to website and systems development than we can. Some of
our competitors have oÅered services for free and others may do this as well. We may be unable to compete
successfully against current and future competitors. In addition, certain oÉine competitors may encourage
manufacturers to limit or cease distribution of their products to dealers who sell through online channels such
as eBay, or may attempt to use existing or future government regulation to prohibit or limit online commerce
in certain categories of goods or services. The adoption by manufacturers or government authorities of policies
or regulations discouraging the sales of goods or services over the Internet could force eBay users to stop
selling certain products on our websites. Increased competition or anti-Internet distribution policies or
regulations may result in reduced operating margins, loss of market share and diminished value of our brand.
In order to respond to changes in the competitive environment, we may, from time to time, make pricing,
service or marketing decisions or acquisitions that could harm our proÑtability. For example, we have
implemented a buyer protection program that generally insures items up to a value of $200, with a $25
deductible, for users with a non-negative feedback rating at no cost to the user. PayPal has implemented a
similar buyer protection program covering losses from selected eBay sellers up to $1,000, with no deductible.
Depending on the amount and size of claims we receive under these programs, these product oÅerings could
harm our proÑtability. In addition, certain competitors may oÅer or continue to oÅer free shipping or other
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