eBay 2004 Annual Report Download - page 65

transaction related services, which could be impractical or ineÇcient for eBay users to match. New
technologies may increase the competitive pressures by enabling our competitors to oÅer a lower cost service.
Although we have established Internet traÇc arrangements with several large online services and search
engine companies, these arrangements may not be renewed on commercially reasonable terms or these
companies may decide to promote competitive services. Even if these arrangements are renewed, they may not
result in increased usage of our services. In addition, companies that control user access to transactions
through network access, Internet browsers, or search engines, could promote our competitors, channel current
or potential users to their vertically integrated electronic commerce sites or their advertisers' sites, attempt to
restrict our access, or charge us substantial fees for inclusion.
The market for PayPal's product is emerging, intensely competitive, and characterized by rapid
technological change. PayPal competes with existing online and oÅ-line payment methods, including, among
others:
‚ credit card merchant processors that oÅer their services to online merchants, including Card Services
International, Chase, First Data, iPayment, Paymentech, and Wells Fargo; and payment gateways,
including CyberSource, VeriSign, and Authorize.net;
‚ BidPay.com and Western Union MoneyZap, each operated by subsidiaries of First Data;
‚ payment services oÅered by Amazon.com;
‚ CheckFree;
‚ processors that provide online merchants the ability to oÅer their customers the option of paying for
purchases from their bank account, including Certegy and TeleCheck, a subsidiary of First Data, or to
pay on credit, including Bill Me Later from I4 Commerce and CIT Bank;
‚ providers of traditional payment methods, particularly credit cards, checks, money orders, and
Automated Clearing House transactions; and
‚ issuers of stored value targeted at online payments, including VisaBuxx.
Some of these competitors have longer operating histories, signiÑcantly greater Ñnancial, technical,
marketing, customer service and other resources, greater name recognition, or a larger base of customers in
aÇliated businesses than PayPal. PayPal's competitors may respond to new or emerging technologies and
changes in customer requirements faster and more eÅectively than PayPal. They may devote greater resources
to the development, promotion, and sale of products and services than PayPal, and they may oÅer lower prices.
Some of these competitors have oÅered, and may continue to oÅer, their services for free in order to gain
market share, and PayPal may be forced to lower its prices in response. Competing services tied to established
banks and other Ñnancial institutions may oÅer greater liquidity and engender greater consumer conÑdence in
the safety and eÇcacy of their services than PayPal. If these competitors acquired signiÑcant market share,
this could result in PayPal losing market share.
Overseas, PayPal faces competition from similar channels and payment methods in most countries and
from regional and national online and oÉine competitors in each country including Visa's Visa Direct,
MasterCard's MoneySend, ING's Way2Pay and Royal Bank of Scotland's World Pay in the European
Community, NOCHEX, Moneybookers, and Royal Bank of Scotland's FastPay in the U.K., CertaPay and
HyperWallet in Canada, Paymate in Australia, Alipay in China and Inicis in South Korea. In addition, in
certain countries, such as Germany and Australia, electronic funds transfer is a leading method of payment for
both online and oÉine transactions. As in the U.S., established banks and other Ñnancial institutions that do
not currently oÅer online payments could quickly and easily develop such a service.
Our business depends 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
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