eBay 2006 Annual Report Download - page 93

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The Marketplaces segment includes our global online commerce platforms. The Payments segment includes
our global payments platform consisting of our PayPal subsidiary. The Communications segment includes the VoIP
offerings provided by our Skype subsidiary. Since October 14, 2005, the results from our Communications segment
reflect Skype operations.
Direct contribution consists of net revenues from external customers less direct costs. Direct costs include
specific costs of net revenues, sales and marketing expenses, and general and administrative expenses over which
segment managers have direct discretionary control, such as advertising and marketing programs, customer support
expenses, bank charges, site operations expenses, product development expenses, billing operations, certain
technology and facilities expenses, transaction expenses, provisions for doubtful accounts, authorized credits
and transaction losses. Segment managers do not have discretionary control over expenses such as our corporate
center costs (consisting of certain costs such as corporate management, human resources, finance and legal),
amortization of intangible assets and stock-based compensation expenses, as they are not evaluated in the
measurement of segment performance. We have also recast our direct costs to reflect changes in the current
management of site operations cost, product development, billing operations, and certain technology and facilities
expenses as direct costs.
The following table summarizes the financial performance of our reporting segments (in thousands):
Marketplaces Payments Consolidated
Year Ended December 31, 2004
Net revenues from external customers ................. $2,573,607 $697,702 $3,271,309
Direct costs .................................... 1,476,965 512,946 1,989,911
Direct contribution ............................. 1,096,642 184,756 1,281,398
Operating expenses and indirect costs of net revenues . . . 222,156
Income from operations ......................... 1,059,242
Interest and other income, net....................... 77,867
Interest expense ................................. (8,879)
Income before income taxes and minority interests ....... $1,128,230
Marketplaces Payments Communications Consolidated
Year Ended December 31, 2005
Net revenues from external customers ......... $3,499,137 $1,028,455 $24,809 $4,552,401
Direct costs . ............................ 2,008,215 725,616 25,821 2,759,652
Direct contribution...................... 1,490,922 302,839 (1,012) 1,792,749
Operating expenses and indirect costs of net
revenues ........................... 351,042
Income from operations .................. 1,441,707
Interest and other income, net ............... 111,148
Interest expense.......................... (3,478)
Income before income taxes and minority
interests. . ............................ $1,549,377
89
eBay Inc.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)