eBay 2007 Annual Report Download - page 63

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primarily from eBay Marketplaces transactions using PayPal. Our Merchant Services net TPV experienced 59%
year-over-year growth in 2007 and 2006, and represented 42% and 35% of PayPal’s net TPV in 2007 and 2006,
respectively. The increase in Merchant Services business resulted from more online merchants, both domestically
and internationally, adding PayPal as a payment option. Our payments net transaction revenues as a percentage of
net TPV was approximately 4% in each of 2007, 2006 and 2005.
Payments net transaction revenues earned internationally totaled $778.3 million in 2007, $533.2 million in
2006, and $364.5 million in 2005, respectively representing 42%, 38% and 36% of total Payments net transaction
revenues, respectively. International growth in our Payments segment continues to benefit from the expansion of our
geographical footprint, the increase in the number of currencies supported by PayPal over the last twelve months
and the increase in cross-border payments, which generate larger fees. Based on changes in foreign currency rates
year-over-year, Payments net revenues were positively impacted by foreign currency translation of approximately
$21.4 million, $4.3 million and $5.3 million in 2007, 2006 and 2005, respectively.
In 2008, we expect the Payments net transaction revenues to increase in total and for net transaction revenues
earned internationally to increase in total and as a percentage of Payments net transaction revenues. We expect
continued growth in our Merchant Services business as the number of merchants integrating PayPal on their
websites increases and as we build consumer preference for PayPal. In addition, we expect our Payments business to
benefit from growth in Marketplaces GMV and increased penetration of PayPal on eBay Marketplaces, each of
which may be impacted by, among other things, the factors discussed above under “Financial Summary.”
Communications Net Transaction Revenues
Communications net transaction revenues were $376.7 million in 2007 compared to $192.8 million in 2006.
The increase in Communications net revenues was due primarily to an increase in SkypeOut minutes to 5.6 billion
in 2007 compared to 4.1 billion in 2006 and to pricing changes. The increase in SkypeOut minutes was due
primarily to the growth in the cumulative number of Skype registered users to 276.3 million at December 31, 2007
from 171.2 million at December 31, 2006.
Communications net transaction revenues were $192.8 million in 2006 compared to $24.8 million in 2005 (net
revenues from the acquisition date of October 14, 2005 through the end of 2005). The increase in net revenues was
due primarily to a full year of revenues generated from our VoIP offerings in 2006. Skype registered users increased
to 171.2 million at December 31, 2006 from 74.7 million at December 31, 2005.
Net transaction revenues from Communications earned internationally totaled $315.4 million in 2007,
$163.7 million in 2006 and $21.4 million in 2005, representing 84%, 85% and 87% of total Communications
net transaction revenues, respectively. Skype revenue is primarily generated in Europe. Based on changes in foreign
currency rates year over year, Communications net revenue was positively impacted by foreign currency translation
of approximately $32.2 million in 2007 and $5.1 million in 2006.
In 2008, we expect Communications net transaction revenues to continue to increase, driven by our continued
focus on increasing user activity and expanding our products and features.
Advertising and Other Net Revenues
Advertising and other net revenues totaled $321.7 million in 2007, $171.8 million in 2006 and $123.4 million
in 2005. Advertising and other net revenues represented 4% of total net revenues during 2007 and 3% of total net
revenues during 2006 and 2005. Advertising and other net revenues increased 87% and 39% during 2007 and 2006,
respectively, compared to the same periods of the prior year due primarily to advertising initiatives in our
Marketplaces segment and interest earned from banks on certain U.S. PayPal customer account balances. Prior to
the fourth quarter of 2006, certain U.S. PayPal customer account balances were maintained in non-interest bearing
accounts. We expect advertising revenues to increase in total as we continue to benefit from our strategic advertising
partnerships that leverage the significant number of users on our Marketplaces platform. The decline in interest
rates in the U.S. may have a significant impact on the amount of interest we earn from banks on certain U.S. PayPal
account balances.
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