eBay 2009 Annual Report Download - page 24

It is difficult for us to forecast the level or source of our revenues or earnings accurately. In view of the
rapidly evolving nature of our business, we believe that period-to-period comparisons of our operating results
may not be meaningful, and you should not rely upon them as an indication of future performance. We do not
have backlog, and substantially all of our net revenues each quarter come from transactions involving sales or
payments during that quarter. Due to the inherent difficulty in forecasting revenues, it is also difficult to forecast
income statement expenses as a percentage of net revenues. Quarterly and annual income statement expenses as a
percentage of net revenues may be significantly different from historical or projected rates. Our operating results
in one or more future quarters may fall below the expectations of securities analysts and investors. In that event,
the trading price of our common stock would almost certainly decline.
We invest heavily in marketing and promotion, customer support, protection programs, technology and
further development of the operating infrastructure for our core and non-core operations. Some of this investment
entails long-term contractual commitments. As a result, we may be unable to adjust our spending rapidly enough
to compensate for any unexpected revenue shortfall, which may harm our profitability.
Growth rates of our Marketplaces businesses in many of our most established markets have been slower
than that for ecommerce generally and have declined in certain periods. Despite our efforts to stem this loss of
market share in these and other markets, we may not be successful. As our growth rates in established markets
slow, we will increasingly need to focus on keeping existing users, especially our top buyers and sellers, active
and increasing their activity level on our websites in order to continue to grow our business. In addition, our
Marketplaces business is facing increased competitive pressure. In particular, the competitive norm for, and the
expected level of service from, Internet ecommerce websites has significantly increased, ranging from improved
user experience to greater ease of buying goods to lower (or no) shipping costs to faster shipping times. If we are
unable to change our services in ways that reflect the changing demands of the ecommerce marketplace,
particularly the higher growth of sales of fixed-price items and higher service levels (some of which depend on
services provided by sellers on our platforms), our business will suffer.
We have announced changes to our Marketplaces business intended to drive more sales and improve seller
efficiency. Some of the changes that we have announced to date have been controversial with, and led to
dissatisfaction among, our sellers, and additional changes that we announce in the future may also be negatively
received by some of our sellers. Given the number of recent changes that we have made to our policies and
pricing, it may take our sellers some time to fully assess and adjust to these changes, and sellers may elect to
reduce volume while making such assessments and adjustments or in response to these changes. If any of these
changes cause sellers to move their business (in whole or in part) away from our websites or otherwise fail to
improve gross merchandise volume or the number of successful listings, our operating results and profitability
will be harmed. We believe that the mix of sales under our traditional auction-style listing format and fixed-price
listing format will continue to shift towards our fixed-price format. Accordingly, we have eliminated some of the
features related to our traditional auction-style format and expect others will become less meaningful to, and used
less frequently by, our sellers, which would result in a corresponding decrease in revenues from such features. In
addition, we expect that the costs associated with our seller discount programs will increase as more sellers will
become eligible for such discounts.
In addition, because a large percentage of PayPal transactions originate on the eBay platform, declines in
growth rates in major Marketplaces markets also adversely affect PayPal’s growth. The expected future growth
of our PayPal, StubHub, and other lower margin businesses may also cause downward pressure on our profit
margins because those businesses have lower gross margins than our Marketplaces platforms.
The current recession could harm our business.
Our Marketplaces and Payments businesses are dependent on consumer purchases. The current economic
downturn has resulted in reduced buyer demand and reduced selling prices and may reduce the volume of
purchases on our Marketplaces platforms and the volume of transactions paid for using our PayPal payment
16