eBay 2009 Annual Report Download - page 33

our posted privacy policies or with any regulatory requirements or orders or other federal, state or international
privacy or consumer protection-related laws and regulations could result in proceedings or actions against us by
governmental entities or others, subject us to significant penalties and negative publicity and adversely affect us.
In addition, as noted above, we are subject to the possibility of security breaches, which themselves may result in
a violation of these laws.
Our revenue from advertising is subject to factors beyond our control.
We derive significant revenue from advertising on our websites. Revenues from online advertising are
sensitive to events and trends that affect advertising expenditures, such as general changes in the economy and
changes in consumer spending, as well as the effectiveness of online advertising versus offline advertising media
and the value our websites provide to advertisers relative to other websites. Recent economic conditions have
adversely impacted our advertising revenue. In addition, major search engine operators have the ability to change
from time to time, at their sole discretion, the rules and search algorithms governing the pricing, availability, and
placement of online advertising. Any changes in these rules or search algorithms could materially reduce the
value that we derive from online advertising on our websites, either directly or indirectly. For example, retailers
pay a fee to Shopping.com for online shoppers directed to their websites by Shopping.com. Rule changes made
by search engines in 2008 disrupted traffic to our Shopping.com website, which in turn adversely affected click-
through traffic to retailers from our Shopping.com website and associated fee revenue. Furthermore, we have
recently changed the placement of ads on our sites, which may reduce the amount we are paid. If we experience a
reduction in our advertising revenues due to economic, competitive, technological or other factors, including the
worldwide economic slowdown, a reduction in revenue due to the renegotiation of the terms of our contracts with
major advertising companies such as Yahoo!, Google and Microsoft, changes in our ad placement, or if we are
unable to provide value to our advertisers, our business and financial results would suffer.
Our growth will depend on our ability to develop our brands, and these efforts may be costly.
We believe that continuing to strengthen our brands will be critical to achieving widespread acceptance of
our services, and will require a continued focus on active marketing efforts across all of our brands. We will need
to continue to spend substantial amounts of money on, and devote substantial resources to, advertising,
marketing, and other efforts to create and maintain brand loyalty among users. Since 2005, we have significantly
increased the number of brands we are supporting, adding Shopping.com, our classified websites (e.g., Kijiji,
Marktplaats and Den Blå Avis), StubHub, Bill Me Later and Gmarket, among others. Each of these brands
requires its own resources, increasing the costs of our branding efforts. Brand promotion activities may not yield
increased revenues, and even if they do, any increased revenues may not offset the expenses incurred in building
our brands. Also, major search engine operators that we use to advertise our brands have frequently-changing
rules that govern their pricing, availability and placement of online advertisement (e.g., paid search, keywords),
and changes to these rules could negatively affect our use of online advertising to promote our brands. If we fail
to promote and maintain our brands, or if we incur substantial expenses in an unsuccessful attempt to promote
and maintain our brands, our business would be harmed.
New and existing regulations could harm our business.
We are subject to the same foreign and domestic laws as other companies conducting business on and off
the Internet. It is not always clear how existing laws governing issues such as property ownership, copyrights,
trademarks and other intellectual property issues, parallel imports and distribution controls, taxation, libel and
defamation, obscenity, and personal privacy apply to online businesses such as ours. The majority of these laws
were adopted prior to the advent of the Internet and related technologies and, as a result, do not contemplate or
address the unique issues of the Internet and related technologies. Those laws that do reference the Internet, such
as the U.S. Digital Millennium Copyright Act and the European Union’s Directives on Distance Selling and
Electronic Commerce, are being interpreted by the courts, but their applicability and scope remain uncertain.
Furthermore, as our activities and the types of goods and services listed on our websites expand, including
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