eBay 2010 Annual Report Download - page 46

motivate employees whose stock option strike prices are substantially above current market prices. Similarly,
decreases in the number of unvested in-the-money stock options held by existing employees, whether because
our stock price has declined, options have vested, or because the size of follow-on option grants has declined,
may make it more difficult to retain and motivate employees.
Problems with or price increases by third parties who provide services to us or to our users could harm our
business.
A number of parties provide services to us or to our users that benefit us. Such services include seller tools
that automate and manage listings, merchant tools that manage listings and interface with inventory management
software, storefronts that help our users list items, caching services that make our sites load faster, and shipping
providers that deliver goods sold on our platform, among others. In some cases we have contractual agreements
with these companies that give us a direct financial interest in their success, while in other cases we have none.
PayPal is dependent on the processing companies and banks that link PayPal to the payment card and bank
clearing networks. Similarly, Bill Me Later relies on an unaffiliated lender in providing the Bill Me Later service
and also relies heavily on third parties to operate its services, including merchant processors and payment
gateways to process transactions. Financial or regulatory issues, labor issues (e.g., strikes or work stoppages) or
other problems that prevent these companies from providing services to us or our users could reduce the number
of listings on our websites or make completing transactions or payments on our websites more difficult, thereby
harming our business. In addition, price increases by companies that provide services to our users (such as postal
and delivery services) could also reduce the number of listings on our websites or make it more difficult for our
users to complete transactions, thereby harming our business. Any security breach at a company providing
services to our users could also adversely affect our customers and harm our business.
In addition, we have outsourced certain functions to third-party providers, including customer support and
product development functions, which are critical to our operations. If our service providers do not perform
satisfactorily, our operations could be disrupted, which could result in user dissatisfaction and adversely affect
our business, reputation and operating results.
Although we generally have been able to renew or extend the terms of contractual arrangements with, or if
necessary replace, third parties who provide services to us on acceptable terms, there can be no assurance that we
will continue to be able to do so in the future. If any third parties were to stop providing services to us on
acceptable terms, including as a result of bankruptcy due to poor economic conditions, we may be unable to
procure alternatives from other third parties in a timely and efficient manner and on acceptable terms, or at all. In
addition, there can be no assurance that third parties who provide services directly to our users will continue to
do so on acceptable terms, or at all.
Customer complaints or negative publicity about our customer support or anti-fraud measures could diminish
use of our services.
Customer complaints or negative publicity about our customer support could severely diminish consumer
confidence in and use of our services. Measures that we sometimes take to combat risks of fraud and breaches of
privacy and security have the potential to damage relations with our customers or decrease activity on our sites
by making our sites more difficult to use or restricting the activities of certain users. These measures heighten the
need for prompt and accurate customer support to resolve irregularities and disputes. Effective customer support
requires significant personnel expense, and this expense, if not managed properly, could significantly impact our
profitability. Failure to manage or train our own or outsourced customer support representatives properly could
compromise our ability to handle customer complaints effectively. If we do not handle customer complaints
effectively, our reputation may suffer and we may lose our customers’ confidence.
Because it is providing a financial service and operating in a more regulated environment, PayPal must
provide telephone as well as email customer support and must resolve certain customer contacts within shorter
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