eBay 2011 Annual Report Download - page 15

Our GSI segment faces different competitors for each of its two business units. GSI seeks to compete on the basis of offering premium
capabilities with a cost advantage. While each of GSI's business units competes on a stand-alone basis, GSI also seeks to differentiate itself by
cross-selling and bundling services to offer more attractive pricing and integrated implementations.
For more information regarding these risks, see the information in “Item 1A: Risk Factors” under the captions “Our industries are intensely
competitive” and “We are subject to regulatory activity and antitrust litigation under competition laws.”
To compete effectively, we may need to expend significant resources in technology and marketing. These efforts may be expensive and
could reduce our margins and have a materially adverse effect on our business, financial position, operating results and cash flows and reduce the
trading price of our stock. Despite our efforts to preserve and expand the size, diversity and transaction activity of our users and customers and to
enhance the user experience, we may not be able to continue to manage our operating expenses or increase or maintain our revenue to avoid or
reduce a decline in our consolidated net income or avoid a net loss.
Seasonality
We expect transaction activity patterns on our websites to mirror general consumer buying patterns. Our GSI segment is highly seasonal.
The fourth calendar quarter typically accounts for a disproportionate amount of GSI's total annual revenue because consumers increase their
purchases and businesses increase their advertising to consumers during the fourth quarter holiday season. Please see the additional information in
“Item 7: Management's Discussion and Analysis of Financial Condition and Results of Operations” under the caption “Seasonality.”
Technology
Our Marketplaces, Payments and GSI platforms utilize a combination of proprietary technologies and services as well as technologies and
services provided by others. We have developed intuitive user interfaces, customer tools and transaction processing, database and network
applications that help enable our users to reliably and securely complete transactions on our sites and help GSI's clients to utilize its suite of
services. Our technology infrastructure simplifies the storage and processing of large amounts of data, eases the deployment and operation of
large-scale global products and services and automates much of the administration of large-scale clusters of computers. Our infrastructure has
been designed around industry-standard architectures to reduce downtime in the event of outages or catastrophic occurrences. We strive to
continually improve our technology to enhance the customer experience and to increase efficiency, scalability and security. For information
regarding technology-related risks, see the information in “Item 1A: Risk Factors” under the captions “System failures and resulting interruptions
in the availability of our websites and services could harm our business” and “Our failure to cost-effectively manage certain aspects of our
business could harm us.”
Intellectual Property
We regard the protection of our intellectual property, including our trademarks (particularly those covering the eBay and PayPal names),
patents, copyrights, domain names, trade dress and trade secrets as critical to our success. We aggressively protect our intellectual property rights
by relying on federal, state and common law rights in the U.S. and internationally, as well as a variety of administrative procedures. We also rely
on contractual restrictions to protect our proprietary rights in products and services. We have entered into confidentiality and invention assignment
agreements with our employees and contractors and nondisclosure agreements with parties with whom we conduct business in order to limit
access to and disclosure of our proprietary information.
We pursue the registration of our domain names, trademarks, and service marks in the U.S. and internationally. Additionally, we have filed
U.S. and international patent applications covering certain aspects of our proprietary technology. Effective trademark, copyright, patent, domain
name, trade dress and trade secret protection is very expensive to maintain and may require litigation. We must protect our intellectual property
rights and other proprietary rights in an increasing number of jurisdictions, a process that is expensive and time consuming and may not be
successful in every location.
We have registered our core brands as trademarks and domain names in the U.S. and a large number of other jurisdictions and have in place
an active program to continue to secure trademarks and domain names that correspond to our brands in markets of interest. If we are unable to
protect our trademarks or domain names, we could be adversely affected in any jurisdiction in which our trademarks or domain names are not
registered. We have licensed in the past, and expect to license in the future, certain of our proprietary rights, such as trademarks or copyrighted
material, to others.
10