eBay 1998 Annual Report Download - page 32

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We must continue to hire, train and manage new employees at a rapid rate. The majority of our employees
today have been with us less than one year and we expect that our rate of hiring will continue at a very high pace. To
manage the expected growth of our operations and personnel, we will need to improve our transaction processing,
operational and financial systems, procedures and controls. Our current and planned personnel, systems, procedures
and controls may not be adequate to support our future operations. We may be unable to hire, train, retain and
manage required personnel or to identify and take advantage of existing and potential strategic relationships and
market opportunities.
We may not maintain profitability.
We believe that our continued profitability and growth will depend in large part on our ability to do the
following:
• increase our brand name awareness;
• provide our customers with superior community and trading experiences; and
• maintain sufficient transaction volume to attract buyers and sellers.
We are investing heavily in marketing and promotion, further development of our website, technology and
operating infrastructure development. We have significant ongoing commitments in some of these areas. 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. The emergence of competitors, many of whom are offering free auctions to users, may
limit our ability to raise user fees in response to declines in profitability or require us to reduce our fees. In addition,
we are spending in advance of anticipated growth, which may also harm our profitability. Our growth rates are not
sustainable and we expect growth rates will decrease in the future. In view of the rapidly evolving nature of our
business and our limited operating history, we believe that period-to-period comparisons of our operating results are
not necessarily meaningful. You should not rely upon our historical results as indications of our future performance.
Our business may be harmed by the listing or sale by our users of illegal items.
The law relating to the liability of providers of online services for the activities of their users on their service is
currently unsettled. We are aware that certain goods, such as firearms, other weapons, adult material, tobacco
products, alcohol and other goods that may be subject to regulation by local, state or federal authorities, have been
listed and traded on our service. We may be unable to prevent the sale of unlawful goods, or the sale of goods in an
unlawful manner, by users of our service, and we may be subject to civil or criminal liability for unlawful activities
carried out by users through our service. In order to reduce our exposure to this liability, we have increased the
number of personnel reviewing potentially illegal items and may in the future implement other protective measures
that could require us to spend substantial resources and/or to reduce revenues by discontinuing certain service
offerings. Any costs incurred as a result of liability or asserted liability relating to the sale of unlawful goods or the
unlawful sale of goods, could harm our business. In addition, we have received significant media attention relating
to the listing or sale of unlawful goods on our website. A continuation of this negative publicity could damage our
reputation and diminish the value of our brand name. It also could make users reluctant to continue to use our
services.
Our business may be harmed by the listing or sale by our users of pirated items.
We have received in the past, and we anticipate we will receive in the future, communications alleging that
certain items listed or sold through our service by our users infringe third-party copyrights, trademarks and
tradenames or other intellectual property rights. Although we have actively sought to work with the content
community to eliminate infringing listings on our website, some content owners have expressed the view that our
efforts are insufficient. An allegation of infringement of third-party intellectual property rights may result in
litigation against us. Any such litigation could be costly for us, could result in increased costs of doing business
through adverse judgment or settlement, could require us to change our business practices in expensive ways or
could otherwise harm our business.