eBay 1998 Annual Report Download - page 71

Download and view the complete annual report

Please find page 71 of the 1998 eBay annual report below. You can navigate through the pages in the report by either clicking on the pages listed below, or by using the keyword search tool below to find specific information within the annual report.

Page out of 79

  • 1
  • 2
  • 3
  • 4
  • 5
  • 6
  • 7
  • 8
  • 9
  • 10
  • 11
  • 12
  • 13
  • 14
  • 15
  • 16
  • 17
  • 18
  • 19
  • 20
  • 21
  • 22
  • 23
  • 24
  • 25
  • 26
  • 27
  • 28
  • 29
  • 30
  • 31
  • 32
  • 33
  • 34
  • 35
  • 36
  • 37
  • 38
  • 39
  • 40
  • 41
  • 42
  • 43
  • 44
  • 45
  • 46
  • 47
  • 48
  • 49
  • 50
  • 51
  • 52
  • 53
  • 54
  • 55
  • 56
  • 57
  • 58
  • 59
  • 60
  • 61
  • 62
  • 63
  • 64
  • 65
  • 66
  • 67
  • 68
  • 69
  • 70
  • 71
  • 72
  • 73
  • 74
  • 75
  • 76
  • 77
  • 78
  • 79

eBAY INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
71
Note 6—Commitments:
Leases
The Company leases office space and equipment under noncancelable operating leases with various expiration
dates through the year 2004. Rent expense for the years ended December 31, 1996, 1997, and 1998 totaled $9,000,
$223,000 and $672,000, respectively.
Future minimum lease payments under non-cancelable operating leases, including lease commitments entered
into subsequent to December 31, 1998, are as follows, (in thousands):
Year ending
December 31,
Operating
Leases
1999....................................................................................................................................... $ 2,978
2000....................................................................................................................................... 4,605
2001....................................................................................................................................... 4,675
2002....................................................................................................................................... 4,782
2003....................................................................................................................................... 4,681
Thereafter .............................................................................................................................. 3,330
Total minimum lease payments..................................................................................... $25,051
Advertising
During 1998, the Company entered into a three-year marketing agreement with America Online, Inc. (“AOL”).
Under the terms of the agreement the Company will be provided with a specific number of advertising impressions
featuring it as the preferred provider of person-to-person auction services on AOL’ s service. In consideration, the
Company has committed to pay $12.0 million over the three-year term of the agreement. The Company is
recognizing these fees as sales and marketing expenses over the greater of the ratio of the number of impressions
delivered over the total number of contracted impressions, or a straight-line basis over the term of the contract. At
December 31, 1998, the Company had paid $4.0 million to AOL, of which $1.7 million was recognized as sales and
marketing expense. In March 1999, the Company expanded the scope of its strategic relationship with AOL. Under
the amended agreement, eBay will be given a prominent presence featuring it as the preferred provider of person-to-
person trading services on AOL’ s proprietary services (both domestic and international), AOL.com, Digital Cities,
ICQ, CompuServe (both domestic and international) and Netscape. eBay will pay $75 million over the four-year
term of the contract and the remaining obligations under the previous contract were cancelled. eBay will develop a
co-branded version of its service for each AOL property which will prominently feature each party’ s brand. AOL
will be entitled to all advertising revenue from the co-branded site.