eBay 2000 Annual Report Download - page 39

transaction processing systems and network infrastructure both to meet increased traÇc on our site and to
implement new features and functions, including those required under our contracts with third parties. We
may be unable to accurately project the rate or timing of increases, if any, in the use of our service or to
expand and upgrade our systems and infrastructure to accommodate any increases in a timely fashion.
We use internally developed systems to operate our service for transaction processing, including billing
and collections processing. We must continually improve these systems in order to accommodate the level of
use of our website. In addition, we may add new features and functionality to our services that would result in
the need to develop or license additional technologies. We capitalize hardware and software costs associated
with this development in accordance with generally accepted accounting principles and include such amounts
in property and equipment. Our inability to add additional software and hardware or to upgrade our
technology, transaction processing systems or network infrastructure to accommodate increased traÇc or
transaction volume could have adverse consequences. These consequences include unanticipated system
disruptions, slower response times, degradation in levels of customer support, impaired quality of the users'
experience of our service and delays in reporting accurate Ñnancial information. Our failure to provide new
features or functionality also could result in these consequences. We may be unable to eÅectively upgrade and
expand our systems in a timely manner or to integrate smoothly any newly developed or purchased
technologies with our existing systems. These diÇculties could harm or limit our ability to expand our
business.
Unauthorized break-ins or other assaults on our service could harm our business
Our servers are vulnerable to computer viruses, physical or electronic break-ins and similar disruptions,
which could lead to interruptions, delays, loss of data, public release of conÑdential data or the inability to
complete customer transactions. In addition, unauthorized persons may improperly access our data. We have
experienced an unauthorized break-in by a ""hacker'' who has stated that he can in the future damage or
change our system or take conÑdential information. We have also experienced ""denial of service'' type attacks
on our system that have made all or portions of our website unavailable for periods of time. These and other
types of attacks could harm us. Actions of this sort may be very expensive to remedy and could damage our
reputation and discourage new and existing users from using our service.
There are many risks associated with our international operations
We are expanding internationally. In 1999, we acquired alando.de.ag, a leading online German personal
trading platform, and began operations in the United Kingdom and, through a joint venture, in Australia. In
the Ñrst quarter of 2000, we further expanded into Japan and formally launched our localized Canadian
operations. In October 2000, we launched our French site. In January 2001, we launched our Italian site. In
February 2001, we completed our acquisition of a majority interest in Internet Auction Company, Ltd. and
announced our intended acquisition of iBazar S.A., a French company with online trading operations in eight
countries, primarily in Europe. Expansion into international markets requires management attention and
resources. We have limited experience in localizing our service to conform to local cultures, standards and
policies. In most countries, we will have to compete with local companies who understand the local market
better than we do. We may not be successful in expanding into international markets or in generating revenues
from foreign operations. Even if we are successful, the costs of operating are expected to exceed our net
revenues for at least 12 months in most countries. As we continue to expand internationally, we are subject to
risks of doing business internationally, including the following:
‚ regulatory requirements, including regulation of ""auctions,'' that may limit or prevent the oÅering of
our services in local jurisdictions, may prevent enforceable agreements between sellers and buyers or
may prohibit certain categories of goods;
‚ legal uncertainty regarding liability for the listings of our users, including less Internet-friendly legal
systems, unique local laws and lack of clear precedent or applicable law;
‚ government-imposed limitations on the public's access to the Internet;
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