eBay 2001 Annual Report Download - page 51

U.S. may be less favorable than those in the U.S., giving greater rights to consumers, content owners and
users. Compliance may be more costly or may require us to change our business practices or restrict our
service oÅerings relative to those in the U.S. Our failure to comply with foreign laws could subject us to
penalties ranging from Ñnes to bans on our ability to oÅer our services.
Our business has been seasonal.
Our results of operations historically have been somewhat seasonal in nature because many of our
users reduce their activities on our websites during the Thanksgiving (in the U.S.) and Christmas holidays
and with the onset of good weather. We have historically experienced our strongest quarter of online
growth in our Ñrst Ñscal quarter, although our shift to more ""practical'' items may cause our seasonal
patterns to look more like a typical retailer. Both ButterÑelds and Kruse have signiÑcant quarter-to-quarter
variations in their results of operations depending on the timing of auctions and the availability of high
quality items from large collections and estates. ButterÑelds typically has its best operating results in the
traditional fall and spring auction seasons and has historically incurred operating losses in the Ñrst and
third quarters. Kruse typically sees a seasonal peak in operations in the third quarter. Seasonal or cyclical
variations in our business may become more pronounced over time and may harm our results of operations
in the future.
We are dependent on the continued growth of online commerce.
The business of selling goods over the Internet, particularly through online trading, is new and
dynamic. Our future net revenues and proÑts will be substantially dependent upon the widespread
acceptance of the Internet and online services as a medium for commerce by consumers. Rapid growth in
the use of and interest in the Internet and online services is a recent phenomenon. This acceptance and
use may not continue. Even if the Internet is accepted, concerns about fraud, privacy and other problems
may mean that a suÇciently broad base of consumers will not adopt the Internet as a medium of
commerce. In particular, our websites require users to make publicly available personal information that
some potential users may be unwilling to provide. These concerns may increase as additional publicity over
privacy issues on eBay or generally over the Internet increase. Market acceptance for recently introduced
services and products over the Internet is highly uncertain, and there are few proven services and products.
In order to expand our user base, we must appeal to and acquire consumers who historically have used
traditional means of commerce to purchase goods. If these consumers prove to be less active than our
earlier users, and we are unable to gain eÇciencies in our operating costs, including our cost of acquiring
new customers, our business could be adversely impacted.
We are dependent on key personnel.
Our future performance will be substantially dependent on the continued services of our senior
management and other key personnel. Our future performance also will depend on our ability to retain and
motivate our other oÇcers and key personnel. The loss of the services of any of our executive oÇcers or
other key employees could harm our business. We do not have long-term employment agreements with
any of our key personnel, we do not maintain any ""key person'' life insurance policies, and many of our
senior oÇcers will fully vest the majority of their equity incentives within the next twelve months. Our new
businesses are all dependent on attracting and retaining key personnel. The land-based auction businesses
are particularly dependent on specialists and senior management because of the relationships these
individuals have established with sellers who consign property for sale at auction. We have had some
turnover of these personnel, and continued losses of these individuals could result in the loss of signiÑcant
future business and would harm us. In addition, employee turnover and other labor problems frequently
increase during the period following an acquisition as employees evaluate possible changes in
compensation, culture, reporting relationships and the direction of the business. These labor issues may be
more severe if employees receive no signiÑcant Ñnancial return from the acquisition transaction, as has
been the case with several of our recent acquisitions. Such increased turnover could increase our costs and
reduce our future revenues. Our future success also will depend on our ability to attract, train, retain and
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