eBay 2002 Annual Report Download - page 65

At this time, we expect third-party advertising and end-to-end services revenues to decrease substantially
on an absolute basis in 2003 relative to 2002.
We are subject to risks associated with information disseminated through our service.
The law relating to the liability of online services companies for information carried on or
disseminated through their services is currently unsettled. Claims could be made against online services
companies under both U.S. and foreign law for defamation, libel, invasion of privacy, negligence, copyright
or trademark infringement, or other theories based on the nature and content of the materials disseminated
through their services. Several private lawsuits seeking to impose liability upon us under a number of these
theories have been brought against us. In addition, federal, state and foreign legislation has been proposed
that imposes liability for or prohibits the transmission over the Internet of certain types of information.
Our service features a Feedback Forum, which includes information from users regarding other users.
Although all such feedback is generated by users and not by us, claims of defamation or other injury have
been made in the past and could be made in the future against us for content posted in the Feedback
Forum. Claims like these are more likely and may have a higher probability of success in jurisdictions
outside the U.S. If we become liable for information provided by our users and carried on our service in
any jurisdiction in which we operate, we could be directly harmed and we may be forced to implement
new measures to reduce our exposure to this liability. This may require us to expend substantial resources
and/or to discontinue certain service oÅerings, which would negatively aÅect our Ñnancial results. In
addition, the increased attention focused upon liability issues as a result of these lawsuits and legislative
proposals could harm our reputation or otherwise impact the growth of our business. Any costs incurred as
a result of this liability or asserted liability could harm our business.
The inability to expand our systems may limit our growth.
We seek to generate a high volume of traÇc and transactions on our services. The satisfactory
performance, reliability and availability of our websites, processing systems and network infrastructure are
critical to our reputation and our ability to attract and retain large numbers of users. Our revenues depend
primarily on the number of items listed by users, the volume of user transactions that are successfully
completed, the Ñnal prices paid for the items listed and the volume of payment transactions by our
payment customers. We need to expand and upgrade our technology, 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 project
accurately 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 websites. 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' experiences 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 with our existing systems any newly developed or purchased technologies or businesses such as
PayPal. These diÇculties could harm or limit our ability to expand our business.
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