eBay 2002 Annual Report Download - page 71

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countries there are competitors that have a better understanding of local culture and commerce than we
do.
The principal competitive factors for eBay include the following:
‚ ability to attract buyers and sellers;
‚ volume of transactions and selection of goods;
‚ customer service; and
‚ brand recognition.
With respect to our online competition, additional competitive factors include:
‚ community cohesion and interaction;
‚ system reliability;
‚ reliability of delivery and payment;
‚ website convenience and accessibility;
‚ level of service fees; and
‚ quality of search tools.
Some current and potential competitors have longer company operating histories, larger customer
bases and greater brand recognition in other business and Internet spaces than we do. Some of these
competitors also have signiÑcantly greater Ñnancial, marketing, technical and other resources. Other online
trading services may be acquired by, receive investments from, or enter into other commercial relationships
with larger, well-established and well-Ñnanced companies. As a result, some of our competitors with other
revenue sources may be able to devote more resources to marketing and promotional campaigns, adopt
more aggressive pricing policies and devote substantially more resources to website and systems
development than we can. In addition, certain oÉine competitors may encourage manufacturers to limit or
cease distribution of their products to dealers who sell through online channels such as eBay. The adoption
by manufacturers of anti-Internet policies could force eBay users to stop selling certain products on our
site. Increased competition or anti-Internet distribution policies may result in reduced operating margins,
loss of market share and diminished value of our brand. Some of our competitors have oÅered services for
free, and others may do this as well. We may be unable to compete successfully against current and future
competitors.
In order to respond to changes in the competitive environment, we may, from time to time, make
pricing, service or marketing decisions or acquisitions that could harm our business. For example, we have
implemented a buyer protection program that generally insures items up to a value of $200, with a $25
deductible, for users with a non-negative feedback rating at no cost to the user. In addition, certain
competitors may oÅer or continue to oÅer free shipping or other transaction related services, which could
be impractical or ineÇcient for eBay users to match. New technologies may increase the competitive
pressures by enabling our competitors to oÅer a lower cost service.
Although we have established Internet traÇc arrangements with several large online services and
search engine companies, these arrangements may not be renewed on commercially reasonable terms. Even
if these arrangements are renewed, they may not result in increased usage of our service. In addition,
companies that control access to transactions through network access, Internet browsers, or search engines,
or Internet-based applications could promote our competitors, channel users to electronic commerce sites
that compete with us, or charge us substantial fees for inclusion.
69