eBay 2002 Annual Report Download - page 72

The market for PayPal's product is emerging, intensely competitive and characterized by rapid
technological change. PayPal competes with existing on-line and oÅ-line payment methods, including,
among others:
‚ Credit card merchant processors that oÅer their services to online merchants, including First Data,
Concord EFS, Paymentech, and Wells Fargo; and payment gateways, including VeriSign and
Authorize.net;
‚ MoneyZap and BidPay oÅered by Western Union, a subsidiary of First Data;
‚ Yahoo! PayDirect oÅered by Yahoo! and HSBC;
‚ c2it oÅered by Citigroup;
‚ WebPay and Valid oÅered by CheckFree; and
‚ U.S.P.S. SendMoney oÅered by the U.S. Postal Service.
Some of these competitors have longer operating histories, signiÑcantly greater Ñnancial, technical,
marketing, customer service and other resources, greater name recognition or a larger base of customers in
aÇliated businesses than PayPal. For example, Citigroup's c2it has existing arrangements with AOL Time
Warner and Microsoft. PayPal's competitors may respond to new or emerging technologies and changes in
customer requirements faster and more eÅectively than PayPal. They may devote greater resources to the
development, promotion and sale of products and services than PayPal, and they may oÅer lower prices.
Some of these competitors have oÅered, and may continue to oÅer, their services for free in order to gain
market share, and PayPal may be forced to lower its prices in response. Competing services tied to
established banks and other Ñnancial institutions may oÅer greater liquidity and engender greater consumer
conÑdence in the safety and eÇcacy of their services than PayPal. If these competitors acquired signiÑcant
market share, this could result in PayPal losing market share.
PayPal also competes with providers of traditional payment methods, particularly credit cards, checks,
money orders and ACH transactions. Associations of traditional Ñnancial institutions such as Visa,
MasterCard and NACHA generally set the features of these payment methods. The associations have
initiated programs to enhance the usability of these payment methods for online transactions and could
lower fees charged to online merchants. Either of these changes could make it more diÇcult for PayPal to
retain and attract customers.
Overseas, PayPal faces competition from similar channels and payment methods in most countries
and from regional and national online and oÉine competitors in each country including First Gate and
World Pay in the European Community, No Chex in the U.K., CertaPay and HyperWallet in Canada,
and Paymate in Australia. In addition, in certain countries, such as Germany, electronic funds transfer
(EFT) is a leading method of payment for both online and oÉine transactions. As in the U.S., established
banks and other Ñnancial institutions that do not currently oÅer online payments could quickly and easily
develop such a service.
Half.com competes directly with online and oÉine retailers in its product categories such as
Amazon.com, as well as with traditional oÉine and online sellers of new and used books, videos and CDs,
consumer electronics and other products.
Our business is dependent on the development and maintenance of the Internet infrastructure.
The success of our service will depend largely on the development and maintenance of the Internet
infrastructure. This includes maintenance of a reliable network backbone with the necessary speed, data
capacity and security, as well as timely development of complementary products, for providing reliable
Internet access and services. The Internet has experienced, and is likely to continue to experience,
signiÑcant growth in the numbers of users and amount of traÇc. If the Internet continues to experience
increased numbers of users, increased frequency of use or increased bandwidth requirements, the Internet
infrastructure may be unable to support the demands placed on it. In addition, the performance of the
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