eBay 2003 Annual Report Download - page 65

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‚ Yahoo! PayDirect oÅered by Yahoo! and HSBC;
‚ current and announced payment services oÅered by Amazon.com;
‚ CheckFree;
‚ processors that provide online merchants the ability to oÅer their customers the option of paying for
purchases from their bank account, including Certegy and TeleCheck, a subsidiary of First Data;
and
‚ providers of traditional payment methods, particularly credit cards, checks, money orders, and
Automated Clearing House transactions.
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. 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's service relies on the credit card networks, the Automated Clearing House network in the
U.S., and similar bank clearing networks overseas. Associations of traditional Ñnancial institutions such as
Visa, MasterCard and the National Automated Clearing House Association, or NACHA, generally set the
features of these payment methods. Changes in these associations' rules could negatively aÅect PayPal's
competitive position.
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 Visa's Visa Direct,
MasterCard's MoneySend, ING's Way2Pay and Royal Bank of Scotland's World Pay in the European
Community, NOCHEX, Moneybookers, and Royal Bank of Scotland's FastPay in the U.K., CertaPay and
HyperWallet in Canada, Paymate in Australia and Inicis in South Korea. In addition, in certain countries,
such as Germany, electronic funds transfer 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. EÅective July 1, 2003, Ñnancial
institutions in the European Union are restricted from charging customers higher fees for many cross-
border Euro payments than they charge for domestic Euro payments. This development could increase the
eÅectiveness of using traditional Ñnancial institutions instead of PayPal for European customers seeking to
complete cross-border payments.
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 depends 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. The Internet infrastructure may be
unable to support such demands. In addition, the performance of the Internet may be harmed by increased
number of users or bandwidth requirements or by ""viruses,'' ""worms,'' and similar programs. The backbone
computers of the Internet have been the targets of such programs. The Internet has experienced a variety
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