eBay 2005 Annual Report Download - page 1

To our Stockholders, Partners, Employees and our Communities of Users
As the Internet spreads throughout the world, more and more people are unlocking the opportunities it
brings. The Internet is connecting us in ways not possible just a decade ago, and transforming the way we
meet, communicate, learn, and do business. It has also sparked a new wave of innovation that continues to
expand the boundaries of what technology can enable us to achieve.
The changing Internet environment has allowed eBay to change as well. In 2005 we expanded our vision
of how to best connect people online through community and commerce. We continued to innovate within our
existing businesses while adding new formats and opportunities for our ever-growing communities of users.
While the company may look different than it did a year ago, our core mission remains the same. We are
pioneering communities built on commerce, sustained by trust, and inspired by opportunity.
The Power of Three
Today, the company is organized into three businesses: Marketplaces, Payments and Communications.
Each is a thriving and successful business in its own right. Together, these three businesses create synergies
that we believe will provide even more opportunity for our communities and lead to additional growth across
the board.
At the heart of the Marketplaces business is the eBay trading platform, which connects buyers and sellers
in a single global marketplace. Continued innovation in marketing and product development and close
cooperation with our community of users led to accelerating growth in 2005, particularly in our largest
markets Ó the US and Germany. eBay ended the year with 181 million registered users around the world. And
in 2005, those users traded more than $44.3 billion in gross merchandise volume, the total value of all
successfully closed items, which represents an increase of 30 percent from 2004.
Alongside the eBay platform, we expanded into other types of marketplaces in 2005. In February, we
acquired Rent.com, a leading Internet listing service for apartments and rental housing. Also in February, we
launched Kijiji, our international classifieds business that brings people together in local markets to find jobs,
trade goods and services, and make personal connections. In August we acquired Shopping.com, a leading
comparison shopping website, which provides eBay sellers with a new channel and access to a new set of
buyers while bringing more traffic and leads to Shopping.com's merchants. eBay's Marketplaces websites now
enable people to meet, buy and sell in a variety of formats and trading experiences.
Our Payments service, PayPal, reached a new milestone in 2005 when it generated more than a billion
dollars in net revenue. In addition to expanding its reach among eBay users around the world, PayPal has also
grown its merchant services business outside the eBay universe, which now accounts for approximately a third
of its total payment volume (TPV). In total, the service ended 2005 with 96 million accounts worldwide, and
processed more than $27 billion in TPV during the year. Excluding the payment gateway business that PayPal
acquired from VeriSign in November, this activity represents an organic increase of 45 percent in TPV from
2004.
In October, we acquired a new business called Skype. A leader in online voice communications, Skype is
revolutionizing the way in which people communicate over the Internet. A strong stand-alone business, Skype
added an average of 190,000 new users a day at the end of 2005 and finished the year with a total of 75 million
users, up 38 percent since we announced the acquisition and representing year-over-year growth of
280 percent.
And while the Skype of today is largely focused on communications, we see incredible potential for its use
in ecommerce. Integrating Skype into the eBay marketplace, for example, has the potential to reduce
communications friction between buyers and sellers and increase the velocity of trade. Creating a PayPal
wallet associated with each Skype account can make it even easier for users to pay for Skype's fee-based
services while at the same time increasing PayPal's payment volume. The acquisition also enables eBay and
Skype to pursue new lines of business, such as services and travel, based on pay-per-call lead generation.
Even as we invested in acquisitions, the organic growth of our company delivered strong financial results
in 2005. eBay Inc. produced net revenues of $4.552 billion, an increase of 39 percent over the prior year. Net
income grew at the same rate as net revenues and surpassed $1 billion for the first time. Operating cash flow