eBay 2005 Annual Report Download - page 58

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transaction revenues, was primarily the result of strong performances in the United Kingdom and Germany, as
well as significant increases in certain of our less established markets, particularly Australia, France and Italy.
For 2004, the growth in our International Marketplaces segment net transaction revenues, both in absolute
terms and as a percentage of total net transaction revenues, was primarily the result of strong performances in
the United Kingdom, South Korea and Germany. The relative strength of foreign currencies against the
U.S. dollar resulted in increased net revenues of approximately $6.7 million during 2005, when compared to
the results if the weighted-average foreign currency exchange rates used in the preparation of our 2004
consolidated financial statements were used. Changes in foreign currency rates will impact our operating
results and, to the extent that the U.S. dollar strengthens, our foreign currency denominated net revenues will
be negatively impacted. We expect that the growth rates of our International Marketplaces segment
transaction net revenues will continue to decline in 2006, although we expect such revenues to grow in
significance relative to our total eBay Marketplaces as we continue to develop and deploy our global online
commerce platform during 2006.
Payments Segment Net Transaction Revenues
Payments segment net transaction revenues increased 47% in 2005, 59% in 2004 and 360% in 2003,
compared to the respective prior year. Payments segment net transaction revenues as a percentage of total net
transaction revenues were 23% in 2005, 21% in 2004, and 20% in 2003. The growth in our Payments segment
net transaction revenues, both in absolute terms and as a percentage of total net transaction revenues is
primarily the result of increases in PayPal transaction volume driven by the growth in both eBay Marketplaces
and PayPal merchant services transactions, and the higher penetration of PayPal in the eBay Marketplaces.
During 2005, over $27.5 billion in total payment volume was transacted on the PayPal platform as
compared to $18.9 billion during 2004. As of December 31, 2005, PayPal had 96.2 million accounts, compared
to 63.8 million accounts at December 31, 2004. Our Payments segment net transaction revenues as a
percentage of total payment volume was 3.6% in 2005 and 2004. The growth in Payments net transaction
revenues was positively affected by PayPal's continued penetration of eBay Marketplaces transactions in all
countries, particularly in the United States and the United Kingdom. Further, Payments net transaction
revenues have grown in connection with the increase in our eBay Marketplaces gross merchandise volume
during 2004 and 2005. The relative strength of foreign currencies, primarily the Euro, against the U.S. dollar,
resulted in higher net revenues of approximately $5.3 million during 2005 when compared to the results if the
weighted-average foreign currency exchange rates used in the preparation of our 2004 consolidated financial
statements were used.
Net transaction revenues from the Payments segment earned internationally totaled $364.5 million in
2005 and $207.6 million in 2004, representing 36.4% and 30.5% of total Payments segment net transaction
revenue, respectively. Changes in foreign currency rates will impact our operating results and, to the extent
that the U.S. dollar strengthens, our foreign currency denominated net revenues will be negatively impacted.
We expect the Payments segment net transaction revenues to increase in total during 2006 and for net
transaction revenues earned internationally to increase in total and as a percentage of Payments net
transaction revenues. We also expect that the Payments segment net transaction revenues will increase as a
percentage of total net transaction revenues in 2006.
Communications Segment Net Transaction Revenues
Communications net transaction revenues were $24.8 million in 2005, which represents the revenue
generated from VoIP offerings from our recent acquisition of Skype on October 14, 2005 through
December 31, 2005. We expect the Communications segment net transaction revenues to increase in total and
as a percentage of total net transactions revenues during 2006. For revenue generating offerings, revenue is
recognized when the related offering is provided, or over the offering period. The majority of revenue offerings
are prepaid. We record deferred revenue for the prepaid amounts in excess of revenue recognized.
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