eBay 2005 Annual Report Download - page 61

expansion of both platforms. Our development staff increased approximately 48% from approximately 1,000 at
December 31, 2003 to approximately 1,500 at December 31, 2004. In addition, our consultant costs increased
by approximately $13.4 million.
General and Administrative
Percent Percent
2003 Change 2004 Change 2005
(In thousands, except percentages)
General and administrative ÏÏÏÏÏÏÏÏÏÏÏÏÏ $332,668 25% $415,725 42% $591,716
As a percentage of net revenuesÏÏÏÏÏÏÏÏÏ 15.4% 12.7% 13.0%
General and administrative expenses consist primarily of employee compensation, provisions for transac-
tion losses associated with our Payments segment, depreciation of equipment, provision for doubtful accounts,
insurance and professional fees.
General and administrative expenses increased in total and remained consistent as a percentage of net
revenues in 2005, as compared to the prior year. The dollar increase was due primarily to employee related and
facilities costs. Employee related costs increased by approximately $111.3 million during 2005 as compared to
the prior year. We increased our general and administrative employees from approximately 2,700 at
December 31, 2004 to approximately 4,200 at December 31, 2005. This increase related primarily to the
addition of employees in our trust and safety and corporate functions. Facilities costs increased by
approximately $48.2 million during 2005 as compared to the prior year. PayPal's transaction loss expense
increased by approximately $23.3 million, to $73.8 million during the year ended December 31, 2005,
reflecting the increase in activity in the Payments segment in addition to the expansion of our PayPal Buyer
Protection Program. PayPal's transaction loss expense rate, which is the transaction loss expense as a
percentage of PayPal's total payment volume, was consistent at 0.27% in 2005 and 2004. With our continued
investment across all areas of our business and related corporate functions, we expect general and
administrative expenses to increase during 2006, but decrease as a percentage of revenue as our revenue base
increases at a higher rate.
General and administrative expenses increased in total, but decreased as a percentage of net revenues in
2004, as compared to the prior year. The dollar increase was due primarily to employee related costs, fees for
external professional advisors, including Sarbanes-Oxley compliance costs, and payment transaction loss
expenses. The increases in employee related costs resulted from growth in the finance, human resource and
legal departments to meet the demands of our expanding business, including growing international operations,
increased regulatory demands, and the integration of acquired businesses. We increased our general and
administrative employees from approximately 1,900 at December 31, 2003 to approximately 2,700 at
December 31, 2004. This increase related primarily to the addition of employees in our trust and safety
functions. Consultant and employee related costs increased by approximately $53.8 million during 2004 as
compared to the prior year. PayPal's transaction loss expense increased by approximately $14.1 million, to
$50.5 million during the year ended December 31, 2004, reflecting the increase in activity in the Payments
segment in addition to the expansion of our PayPal Buyer Protection Program. PayPal's transaction loss
expense rate, which is the transaction loss expense as a percentage of PayPal's total payment volume, was
0.27% in 2004 compared to 0.30% in 2003. The decrease in this percentage from 2003 to 2004 was offset in
part by the increase in coverage for our PayPal Buyer Protection Program. Patent litigation expense of
approximately $30 million during 2003 has been included in general and administrative expense and was
related to the accrual of an August 6, 2003 court judgment resulting from the MercExchange patent
infringement lawsuit.
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