eBay 2006 Annual Report Download - page 13

In addition to working with our partners we will continue to make Skype Certified products available directly
to our users through Skype’s webstore as well as through other retail channels.
New E-Commerce Opportunities
We plan on expanding Skype’s presence within our existing businesses because communication via e-mail —
the traditional way for buyers and sellers to communicate — can be a source of friction in the online shopping
experience, primarily because of delays in response time. Skype enables us to create new channels for e-commerce
activity by reducing friction in the online shopping experience. Communication via Skype allows buyers and sellers
to benefit from being able to communicate directly with each other in an instantaneous and private environment.
Other Items
Employees
As of December 31, 2006, eBay Inc. and its subsidiaries employed approximately 13,200 people (including
approximately 600 temporary employees), approximately 7,900 of whom were located in the U.S. (including
approximately 300 temporary employees).
Competition
We encounter vigorous competition in our businesses from numerous sources. Our users can find, buy, sell, and
pay for similar items through a variety of competing channels. These include, but are not limited to, online and
offline retailers, distributors, liquidators, import and export companies, auctioneers, catalog and mail-order
companies, classifieds, directories, search engines, products of search engines, virtually all online and offline
commerce participants (consumer-to-consumer, business-to-consumer and business-to-business), online and
offline shopping channels and networks. As our product offerings continue to broaden into new categories of
items and new commerce formats, we expect to face additional competition from other online and offline channels
for those new offerings. We also compete on the basis of price, product selection, and services. For our PayPal
service, our users may choose to pay through a variety of alternative means, including other online payment
services, offline payment methods such as cash, check or money order, and traditional online or offline credit card
merchant accounts. For our Communications segment, our users may choose to use their local telephone
companies, cable providers, and other VoIP providers. To compete effectively, we may need to expend significant
resources in technology and marketing. These efforts may be expensive and could reduce our margins and have a
material adverse effect on our business, financial position, operating results, and cash flows and reduce the trading
price of our stock. We believe that we will be able to maintain profitability by preserving and expanding the
abundance and diversity of our users’ online community and enhancing our user experience, but we may not be able
to continue to manage our operating expenses to mitigate a decline in consolidated net income. For more
information regarding these risks, see the information in “Item 1A: Risk Factors” under the caption “Our industry
is intensely competitive.”
Seasonality
We have historically experienced our strongest quarter of sequential growth in our fourth quarter. We expect
transaction activity patterns on our websites to increasingly mirror general consumer buying patterns as our
business continues to mature. Our expectation is that Skype’s business will experience seasonally slower growth
during holiday and vacation periods.
Technology
Marketplaces and Payments
Our Marketplaces and Payments platforms utilize a combination of proprietary technologies and services as
well as technologies and services provided by others, We have developed intuitive user interfaces, customer tools
and transaction processing, database and network applications that enable our users to reliably and securely
complete transactions on our sites. Our technology infrastructure simplifies the storage and processing of large
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