eBay 2007 Annual Report Download - page 46

given their shorter histories and, in some cases, higher growth rates. Any failure to accommodate transaction
growth could impair customer satisfaction, lead to a loss of customers, impair our ability to add customers, or
increase our costs, all of which would harm our business. Further, steps to increase the reliability and
redundancy of our systems are expensive, reduce our margins, and may not be successful in reducing the
frequency or duration of unscheduled downtime.
•Customer Account Billing. Our revenues depend on prompt and accurate billing processes. Our failure to
grow our transaction-processing capabilities to accommodate the increasing number of transactions that
must be billed on any of our websites would harm our business and our ability to collect revenue.
•Customer Support. We are expanding our customer support operations to accommodate the increased
number of users and transactions on our websites and the increased level of user protection activity we
provide worldwide. If we are unable to provide these operations in a cost-effective manner, users of our
websites may have negative experiences, current and future revenues could suffer, and our operating margins
may decrease.
We must continue to effectively hire, train, and manage new employees. If our new hires perform poorly, if we
are unsuccessful in hiring, training, managing, and integrating these new employees, or if we are not successful in
retaining our existing employees, our business may be harmed. To manage the expected growth of our operations
and personnel, we will need to improve our transaction processing, operational and financial systems, procedures,
and controls. This is a special challenge as we acquire new operations with different systems. Our current and
planned personnel, systems, procedures, and controls may not be adequate to support our future operations. The
additional headcount and capital investments we are adding will increase our cost base, which will make it more
difficult for us to offset any future revenue shortfalls by expense reductions in the short term.
We may have exposure to greater than anticipated tax liabilities.
The determination of our worldwide provision for income taxes and other tax liabilities requires estimation and
significant judgment and there are many transactions and calculations where the ultimate tax determination is
uncertain. Our determination of our tax liability is always subject to review by applicable domestic and foreign tax
authorities. Any adverse outcome of such a review could have a negative effect on our operating results and
financial condition. Although we believe our estimates are reasonable, the ultimate tax outcome may differ from the
amounts recorded in our financial statements and may materially affect our financial results in the period or periods
for which such determination is made.
We depend on the continued growth of online commerce and communications.
The business of selling goods over the Internet, particularly through online trading, is dynamic and relatively
new. Concerns about fraud, privacy, and other problems may discourage additional consumers from adopting the
Internet as a medium of commerce. In countries such as the U.S. and Germany, where our services and online
commerce generally have been available for some time and the level of market penetration of our services is high,
acquiring new users for our services may be more difficult and costly than it has been in the past. In order to expand
our user base, we must appeal to and acquire consumers who historically have used traditional means of commerce
to purchase goods and may prefer Internet analogs to such traditional retail means to our offerings, such as the
retailer’s own website. If these consumers prove to be less active than our earlier users, and we are unable to gain
efficiencies in our operating costs, including our cost of acquiring new customers, our business could be adversely
impacted.
Our business depends on the development and maintenance of the Internet infrastructure.
The success of our services 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, significant growth in the numbers of
users and amount of traffic. The Internet infrastructure may be unable to support such demands. In addition,
increasing numbers of users, increasing bandwidth requirements, or problems caused by “viruses,” “worms,” and
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