eBay 2008 Annual Report Download - page 3

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To Our Stockholders,
In 2008, we embraced a tremendous amount of fundamental change against the backdrop of a deteriorating external
market and economy. Even with the challenges, we exited the year a stronger company and remain a leader in
e-commerce, payments and Internet voice communications. Our performance for the full year not only reflects the
strength of our portfolio, but also the operating discipline, strategic clarity and focus with which our management
team is leading the company going forward.
Financially, the company had a good year, marked by strong revenue growth, stronger EPS growth and excellent
free cash flow. Despite the extremely challenging economic environment in 2008 – including a slowdown in global
e-commerce, a strengthening dollar, and declining interest rates – we delivered $8.5 billion in revenues, an
11 percent increase from the prior year, and $1.36 of diluted EPS. We also delivered a solid operating margin of
24 percent.
The size of the eBay marketplace continues to be the largest in the world with nearly $60 billion of gross
merchandise volume (the total value of goods sold in all of our Marketplaces) in 2008. PayPal continues to
experience strong growth, both on eBay and across e-commerce, and Skype had a great year, growing both revenues
and user base.
In addition, we strengthened our portfolio by investing in the growth of our emerging businesses and through key
acquisitions. In 2008, advertising, global classifieds and StubHub, the leading online tickets marketplace, all gained
momentum in terms of revenues.
Key acquisitions we made during the year will help us build on our strengths. Fraud Sciences enhances PayPal’s risk
management capabilities. Bill Me Later further extends our leadership position in payments. And dba.dk and
BilBasen, leading classifieds sites in Denmark, broaden our global leadership in online classifieds.
Connecting buyers and sellers
In 2008, we focused on three clear priorities to both improve our core Marketplaces business and connect more
buyers and sellers than ever before.
1. Make eBay safer and easier to use
2. Improve value and selection by combining fixed price with auction-style listings in a uniquely eBay way
3. Extend PayPal’s leadership position both on eBay and across e-commerce
We made progress in all three areas in 2008. Turning to Marketplaces, we made more fundamental changes to our
core eBay business than at any point in our history. Many of these changes were overdue and were things that our
sellers had been asking for and that our buyers had come to expect. We believe that eBay is a healthier marketplace
than it was a year ago. Our pricing is more competitive, our success is more aligned with that of our sellers, and fixed
price and auction-style listings are becoming more balanced.
While we still have a lot of work to do, the significant structural changes we made in 2008 provide the necessary
foundation to continue moving aggressively ahead to accelerate growth in our core business.
Despite increasing competition for the attention of buyers and sellers, eBay remains one of the leading e-commerce
platforms in the world. In fact, more than 85 million people came to our Marketplaces sites globally in December
2008, making eBay the most-visited retail site for holiday shopping, according to ComScore.
We also continued to expand the number of ways we connect buyers and sellers. We have strong momentum in
advertising, classifieds and StubHub. For the full year, text and graphical advertising revenue was up 139 percent,
StubHub was up 54 percent and classifieds grew 57 percent. These alternative e-commerce formats are increasingly
giving us profitable, scalable and more diverse ways to monetize our traffic and connect buyers and sellers.
Collectively, these alternative formats delivered $1 billion in revenue in 2008.
We’ve only just started to tap the enormous potential of our payments business through PayPal, especially across
e-commerce. In 2008, PayPal increased its penetration on eBay by 5 points to 58 percent, and we significantly
expanded market share outside of eBay. In fact, we reached two important milestones during the year – for the first