eBay 2008 Annual Report Download - page 35

There are many risks associated with our international operations.
Our international expansion has been rapid and our international business, especially in Germany and the U.K.,
has also become critical to our revenues and profits. Net revenues outside the U.S. accounted for approximately
51% and 54%, respectively, of our net revenues in fiscal years 2007 and 2008. Expansion into international markets
requires management attention and resources and requires us to localize our services to conform to local cultures,
standards, and policies. The commercial, Internet, and transportation infrastructure in lesser-developed countries
may make it more difficult for us to replicate our traditional Marketplace business model. In many countries, we
compete with local companies that understand the local market better than we do, and we may not benefit from first-
to-market advantages. We may not be successful in expanding into particular international markets or in generating
revenues from foreign operations. For example, in 2002 we withdrew our eBay marketplace offering from the
Japanese market, and in 2007 we contributed our business in China to a joint venture with a local Chinese company.
Even if we are successful in developing new markets, we often expect the costs of operating new sites to exceed our
net revenues for at least 12 months in most countries.
As we continue to expand internationally, including through the expansion of PayPal, Skype, Shopping.com,
and our classified businesses, we are increasingly subject to risks of doing business internationally, including the
following:
• strong local competitors;
• regulatory requirements, including regulation of Internet services, communications, auctioneering, profes-
sional selling, distance selling, privacy and data protection, banking, and money transmitting, that may limit
or prevent the offering of our services in some jurisdictions, prevent enforceable agreements between sellers
and buyers, prohibit the listing of certain categories of goods, require product changes, require special
licensure, subject us to various taxes, penalties or audits, or limit the transfer of information between us and
our affiliates;
• greater liability or legal uncertainty regarding our liability for the listings and other content provided by our
users, including uncertainty as a result of legal systems that are less developed with respect to the Internet,
unique local laws, conflicting court decisions and lack of clear precedent or applicable law;
• cultural ambivalence towards, or non-acceptance of, online trading;
• laws and business practices that favor local competitors or prohibit foreign ownership of certain businesses;
• difficulties in integrating with local payment providers, including banks, credit and debit card networks, and
electronic fund transfer systems or with the local telecommunications infrastructure;
• differing levels of retail distribution, shipping, communications, and Internet infrastructures;
• different employee/employer relationships and the existence of workers’ councils and labor unions;
• difficulties in staffing and managing foreign operations;
• challenges associated with joint venture relationships, including dependence on our joint venture partners;
• difficulties in implementing and maintaining adequate internal controls;
• longer payment cycles, different accounting practices, and greater problems in collecting accounts
receivable;
• potentially adverse tax consequences, including local taxation of our fees or of transactions on our websites;
• higher telecommunications and Internet service provider costs;
• different and more stringent user protection, data protection, privacy and other laws;
• seasonal reductions in business activity;
• expenses associated with localizing our products, including offering customers the ability to transact
business in the local currency;
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