eBay 2008 Annual Report Download - page 58

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income in the first quarter of 2009 to be lower than the first quarter of 2008 due primarily to the effect of an
anticipated stronger U.S. dollar as well as the negative impact of the economic environment on consumer spending
and the challenges associated with reaccelerating growth of GMV in our Marketplaces core business. Although the
current economic environment makes it difficult to predict the impact on individual types of expenses, we expect
that cost controls, including our previously-announced restructuring that impacts our employee related operating
expenses, will partially offset the negative effects of an anticipated year-over-year decline in revenues and our
expected investments in our higher growth businesses such as Payments, Classifieds and Communications. We also
expect diluted earnings per share will be negatively impacted by lower interest rates and from dilution resulting
from recent acquisitions.
Results of Operations
Net Revenues
Our net transaction revenues from our Marketplaces segment are derived primarily from listing and final value
fees paid by sellers. For our Payments segment, net transaction revenues are generated primarily by fees paid by
merchants for payment processing services. Our Communications segment net transaction revenues are generated
primarily from fees charged to users to connect Skype’s VoIP product to traditional fixed-line and mobile
telephones. These fees are charged on a per-minute basis or on a subscription basis and we refer to these minutes
as SkypeOut minutes.
Our marketing services and other revenue are generated from all three of our business segments. Our
marketing services are derived principally from the sale of advertisements, revenue sharing arrangements,
classifieds fees, lead referral fees. Our other revenues are derived principally from interest earned from banks
on certain PayPal customer account balances, interest and fees earned on the Bill Me Later loan portfolio and from
contractual arrangements with third parties that provide services to all of our users.
Revenues are attributed to U.S. and international geographies primarily based upon the country in which the
seller, payment recipient, customer, Skype user’s Internet protocol address, online property that generates adver-
tising, or other service provider, as the case may be, is located. Because we generate the majority of our revenue
internationally, fluctuations in foreign currency exchange rates will impact our results of operations. Based on
changes in foreign currency rates year over year, total net revenues for the year ended December 31, 2008 were
positively impacted by foreign currency translation of approximately $190.9 million compared to the prior year. On
a business segment basis, Marketplaces, Payments and Communications total net revenues for the year ended
December 31, 2008 were positively impacted by foreign currency translation of approximately $158.8 million,
$0.3 million and $31.8 million, respectively. Total net revenues for the year ended December 31, 2007 were
positively impacted by foreign currency translation of approximately $276.0 million compared to the prior year. On
a business segment basis, Marketplaces, Payments and Communications total net revenues for the year ended
December 31, 2007 were positively impacted by foreign currency translation of approximately $222.4 million,
$21.4 million and $32.2 million, respectively. Impact of foreign currency translation only includes changes between
our functional currencies and our U.S. dollar reporting currency.
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