eBay 2009 Annual Report Download - page 99

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eBay Inc.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
Our Marketplaces segment generates net transaction revenues primarily from listing and final value fees
paid by sellers. Listing fee revenues are recognized ratably over the estimated period of the listing, while
revenues related to final value fees are recognized at the time that the transaction is successfully concluded. A
transaction is considered successfully concluded when at least one buyer has bid above the seller’s specified
minimum price or reserve price, whichever is higher, at the end of the transaction term.
Our Payments segment earns transaction revenues primarily from processing transactions for certain
customers. Revenues resulting from a payment processing transaction are recognized once the transaction is
complete.
Our Communications segment transaction revenues were generated primarily from fees charged to users to
connect Skype’s Internet communications products to traditional telecommunication networks. These fees were
recognized when the service is provided. The majority of Communications segment transaction revenues were
prepaid. We recorded customer advances for prepaid amounts in excess of revenues recognized as a current
liability.
Our marketing services and other revenues, included in all of our segments, are derived principally from the
sale of advertisements, revenue sharing arrangements, classifieds fees, lead referral fees and other revenues. Our
advertising revenues are derived principally from the sale of online advertisements. To date, the duration of our
advertising contracts has ranged from one week to five years, but is generally one week to one year. Advertising
revenues on contracts are recognized as “impressions” (i.e., the number of times that an advertisement appears in
pages viewed by users of our websites) are delivered; as “clicks” (which are generated each time users on our
websites click through our text-based advertisements to an advertiser’s designated website) are provided to
advertisers; or ratably over the term of the agreement where such agreements provide for minimum monthly or
quarterly advertising commitments or where such commitments are fixed throughout the term. Revenues related
to revenue sharing arrangements are recognized based on revenue reports received from our partners, provided
that collectability is reasonably assured. Revenues related to classified fees are fees for listing items on our
classified websites and are recognized over the estimated period of the classified listing. Lead referral fee
revenue is generated from lead referral fees based on the number of times a user clicks through to a merchant’s
website from our websites. Lead referral fees are recognized in the period in which the user clicks through to the
merchant’s website.
Other revenues are derived principally from contractual arrangements with third parties that provide
services to eBay and PayPal users and interest earned from banks on certain PayPal customer account balances
and interest and fees earned on the Bill Me Later portfolio of receivables from loans. Revenues from contractual
arrangements with third parties are recognized as the contracted services are delivered to end users. Revenues
from interest income are recognized when earned. Interest and fees earned on the Bill Me Later portfolio of
receivables from loans are computed and recognized based on the amount of loans outstanding and their
contractual interest and fee rates.
To drive traffic to our websites, we periodically provide incentives to our users such as percentage discounts
off current purchases. The incentives used by our users are reported as a reduction of revenue.
Website development costs
Costs related to the planning and post implementation phases of our website development efforts are
recorded as an operating expense. Direct costs incurred in the development phase are capitalized and amortized
over an estimated useful life of one to three years as charges to cost of net revenues. During the years ended
December 31, 2007, 2008 and 2009, we capitalized $110.6 million (including $8.4 million of stock-based
compensation), $112.7 million (including $10.6 million of stock-based compensation) and $105.4 million
(including $9.1 million of stock-based compensation) of website development costs, respectively.
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