eBay 2010 Annual Report Download - page 34

requirements could cause us to incur substantial costs or require us to change our business practices in a manner
adverse to our business. In addition, we have and post on our websites our own privacy policies and practices
concerning the collection, use and disclosure of user data. Any failure, or perceived failure, by us to comply with
our posted privacy policies or with any regulatory requirements or orders or other federal, state or international
privacy or consumer protection-related laws and regulations could result in proceedings or actions against us by
governmental entities or others, subject us to significant penalties and negative publicity and adversely affect us.
In addition, as noted above, we are subject to the possibility of security breaches, which themselves may result in
a violation of these laws.
Our revenue from advertising is subject to factors beyond our control.
We derive significant revenue from advertising on our websites. Revenues from online advertising are
sensitive to events and trends that affect advertising expenditures, such as general changes in the economy and
changes in consumer spending, as well as the effectiveness of online advertising versus offline advertising media
and the value our websites provide to advertisers relative to other websites. Recent economic conditions have
adversely impacted our advertising revenue. In addition, major search engine operators have the ability to change
from time to time, at their sole discretion, the rules and search algorithms governing the pricing, availability, and
placement of online advertising. Any changes in these rules or search algorithms could materially reduce the
value that we derive from online advertising on our websites, either directly or indirectly. For example, retailers
pay a fee to Shopping.com for online shoppers directed to their websites by Shopping.com. Rule changes made
by search engines in 2008 disrupted traffic to our Shopping.com website, which in turn adversely affected click-
through traffic to retailers from our Shopping.com website and associated fee revenue. Furthermore, we have
recently changed the placement of ads on our sites, which may reduce the amount we are paid. Finally, legislators
and regulators in various jurisdictions, including the U.S. and the European Union, are reviewing Internet
advertising models and the use of user-related data, and are considering proposals that could restrict or otherwise
impact this business model. If we experience a reduction in our advertising revenues due to economic,
competitive, regulatory, technological or other factors, including the worldwide economic slowdown, or due to
the renegotiation of the terms of our contracts with major advertising companies or due to a reduction in our
ability to effectively place advertisements on our sites or otherwise provide value to our advertisers, our business
and financial results would suffer.
Our growth will depend on our ability to develop our brands, and these efforts may be costly.
We believe that continuing to strengthen our brands will be critical to achieving widespread acceptance of
our services, and will require a continued focus on active marketing efforts across all of our brands. We will need
to continue to spend substantial amounts of money on, and devote substantial resources to, advertising,
marketing, and other efforts to create and maintain brand loyalty among users. Since 2005, we have significantly
increased the number of brands we are supporting, adding Shopping.com, our classified websites (e.g., eBay
Classifieds, Kijiji, Marktplaats and Den Blå Avis), StubHub, Bill Me Later and Gmarket, among others. Each of
these brands requires its own resources, increasing the costs of our branding efforts. Brand promotion activities
may not yield increased revenues, and even if they do, any increased revenues may not offset the expenses
incurred in building our brands. Also, major search engine operators that we use to advertise our brands have
frequently-changing rules that govern their pricing, availability and placement of online advertisement (e.g., paid
search, keywords), and changes to these rules could negatively affect our use of online advertising to promote our
brands. If we fail to promote and maintain our brands, or if we incur substantial expenses in an unsuccessful
attempt to promote and maintain our brands, our business would be harmed.
New and existing regulations could harm our business.
We are subject to the same foreign and domestic laws as other companies conducting business on and off
the Internet. It is not always clear how existing laws governing issues such as property ownership, copyrights,
trademarks and other intellectual property issues, parallel imports and distribution controls, taxation, libel and
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