eBay 2010 Annual Report Download - page 63

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Some key operating metrics that members of our senior management regularly review to evaluate our
financial results include free cash flow (which we define as net cash provided by operating activities less
purchases of property and equipment, net), market share, net promoter score (NPS) and revenue, excluding
acquisitions and foreign currency impact. Some key operating metrics specific to our Marketplaces business
include gross merchandise value (GMV), GMV excluding vehicles and number of sold items. Some key
operating metrics specific to our Payments business include net charge-off rate, net number of payments, net total
payment volume (TPV) and risk adjusted margin.
Outlook
We expect our Payments business to continue its strong performance from expanded merchant coverage and
share of checkout while generating increased operating leverage. In addition, we expect Marketplaces to have a
solid performance in its core markets driven by continued progress in trust, value and selection. From a
macroeconomic perspective, we expect a stable outlook on the overall economy and market growth.
Results of Operations
Net Revenues
We generate two types of net revenues: (1) net transaction revenues and (2) marketing services and other
revenues. Our net transaction revenues are derived principally from listing fees and final value fees (which are
fees payable on transactions completed on our Marketplaces trading platforms), fees paid by merchants for
payment processing services and, until the sale of Skype on November 19, 2009, fees charged to users to connect
Skype’s Internet communications products to traditional fixed-line and mobile telephones. Our marketing
services revenues are derived principally from the sale of advertisements, revenue sharing arrangements,
classifieds fees and lead referral fees. Our other revenues are derived principally from interest earned on certain
PayPal customer account balances, interest and fees earned on the Bill Me Later portfolio of receivables from
loans and from contractual arrangements with third parties that provide services to our users.
We generate the majority of our revenues internationally. Accordingly, fluctuations in foreign currency
exchange rates impact our results of operations. We have a foreign exchange risk management program that is
designed to reduce our exposure to fluctuations in foreign currencies; however, the effectiveness of this program
in mitigating the impact of foreign currency fluctuations on our results of operations varies from period to period,
and in any given period our operating results are usually affected, sometimes significantly, by changes in
currency exchange rates. Fluctuations in exchange rates also directly affect our cross border revenue. We
calculate the year-over-year impact of foreign currency movements on our business using prior period foreign
currency rates applied to current year transactional currency amounts.
For the year ended December 31, 2010, foreign currency movements relative to the U.S. dollar negatively
impacted net revenues by $9.6 million compared to the prior year, which is net of the $11.1 million positive impact
from hedging activities of PayPal’s net revenue. On a business segment basis for the year ended
December 31, 2010, foreign currency movements relative to the U.S. dollar negatively impacted Marketplaces and
Payments net revenues by approximately $7.1 million and $2.5 million, respectively, compared to the prior year.
For the year ended December 31, 2009, foreign currency movements relative to the U.S. dollar negatively
impacted net revenues by approximately $354.2 million compared to the prior year, which is net of the $15.4
million positive impact from hedging activities of PayPal’s net revenues. On a business segment basis for the
year ended December 31, 2009, foreign currency movements relative to the U.S. dollar negatively impacted
Marketplaces, Payments and Communications net revenues by approximately $247.7 million, $62.1 million and
$44.4 million, respectively, compared to the prior year.
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