eBay 2009 Analyst Day

Agenda

8:15 INTRO AND DISCLOSURESMark Rowen, VP of Investor Relations, eBay Inc.

8:20 EBAY: Leading eBay into the future8:20 EBAY: Leading eBay into the futureJohn Donahoe, President & CEO, eBay Inc.

8:50 PAYPAL: Vision and potential for PayPalScott Thompson President PayPalScott Thompson, President, PayPal

9:30 BREAK

10:00 MARKETPLACES: Vision and potential for Marketplaces10:00 MARKETPLACES: Vision and potential for MarketplacesLorrie Norrington, President, eBay MarketplacesStephanie Tilenius, SVP Global Product & General Manager, eBay North AmericaMark Carges, SVP & Chief Technology Officer, eBay Inc.g , gy , y

11:00 SKYPEJosh Silverman, President, Skype

11 30 LUNCH11:30 LUNCH

12:30 FINANCE: Business model and operational excellenceBob Swan, Chief Financial Officer, eBay Inc.

1:00 GENERAL Q&A

Forward looking statement

This presentation may make forward-looking statements relating to our future performance that are based on our current expectations, forecasts and assumptions and involve risks and uncertainties, including those relating to the company’s ability to grow its businesses, user base and user activity.

Our actual results may differ materially from those discussed during this presentation for a variety of reasons, including, but not limited to, the impact of recent global economic events and the global economic downturn; foreign-exchange-rate fluctuations; changes in political, business, and economic conditions; our ability to profitably expand our business model to new types of merchandise and sellers;conditions; our ability to profitably expand our business model to new types of merchandise and sellers; the impact and integration of recent and future acquisitions; our increasing need to grow revenues from existing users in established markets; an increasingly competitive environment for our businesses; the complexity of managing a growing company with a broad range of businesses, our need to manage regulatory, tax, IP and litigation risks (including risks specific to PayPal and the financial industry, and risks specific to Skype’s technology and to the VoIP industry); and our need to upgrade our technology andspecific to Skype s technology and to the VoIP industry); and our need to upgrade our technology and customer service infrastructure at reasonable cost while adding new features and maintaining site stability.

You can find more information about factors that could affect our actual results in our most recentYou can find more information about factors that could affect our actual results in our most recent annual report on our Form 10-K and our subsequent quarterly reports on Form 10-Q (available at http://investor.ebay.com). You should not unduly rely on any forward-looking statements, and we assume no obligation to update them. All information in this presentation is as of March 11, 2009, and we do not intend, and undertake no duty, to update this presentation.

This presentation contains non-GAAP measures relating to the company's performance. You can find the reconciliation of those measures to the nearest comparable GAAP measures in the appendix at the end of this presentation.

Leading eBayLeading eBayLeading eBay into the futureLeading eBay into the futureinto the futureinto the future

March 11, 2009

What we do: Connect buyers and sellers

eBay

P P l

Buyers SellersPayPal

Classifieds

Shopping.com

StubHub

AdvertisingAdvertising

Our company has evolved

2004 2008

Classified,Classified, Advertising, all others

AuctionsAuctions

Fixed price

$3 3B

Fixed price

$3.3B$8.5B

Classified, Advertising, all others $8.5B

Our markets are still in their early days

eCommerce Online Payments

Online Communications

$1.4T

$0.6T$0.4T

$

future2008 future2008 future2008

And markets differ:Multiple winners in shopping: Few winners in paymentsMultiple winners in shopping: Few winners in payments

Shopping PaymentsShopping Payments

Online consumer behaviors continue to change

Our focusOur focus

yesterday today tomorrow

How we will win

PayPal Highlights

1 Powering global eCommerce1 Powering global eCommerce

2 Unmatched advantages

3 Significant opportunity aheadg pp y

What to expect from PayPal

d ill b bi• A second “core” … will be bigger than eBay Marketplacethan eBay Marketplace

• The leading global online kpayment network

Marketplaces

Our starting point: World’s largest marketplace

Buyers Sellers

150M+ unique visitors 25M+ sellers• 150M+ unique visitors• 3M items bought daily• 50,000 categories

• 25M+ sellers• 150M+ live listings• Multiple formats

Robust and scalable technology gyplatform

Piercing the myths

eBay Playbook Customer-driven innovation

Auctions as strategy

Auctions as one of several formatsgy

Open Managed pmarketplace

gmarketplace

Tweak the model Transform the model

eBay Highlights

1 Focus where we can win: “Secondary Market”

2 Transform our Marketplace

3 Grow complementary formats

What to expect from eBay

We are creating the “new eBay” and will win in the huge Secondary marketwill win in the huge Secondary market

hi ill k iThis will take time • 2009: growth expected to be slower than the market • 2010: growth expected to be with the market• 2011: growth expected to be faster than the market

Skype Highlights

Accelerating user growth and outstanding fundamentals

1outstanding fundamentals

Attacking an enormous2 Attacking an enormous opportunity, positioned to win

2

Business is getting stronger and3 Business is getting stronger and more valuable

3

What to expect from Skype

St t d l b iStrong standalone business … one of fastest growing in historyg g y

We’ll ensure it’s successful &We ll ensure it s successful & realizes best value

Operating differently across the company

• Customer driven

• Unlocking technology

• Operating discipline

Summary

• Connecting buyers and sellers … in innovative waysways

• PayPal: Leading online global payment network

• eBay Marketplace: Win in global secondary marketmarket

• Skype: Great standalone, we will maximize its potential and value

• Unlocking Technology to innovate for UserUnlocking Technology to innovate for User Experiences

A t bl di i li d• Accountable, disciplined

The Global InternetThe Global InternetPayment NetworkPayment Networkyy

March 11, 2009

24

An evolving industry

1 Powering global eCommerce

2 Unmatched advantages2 Unmatched advantages

3 Significant opportunity ahead

25

Traditional payments not designed for the web

HelgaReview &Complete

Helga

27

Traditional payments not designed for the web

Helga F d tHelga • Fraudsters• ID theft

28

Traditional payment networks are limited

29

Worldwide accessibility

30

Enabling small sellers

BlakeBlake

31

Enabling large merchants across the web

or

32

Solving consumer payment problems

Personal Payments

Marsha Ali

33

Solving consumer payment problems

Personal Payments

Marsha Ali

Erica

34Grocery

We’ve built a global Internet payment network

• 190 global marketsg

• 17 local language sitesg g

• 19 currencies

35

Unmatched advantages & network effects

Internet FraudInternet technology

Fraudexpertisetechnology p

PayPal t knetwork

effectsGlobal

connectionsClosed-loop

d t connectionsdata

36

Growth in active accounts

TPV growing 2 3X f t16%

+23%2-3X faster than competitors

+16%

competitors

$36 $48 $6049 4 57 3 70 4$36 Billion

$48 Billion

$60 Billion

49.4 Million

57.3 Million

70.4 Million

2006 2007 2008

37

Growth in global Total Payment Volume (TPV)

TPV growing 1 5 2X f t1.5-2X faster than eCommerceeCommerce

$36 $48 $60$36 Billion

$48 Billion

$60 Billion

2006 2007 2008

38

Strong stated preference for online payments

#2#2

#1#1

#3#3

#2

#1#1

39

Tremendous payment volume opportunity

TPV Growing 2-3X

Faster than CompetitorsTPVTPV

$100-120BILLION

$36 $48 $60$36 Billion

$48 Billion

$60 Billion

2006 2007 2008 2011

40

How we’ll get there

Global eBayGlobal eBay

Global Merchant Global Merchant Adjacent Adjacent ServicesServices paymentspayments

41

Global eBayGlobal eBayGlobal eBayGlobal eBay

42

Penetration growing on eBay

201173 78% 201173-78%

rage 200858%

ller C

ove

SHARE

eBay

Sel SHARE

Consumer Preference

43

Significant opportunity in international markets

2008 eBay aGMV & PayPal penetration(Including Shipping & Handling)

$24B$29B

( c d g S pp g & d g)

$24B

41%

79%

41%

North America International

44

Share gains across eBay markets

100

PayPal penetration in eBay markets (%)100

80

60

40

20

2006

2007

2008

2005

2004

20082007200620052004

45

eBay is a powerful partner

New active accounts acquired

Total Payment Volume

9.7M$31B

q

7.8M $22B

MS

eBay

1H 2007 2H 2008 1H 2007 2H 2008

46

Global Merchant ServicesGlobal Merchant ServicesGlobal Merchant ServicesGlobal Merchant Services

47

Gaining share in Global Merchant Services

20118 9% 20118-9%

vera

ge

5% 2008

chan

t C

o

SHARE

Mer

c SHARE

Consumer Preference

48

Success across merchant segments

eCommerce volume PayPal TPV2006-08 CAGR

Largemerchants 130%

77%

Small/71%

77%

medium businesses

71%

17%Soleproprietors

33%

17%

6%Total

6%54%

49

Serving the worlds largest online brands

PP # of top 50online merchants

21

1414

88

18

30

50

Share gain opportunity in North America…

North America

$305-315$237

Billion

315Billion

20

Share2008 2011

9% 13-14%

51

…and in large International markets

$460-

InternationalNorth America

$460-480Billion

$293Billion

$305-315$237

Billion

315Billion

2008 2020 2008 2011

2% 5-6%2008 2011

9% 13-14%Share

52

Bill Me Later complements PayPal

• Helps PayPal drive coverageHelps PayPal drive coverage & preference

• Helps merchants drive sales• Helps merchants drive sales

53

Sales lift for merchants

Sales lift through promotionalpromotional offers

54

Fast, convenient, secure credit for consumers

55

Structural advantage in risk management

Credit card

$$$$$$$$$$

$

$$

56

Significant PayPal – BML synergies

Grow eBay GMV

Accelerate merchant sales cycle

Speed Bill Me Later consumer acquisition

Turn transaction expense into revenue

Decrease Bill Me Later fraud losses

Reduce Bill Me Later cost of capital

57

Adjacent paymentsAdjacent paymentsAdjacent paymentsAdjacent payments

58

Many sectors need payment solutions

Mobile & other devices Banks

Businesses withspecializedpayment needs

Governmentspayment needs

Social networksNon-profits

59

PayPal platform enables developers

225k+ developers

100k+ developers

660k+ developers

developers

Millions of

Platform

Millions of .NET developers

PayPal global Internet payments network

60

Early traction: Non-retail & mobile

61

Tremendous growth ahead

$100 120B

Global Total Payment Volume

Adjacent Payments

$100-120B

Global M h t

y

$60B Merchant Services

$60B

eBayeBay

2008 2011

$4-5 billion in revenue by 2011

$2 4 $4 5$2.4BILLION

$4-5BILLION

2008 2011

63

Long-term high growth businesses

2009 10: margin decrease due to2009-10: margin decrease due to BML integration

Medium term: margins return to 18-20%g

Longer term: margin expansion as theLonger term: margin expansion as thebusiness scales over investments

64

The Internet is becoming more mainstream

1.4B global Internet usersg

> 50% of users are in emerging markets

Users spend 15 hours per week online

eCommerce from 5% to 15 20% of retaileCommerce from 5% to 15-20% of retail

65

An evolving industry

1 Powering global eCommerce

2 Unmatched advantages2 Unmatched advantages

3 Significant opportunity ahead

66

The world’s favorite way toThe world s favorite way to pay and be paid

67

p y p

What is going on at eBay?What is going on at eBay?

In Marketplaces we are

• Creating a NEW eBay

• Fixing our foundation by transforming the user experience and technologyexperience and technology

• Positioning to win the large opportunity in the g g pp ysecondary market

i l f• Growing our complementary formats

eBay is about the largest selection of great deals in any format

Marketplace connects buyers and sellers globally

Buyers Sellers

150M+ unique visitors 25M+ sellers• 150M+ unique visitors• 3M items bought daily• 50,000 categories

• 25M+ sellers• 150M+ live listings• Multiple formats

Robust and scalabletechnology platform

An increasingly global footprint

North America(46% of Total)

Europe(45% of Total)

Asia Pacific(9% of Total)(46% of Total) (45% of Total) (9% of Total)

$2 6B $

$1.9B

$2.6B

$1.4B

$2.5B

2005 2008 2005 2008 2005 2008

$0.3B$0.5B

Broad choice of formats

A ti Fi d P iAuctions Fixed Price

ClassifiedsAdvertising

Buyers Sellers

VerticalExperiences

Unique advantages of Marketplace model

Wide global supply of Superior products without ownershipflexibility

Surface best inventory regardless of format

Ultimate buyer choice

Enabling competition, but Seller not competing against sellersplatform

Sellers compete so our buyers get the best deals

Customers win

If your Marketplace is soIf your Marketplace is so advantaged why aren’t youadvantaged … why aren t you

growing faster?g g

By 2008, we had fallen behind

• Customer experience had pfallen behind

• Optimizing for auctions, and

Customer experience

constraining fixed price

• “Open Marketplace” philosophy slowed us down

• Too incremental –not driving the marketplace

Approach to change

• Needed to “revamp” technology

Our three year journey

2008 2009 2010+

Fix the foundationFix the foundation• enhance trust• improve selection

drive great deals on our site• drive great deals on our site

P iti f g thPosition for growth• transform the user experience• innovate through technologyg gy• grow our complementary formats

20082008

L i th d kLaying the ground work.

In 2008, we began to fix the foundation

• New feedback systemTrust standards • Surface highest trust sellers in search

• Better deals “race to the top” in searchUser experience& search • 4X in listings duration for fixed price

• Created incentives for high qualitySeller• Started risk-free pricingIncentives

Our trusted sellers are doing well…

More trusted sellers…

Contributing to more of our GMV…

Growing faster than eCommerce…

49%trusted sellers

eCommerce

27%

26%

24% 17%

4%

12%

Q4 ‘07 Q4 ‘08 Q1 ‘08 Q4 ‘08 Q3 ‘08 Q4 ‘08

4%

-6%

Q4 07 Q4 08% of Sellers with 4.8+

DSRs

Q1 08 Q4 08% of GMV from 4.8+ DSR

sellers

Q3 08 Q4 08GMV Growth Y/Y

(ex. Vehicles)

Data shown is US only% of Sellers includes only sellers that have a DSR rating; Trusted sellers have 4.8+ DSRsGMV excludes vehicles, real estate and StubHub

Increased selection

Average Daily Live Listings (Millions)Fixed Price151

Auctions

119

90 122

119

90 122

29 29Q4 ‘07 Q4 ‘08

Lower shipping costs = better value for buyers

% of listings offering free shipping

30%

20%

10%

Q1 ‘08 Q2 ‘08 Q3 ‘08 Q4 ‘08

0%

N YNecessary… Yes

Enough to Win… NoEnough to Win… No

In 2009 we’re taking bolder actions

• First contact resolution for top buyersTrust t d d • eBay protection for top buyers (US, UK)

• Increasing exposure for high-quality sellersstandards eBay protection for top buyers (US, UK)

• Optimize new search platform• Product-based experience highlights valueUser experience • Product based experience highlights value

• Enabling multiple-SKU listings

User experience& search

• Integrate local classifieds listings

Eliminating upfront fees for C2C sellers (UK)

g g

S ll • Eliminating upfront fees for C2C sellers (UK)

• Improving seller economics on eBay

Seller Incentives

We must stabilize, then grow our business

2008 2009 2010+

Fix the foundation

Position for growth

Our focus: the secondary market

Large retailSmall retailLiquidationUsed

Big business Secondary MarketBig business Secondary Market~$500B

Small businessInventory:

C ll tibl

Inventory:

Small business• Collectible• Vintage• Pre-Owned

Consumer

Inventory:• Out of season• Some new

iConsumer

Market opportunity

Inventory:• Out of season• Outlet inventory

in season

eBay today

Market opportunity • Outlet inventory• Overstock/returns• Liquidation inventory

Secondary market: large, compelling opportunity

Consolidating this inventory creates step-change in deals and selection for our buyers

~$500B Market

Off-priceretailers Outlets Liquidators Wholesalers

A Marketplace is ideal to win the secondary market

Secondary market Marketplace model

Inefficient supply chains

• Absorbs volatile supply• Moves deep-SKUpp y p

Items of uncertain value

• Sellers can test market price• Multiple formats to drive velocity

Buyers lookingBuyers looking foremost for great deals

• Best deals with reliable service• Search brings it all together

g

Transforming the user experience

Before: Auctions ending soonest

Before: Auctions ending soonest

Sorted by time endingending

Less relevance

High shipping costs

After: relevant, well-priced inventory from trusted sellers

After: relevant, well-priced inventory from trusted sellers

Sorted by best ymatchMore relevant

first item

Free shipping

Search experience that merges products and listings

New vertical experience for hard goods

New vertical experience for hard goods

Inventory ysorted byconditioncondition

Shows valueand savings

Buyers can select from multiple SKUs for soft goods

Snapshot view for Clothing, Shoes and Accessories

Buyers can find local inventory from Classifieds

Core search results

ClassifiedsClassifieds

Sponsoredlinkslinks

Unique power of a marketplace

Bose iPod docking station case study



• Top search is “new in box Top search is new in box Fixed Price”

• Price $50 lower than retailretail

• Great seller



• Consumer seller with 100% Feedback score i lli “b l d”is selling “barely used”

• Auction price closed at 70% l th t il70% lower than retail

Trusted sellers compete to provide the best deals

Garmin Nuvi 200w eBay sale history (10/19-11/10)

Seller 1• $142.89

Seller 3$145 Seller 3• $139.95

$140

Seller 2• $141.89 Seller 4

• $136 95Seller 3 wins!

$135• $136.95 wins!

• $128.97$130

$125

Deals are better than ever

In the U.S., a new Tivo HD DVR costs an average of 12% less than competitiors

Daily Deals driving great value for consumers

Breadth of inventory

Secondary Market

LatestiPod NanoBrand New

LatestiPod Nano

New Open Box

Prior GeniPod NanoBrand New

All generationsiPod Nano

Refurbs / UsedBrand New New, Open Box Brand New Refurbs / Used

eBay is the best way to access the world’s inventory


Retail-like option: experienced sellers

vetted by eBay


Marketplace option: great deals & valuegreat deals & value


Local option: connects buyers

with nearby sellers


Advertising: shows what’s available

across the web

We will continue to transform our user experience

eBay will be:

• A trusted, easy-to-use and rewarding shopping experience with different vertical experiencesexperience with different vertical experiences

• Powered by search that integrates multiple• Powered by search that integrates multiple formats, experiences and inventory

• Positioned to capture the secondary market and support larger sellerssupport larger sellers

Becoming the channel of choice for web’s best sellers

Velocity • Best channel for velocity and cash flowSteering traffic to our best sellersy • Steering traffic to our best sellers

Efficiency• Increasing operational efficiency

- Reduce contacts via better trustEfficiency- Tools for shipping and tracking- Seller dashboard for better insights

• Release management and Reliability

gcommunications

A new day forA new day fortechnology at eBaytechnology at eBay

Top eBay technology questions

“I thought you were going“I thought you were going“I thought you were going to fix search?”“I thought you were going to fix search?”to fix search?to fix search?

“What are you doing to “What are you doing to y gimprove the user

y gimprove the user pexperience?”

pexperience?”

2009 Priorities

1 Search

2 Catalog

3 User Experience3 Use xpe e ce

4 Platform4 Platform

Search in a real-time marketplace

All changes immediately reflected in searchg y80M+ from bids, price changes, listings, purchases, etc.

S hi i d i i & fiSophisticated navigation & refinementDifferent for each of our 50,000 categories

Unique mix of formats and inventoryFixed price and auction• Fixed price and auction

• Vintage & collectible to liquidation & new out-of-season

Search in 2009

Improve relevanceImprove relevanceData mining & machine learning

Better sortingBest Match surfaces most relevant info

S h l tfSearch as a platformFoundation for custom shopping experiencespp g pacross categories

2009 Priorities

1 Search

2 Catalog



Catalogs: bringing structure …

UPC codeUPC code

B ghtBought catalog

… to unstructured data

… to unstructured data

Big pictures

“Satin floral accents”accents”

eBay’seBay s CataloggBringing structure tounstructured dataunstructured data

2009 Priorities

1 Search

2 Catalog



User experience

User experience: visual browse

“More like this color”this color

“More like this style”

User experience: category customization

2009 Priorities

1 Search

2 Catalog



Opening eBay.com to developers

Native on BeBay

Transforming technology at eBay

2008 2009 2010+

Search & PlatformSearch & Platform• Best Match• Project Echo

Product based experiences• Product-based experiences

Catalog & User Experience• Onboard more product catalogs• Bring structure to unstructured data• Bring structure to unstructured data• Custom shopping experiences

Driving the technology agenda at eBay differently

Technology driving strategyTechnology driving strategy

Innovation driven world classInnovation-driven, world-class software developmentp

Agile test-and-learnAgile, test-and-learn, intensely customer-focused ydevelopment process

Growing our FormatsGrowing our Formats

We’ll continue to grow formats like Classifieds

Classifieds global revenue

$270M$270M46%CAGR

$86M2005 2008

Classifieds market: large, growing, complementary

Global online classifieds market size

Services, dating, jobs & housing

Vehicles, goods

Services, dating, jobs & housing

$22B

$17B

$22BComplementary to eBay$17B

2008 2010

Sources: Gerson Lehman Group Analysis - August 2008; eMarketer; Collins Steward LLC Report - Nov 2008; Internal estimates

Classifieds is a strong global opportunity

dCanada

#1 Denmark

#1

Netherlands

#1

United Kingdom

#1

Germany

#1

A t liItaly

Spain

#2

Australia

#2 #1

We are #1 or #2 in 8 major markets

Multiple ways to monetize Classifieds

Insertion Fees Feature Fees Advertising

CPC advertisingHome page featuredJob posting fees

High value goods

CPM advertising

High value goods



Buyers Sellers

VerticalExperiences

We are reshaping the Marketplaces business

Auctions

Marketplaces revenue

$5 6BAuctions

Fixed price

Advertising

$5.6B

Classifieds

Other $3.5B

2005 2008

We are reshaping the Marketplaces business


AuctionsAuctions

$5-7B$5 6B Auctions

stabilizes but trails the market

Fixed price

Advertising

$5.6B

Classifieds

Other Fixed Price grows faster

$3.5Bthan the market

Oth f tOther formats grow faster than

the market

2005 2008 2011

3 things to remember3 things to remember

A New eBay

Transforming our Marketplace1 Transforming our Marketplace... Fixing the foundation1

2 Focusing where we can win… 2 gSecondary market

3 Growing our complementary formats3 g p y

One of the fastest growingOne of the fastest growing 5 year-olds in history

With accelerating growth, and outstanding g g gfundamentals

Attacking an enormous opportunity, and positioned to win

Business is getting stronger

Enabling the World’s Conversations

How we make money

Wh t’ F ? What’s Paid?

How we make money

What’s Free? What s Paid?

• SkypeOut (pay as you• Skype-to-Skype

SkypeOut (pay as you

go)calls

• Subscriptions

• Video Calling• Online numbers

• Chat/IM • Voicemail

• Conference Calling • SMS

Skype is one of the fastest adopted technologies in historytechnologies in history

With massive (and accelerating)

Skype Calling Minutes (billions)

8%usage

8%of world’s

internationalcalling minutes

20100B Cumulative

Minutescalling minutes

14 2 14 816

10 9 10 811.9

14.2 14.8

7 59.5

10.9 10.8 9.8

7.5

2006 2007 2008

Remarkable global reach

US/CAN EUS/CAN

52MAPAC

Europe

148M

147M

Rest of the World

59M

And a powerful business modelp

Skype Revenue($Milli )

Slightly ahead of eBay and PayPal

at 5 years ($Millions)at 5 years

2004 and 2005 estimated based on SkypeOut billings

With Outstanding FundamentalsWith Outstanding Fundamentals

Skype Segment Margin• Negligible customer

acquisition costs

Skype Segment Margin

• Negligible capex/network maintenance costsmaintenance costs

• Pre-funded accounts =Pre funded accounts negative working capital

• Strong free cash flow conversion (FCF)

** Direct segment margin and does not include allocation for corporate costs

An historic time:An historic time:Communication is moving from

hardware to softwarehardware to software

Internet

Paradigm changeHardwired Software-basedParadigm changeHardwired into the network & device

Software based network & flexible devices

==Voice Data

rMeans there is potential for Skype “everywhere”

Unlocking massive benefits for usersUnlocking massive benefits for users

rEasier / EverywhererRicher Experience rMore Choicesr

Presence

r

Video-callingConsumers buy data plan

r

Unified Messaging

S l d i

Chat, Voice, File Transfer are t bl t k

Consumers buy data plan

Select best-of-breed applicationSeamless device

integrationtable-stakes application

PAYG, premium services

=Voice Data

The opportunity to become the world’s leadingto become the world s leading

communication software company.

The opportunity is i

Telecom has remained ~2% of

massive

Communication is a HUGE $1.4T market

Telecom has remained ~2% of HH income for the past 40

years

2.5%

3.0%

1.5%

2.0%

2.5%

0.5%

1.0%

0.0%1981 1986 1991 1996 2001

$300BEBITDA

Market size: Communication relative to Search and ecommerce ($ in Bn)Source:Trends in Telephony Service from FCC (June 2005)

In 2008 we sharpened our focus on t ith k bl ltcustomers, with remarkable results

39% 72%39%YoY

Q4 08

72%YoY

Q4 08

A i U

Q4 08 Q4 08

Active Users Engagement (Calling Minutes per Active User)

Leading to Accelerating Revenue Growth

70%YoY Growth Rates (Revenue)50%

60%

38%

Organic*

41%

31% 33%30%

40%38%

10%

20% Reported(Fx-impacted)

0%Q1 08 Q2 08 Q3 08 Q4 08

* Euro-denominated (Skype’s functional currency)

Higher VIDEO penetration led to more users, d lli i tand more calling minutes

Vid lli i t d tilitVideo calling increases engagement and utility

SUBSCRIPTIONS added a popular new paid product and increased engagementproduct, and increased engagement

We hit an inflection point in 2008

With Sk ’ i ll h kWith Skype’s size, small changes make a HUGE difference

Increasing penetration of paid products by 1 percentage point = $60m in revenuepercentage point $60m in revenue

To be a billion dollar businesswe need our existing paying users to makewe need our existing paying users to make

just one more call per day!

O St tOur Strategy

2 Invest in Mobile Business Platform2 Invest in

1 Leverage our core consumer business

3 Build our mission critical infrastructure3 Build our mission critical infrastructure

Core CONSUMER is a $240B market2008 Worldwide Telecom Market1 - Total Market: $1.4

billion

$241BFixed VoiceCConsumer

And we have a clear plan to attack itAnd we have a clear plan to attack it

1 Continue driving1. Continue driving new users

2. Better promote our paidour paid products

3. Increase revenue per paying user

4. Monetize free

$602B Wireless Voice Market$602B

Wi lWireless Voice

Our Mobile ApproachOur Mobile Approach

A il bilit t l dAvailability post-load

Device pre-load

Operator partnerships

Skype is available for download yptoday on several platforms

Approximately 12 million downloadsat the end of 2008

Skype’s partnership with Hutchison 3yp p p

500K it ld f th t500K units sold, one of the mostpopular pre-pay handsets for 3

20% higher margin than 3’s average

79% of customers are new to 3

No Skype download requiredyp q

Partnership with leading worldwide mobile h d t idhandset provider

Skype pre-loaded and integrated on select N series devicesdevices

Available in some markets starting 2H 2009

Business is a $203B marketBusiness is a $203B market

$203BFixed VoiceBusiness

A compelling business offeringg g

Why? Skype is already used in businessWhy? Skype is already used in business35%* of

users say Reduce

Business TravelCost SavingsBenefits Productivitythey use Skype for businesspurposes

Focus Expand Develop Build out

p p

BusinessProductOffering

DevelopSales

ChannelPaid

Support 35%Offering

65%

*Based on a survey of U.S., CN, U.K of Skype users in March 2008

Platform: A Thriving Ecosystem g y

users190 Skype certified190 Skype certified devices

15,000 DevelopersPartnerships with

world-class companies

We are startinga new chapter in our history

Act 1

2003 2008

Platform: Desktop/LaptopRevenue Stream: SkypeOutyMarket segment: LD callingMain product: VoiceMain region: Mature internet

“One”

r

Main region: Mature internet marketsMain target user: Consumersr

Act 22009 2011

• Platforms + MobileDiversified revenue streams• Diversified revenue streams

• Business subscriptions• Market segments + Collaboration• Products + Video

“Many”

r

• Products + Video• Regions + Emerging• Targets + Businessr

2012 d b d2012 and beyond

• Platform• Balance of revenue streams

M ltiple market segments“Any” • Multiple market segments• Established products• Regional ubiquity• Mature target markets

Any

r• Mature target markets

What will our business look like in 2011?

• We will more than double revenue• We will more than double revenue

• While maintaining segment margins of around 18-20%margins of around 18-20%

• With more diversified revenue streams (telecom service &streams (telecom, service & licensing, and advertising)

One of the fastest growingOne of the fastest growing 5 year olds in history

With accelerating growth and outstandingWith accelerating growth, and outstanding fundamentals

Attacking an enormous opportunity, and positioned to winto win

Business is getting strongerBusiness is getting stronger

Our business model &Our business model &Our business model &operational excellenceOur business model &operational excellenceoperational excellenceoperational excellence

March 11, 2009

What you heard today…What you heard today…

What o can e pectWhat o can e pect…What you can expectf i th f t

…What you can expectf i th f tfrom us in the futurefrom us in the future

We play in very attractive markets

eCommerce Online

PaymentsOnline

Communications

$1.4T

$0.6T$0.4T

$

future2008 future2008 2008 future

Source: External estimates & internal analysis

We have the three leading brands on the web

• $5.6B Rev 2008 with 14% 06 08 CAGR

• $2.4B Rev in 2008 with 29% 06 08 CAGR

• $0.6B Rev in 2008 with 68% 06 08 CAGR14% 06-08 CAGR

• ~$60B GMV 2008

• 13% share of global

29% 06-08 CAGR

• ~$60B TPV in 2008

• 9% share of global

68% 06-08 CAGR

• More than 100B Skype calling minutes• ~13% share of global

eCommerce

• ~86M active users

• ~9% share of global eCommerce

• ~70M active users

g

• ~400M registered users

Proven and powerful business models

Strong cash Very high growth

High growth engine …

ggeneration…attractive growth …

good marginsg

good marginsattractive margins

Generating excellent cash flows… Generating excellent cash flows

M&A: Using financial strength to extend our reach

Strengthen Extend Acquire geographic footprint

formats / products

key technologiesp p g

A significantly diversified portfolio

20082004 2008StubHubOther MP

BML

Text & Graphical Ads

ClassifiedsAdjacencies Other MP

Adjacencies

AuctionsClassifieds

Auctions

Fixed price

$

Fixed price

$3.3B$8 5B$8.5B

An expanding global footprint

North America48% of total

Europe41% of total

Asia11% of total

Up 30%

Up 149%

Up 44%

$1 0$1.0Billion$0.4

Billion$3.5Billi

$2.4Billi

$4.1Billi

$3.2Billi

2006 2008 2006 2008 2006 2008

BillionBillionBillionBillion

Portfolio has generated excellent financials

Free cash flow*Non-GAAPEPS*

Revenue

23%

$7.7B

$8.5B

$6.0

$7.7B

26% 14%$4.6

$1 71 $2 2 $2.3B

$0.86$1.05

$1.53 $1.71 $1.6B $1.7B$2.2

‘05 ‘06 ‘07 ‘08 ‘05 ‘06 ‘07 ‘08 ‘05 ‘06 ‘07 ‘08

* Reconciliation in appendix

Attractive returns on invested capital

ROIC*

25% 27%23%

18%18%

2005 2006 2007 2008

* Reconciliation in appendix

2008 was a tough year …

Full year performance was ok …

T Li

2008 1st half 2nd half

U 11% 22% 2%Top Line Up 11% 22% 2%

Non-GAAP EPS* Up 12% 25% 0%

Free cash $2 3B 23% -9%flow*

$2.3B 23% -9%

… but a brutal second half!* Reconciliation in appendix

... and 2009 will be a challenging year

• A tough economy

• Turnaround effort continues in MarketplacesMarketplaces

• Significant headwind from strong US dollarg g

• Two acquisitions in 4Q 2008 … will be dil i i 2009dilutive in 2009

• Strong balance sheet but cash balances• Strong balance sheet … but cash balances will earn less

Positioning for the future: Clear priorities

• Capitalize on PayPal’s enormous potential

• Transition the core eBay platform for

Capitalize on PayPal s enormous potential

today’s consumer with alternative formats

• Skype to be all it can be

• Operating smarter … create capacity to invest

PayPal Merchant Services … ~$30B TPV

Merchant services revenue

Strong growth despite difficult economic conditions…

…will continue to grow rapidly over next 3 yrs

2011201020092008Q4 08Q3 08Q2 08Q1 08

PayPal On eBay … ~$30B TPV

On-eBay Revenue

Decelerating along with eBay core GMV…

…increased penetration will drive growth

2011201020092008Q4 08Q3 08Q2 08Q1 08

PayPal: the business model

Great deals for merchants Consumer funding choice

(T ti )Risk management

(F d l )(Global take rate) (Transaction expense) (Fraud losses)

‘05 ‘06 ‘07 Future

stable declines stable / down

‘08 ‘05 ‘06 ‘07 Future‘08 ‘05 ‘06 ‘07 Future‘08

… ~60% transaction margin business

PayPal: Capitalizing on enormous potential

$4 - $5Bi 2011

PayPal revenue

in 2011

BML/AdjacentBML/Adjacent payments

40% range

30% range Merchantservices

low singledigits On eBay

2008 2009 2010 2011

2009-20112009 2011CAGRs

Marketplaces: Broad choice of formats



Buyers Sellers

VerticalExperiences

Marketplaces Fixed Price format … $22B GMV

Doubledi it CAGR

Fixed price revenue . . . $2B 2008

with double digit growth…

digit CAGR

and huge growth potential

2011201020092008Q4 08Q3 08Q2 08Q1 08

fx-neutral excluding vehicles.

Marketplaces: Complementary formats

Advertising Classifieds~2X2008

~2X2008revenue revenue2008 2008

2008 2011 2008 2011

Auction format: $23B GMV

CAGR in negative double

Auction revenue . . . $2B 2008egat ve doub e

digit rangeA differentiated format…Smaller before stabilizing

2011201020092008Q4 08Q3 08Q2 08Q1 08

fx-neutral excluding vehicles.

Marketplaces: A state of transition

$5 - $7Bi 2011


in 2011

Other

~2X 2008 levels

V hi lClassifiedsAdvertisingOther

Fi d i

Vehicles

smaller before bigger

Fixed price

2008 2009 2010 2011

Auction

2008 2009 2010 2011

Skype: Powerful standalone business

$1B +Skype revenue

$1B +in 2011

30% range 2009-2011CAGRCAGR

2008 2009 2010 2011

Strengthening the portfolio

$ $$8 5B

$10 - $12B2011 REV

$8.5B2008 REV

Auctions

Auctions

Fixed price

Auctions

p

Fixed priceMP MS&O

MP MS&O

B ildi bi d tB ildi bi d tBuilding a bigger and stronger portfolio will require investments

Building a bigger and stronger portfolio will require investmentsportfolio will require investments …portfolio will require investments …

… we will need to operate smarter in d t f d i t t

… we will need to operate smarter in d t f d i t torder to fund our investments …order to fund our investments …

Achieving full potential requires…

Operating smarter

Significant in estment$2B over 3 yearssmarter investment$ y

CustomerLower processing costs

Customerretention / loyalty

Improved customer

User experience / search / platform

customer experience

O i iImproved trust /

Organizationsimplification

comprehension

Operating smarter: we’ve simplified the org

Simplified organization by removing ~10% of HC ~$450y g

Million

Q3 ‘08 ending HC 3 yr savingsQ3 08 ending HC 3 yr savings

Operating smarter … improved customer experience

We spent $700M in 2008 on customer support …

Drive Down ContactsEliminate Root Causes

20072007

2008

R i t i b tt t i

$300M in savings … more satisfied customers

… Reinvest in a better customer experience

Operating smarter: Lower processing costs

We spent $700M in 2008 in processing PayPal transactions …

P idi g L hi gProviding consumer choice

Launching new products

ANNESSA: IANNESSA: I don’t know where these images are

Cards BalanceBank

images are

Higher Lower

… lowering processing costs … reinvestment/comprehension

g

Operating smarter to create capacity to invest

High growth lowermargin business

Operationalexcellence

Reinvest

O i M i LOperating Margin Levers

FX Business Mix

Ops Excellence

ReinvestmentMix Excellence

Appendix

Reconciliation of GAAP to Non-GAAP EPS

Twelve Months EndedDecember 31, December 31, December 31, December 31, December 31,

(in millions) 2004 2005 2006 2007 2008

GAAP net income (loss) $ 778.2 $ 1,082.1 $ 1,125.6 $ 348.3 $ 1,779.4 Stock-based compensation expense 5.8 31.8 317.4 301.8 352.1 Employer payroll taxes on stock based compensation 17 5 13 0 5 3 6 9 3 1

Twelve Months Ended

Employer payroll taxes on stock-based compensation 17.5 13.0 5.3 6.9 3.1 Amortization of acquired intangible assets (1) 65.9 128.9 214.9 223.7 264.1 Restructuring - - - - 49.1 Impairment of goodwill - - - 1,390.9 - Gain on sale of equity investment (6.4) (2.3) - - - Income taxes associated with certain non-GAAP entries (31.5) (50.5) (171.6) (165.4) (202.9)

Non GAAP net income $ 829 5 $ 1 203 0 $ 1 491 6 $ 2 106 2 $ 2 244 9Non-GAAP net income $ 829.5 $ 1,203.0 $ 1,491.6 $ 2,106.2 $ 2,244.9

Diluted net income per share: GAAP net income per diluted share $ 0.57 $ 0.78 $ 0.79 $ 0.25 $ 1.36 Non-GAAP net income per diluted share $ 0.61 $ 0.86 $ 1.05 $ 1.53 $ 1.71

Shares used in non-GAAP diluted share calculation 1,368 1,394 1,425 1,376 1,313

(1) Includes amortization of acquired intangible assets within cost of net revenues and operating expenses.

Calculation of FCF

December 31, December 31, December 31, December 31, December 31,Twelve Months Ended

, , , , ,(in millions) 2004 2005 2006 2007 2008

GAAP operating cash flow $ 1,285.3 $ 2,009.8 $ 2,247.8 $ 2,641.3 $ 2,882.0 Purchases of property and equipment, net (292.8) (338.3) (515.4) (454.0) (565.9) Proceeds from sale of Proceeds from sale of

corporate aircraft - 28.3 - - - Payment of headquarters facility lease obligation - (126.4) - - -

Free cash flow $ 992.5 $ 1,573.4 $ 1,732.4 $ 2,187.3 $ 2,316.1 , , , ,

Calculation of RoICCalculation of RoIC(in thousands, except percentages)

Numerator components: Q4'04 Q1'05 Q2'05 Q3'05 Q4'05 Q1'06 Q2'06 Q3'06 Q4'06 Q1'07 Q2'07 Q3'07 Q4'07 Q1'08 Q2'08 Q3'08 Q4'08Non-GAAP operating income 313,859$ 367,424$ 406,390$ 393,551$ 448,070$ 460,687$ 460,427$ 464,493$ 575,007$ 593,445$ 594,664$ 593,445$ 754,979$ 701,364$ 700,487$ 674,318$ 667,958$ T t 33% 29% 30% 34% 28% 29% 28% 27% 29% 26% 25% 10% 24% 23% 22% 17% 24%Tax rate 33% 29% 30% 34% 28% 29% 28% 27% 29% 26% 25% 10% 24% 23% 22% 17% 24%Non-GAAP operating income after tax 209,658$ 260,871$ 286,233$ 260,176$ 322,338$ 325,244$ 332,889$ 337,825$ 406,703$ 441,523$ 447,544$ 531,845$ 576,276$ 540,892$ 549,673$ 559,684$ 508,685$

Denominator components: Q4'04 Q1'05 Q2'05 Q3'05 Q4'05 Q1'06 Q2'06 Q3'06 Q4'06 Q1'07 Q2'07 Q3'07 Q4'07 Q1'08 Q2'08 Q3'08 Q4'08Total assets 7,991,051 8,589,158 9,033,122 9,626,043 11,788,986 12,568,535 13,250,251 13,463,118 13,494,011 13,920,051 14,361,157 14,786,812 15,366,037 15,046,305 15,021,625 14,240,157 15,592,439 Total cash, cash equivalents and investments 3,278,338 3,465,015 3,848,937 3,929,828 2,943,599 3,528,735 4,010,778 3,795,865 3,495,486 3,519,880 3,793,677 4,461,775 5,035,692 4,108,141 4,181,717 3,777,482 3,458,840Total cash, cash equivalents and investments 3,278,338 3,465,015 3,848,937 3,929,828 2,943,599 3,528,735 4,010,778 3,795,865 3,495,486 3,519,880 3,793,677 4,461,775 5,035,692 4,108,141 4,181,717 3,777,482 3,458,840 Current liabilities 1,084,870 1,149,106 1,186,818 1,266,792 1,484,935 1,681,508 1,719,405 2,220,685 2,518,395 2,250,571 2,328,643 3,272,867 3,099,579 3,080,432 3,006,234 2,854,733 3,705,087

TTM Non-GAAP operating income after tax - 846,030$ 945,386$ 1,016,938$ 1,129,618$ 1,193,991$ 1,240,647$ 1,318,296$ 1,402,661$ 1,518,940$ 1,633,595$ 1,827,615$ 1,997,188$ 2,096,556$ 2,198,685$ 2,226,524$ 2,158,933$ TTM average total assets - 7,422,501 7,937,476 8,496,195 9,405,672 10,321,169 11,253,387 12,139,387 12,912,980 13,339,193 13,697,718 14,005,030 14,385,614 14,696,072 14,916,387 14,892,187 14,975,132 TTM 9 % f h h i l d i 3 0 8 3 4 3 223 111 3 340 3 8 3 318 486 3 366 062 3 469 3 4 9 6 3 3 3 148 3 486 641 3 36 980 3 622 6 0 3 8 8 23 3 9 4 641 4 100 390 4 09 313 3 68 468TTM 95% of average cash, cash equivalents and inves - 3,078,354 3,223,111 3,340,358 3,318,486 3,366,062 3,469,757 3,459,673 3,377,148 3,486,641 3,536,980 3,622,670 3,858,237 3,974,641 4,100,390 4,097,313 3,687,468 TTM average current liabilities - 1,012,921 1,058,852 1,132,802 1,234,504 1,353,832 1,467,892 1,674,665 1,924,986 2,078,113 2,207,540 2,518,232 2,694,011 2,806,418 2,957,551 3,062,769 3,161,622 ROIC - 25.4% 25.9% 25.3% 23.3% 21.3% 19.6% 18.8% 18.4% 19.5% 20.5% 23.2% 25.5% 26.5% 28.0% 28.8% 26.6%

(in thousands, except percentages)2005 2006 2007 2008

TTM Non-GAAP operating income after tax 1,129,618$ 1,402,661$ 1,997,188$ 2,158,933$ TTM average total assets 9,405,672 12,912,980 14,385,614 15,053,313

Full Year Ended December 31,

TTM 95% of average cash, cash equivalents and inves 3,318,486 3,377,148 3,858,237 3,906,756 TTM average current liabilities 1,234,504 1,924,986 2,694,011 3,149,213 ROIC 23.3% 18.4% 25.5% 27.0%

eBay 2009 Analyst Day

Technology

Transcript of eBay 2009 Analyst Day