Investor Relations

	eBay Inc. Revenue Model Tutorial

Last updated: February 2, 2007

Investors and analysts who want to maintain their own revenue model for eBay and its consolidated subsidiaries can access a wealth of data publicly available on our Web sites. The topics in this tutorial cover the basics of tracking new listings on ebay.com and eBay's international sites and estimating eBay transaction revenues.

Use this tutorial to help you forecast eBay's revenue based on your own assumptions and publicly available information on eBay's sites.

Important: Any revenue forecast or estimate that you derive using the methods in this tutorial is not an official forecast, opinion, or estimate of eBay, Inc. or its management. Future changes in the structure or functionality of our sites may make the methods described in this tutorial inaccurate, and we assume no obligation to update this tutorial.

This tutorial covers the following topics:

• Tracking listings on eBay
• Tracking eBay's worldwide listings
• Estimating eBay transaction revenues
• Tutorial FAQs

Tracking listings on eBay

To calculate the number of listings on ebay.com:

1. Go to eBay's Home page (http://www.ebay.com) and click the Buy tab at the top of the page.

   The Buy page appears.

2. Scroll to the bottom right of the Browse Categories section and click the link in italics labeled "See all categories..."

   

   The All Categories page now appears. On this page, you'll see four pull-down menus labeled: Category, Format, Listings, and Location.

3. Select All Categories in the Category pull-down menu.
   
   
4. Use the Format pull-down menu to calculate the number of listings on the site.

   The Format pull-down functionality works differently from country to country. For eBay.com, eBay Motors, Canada, Australia, Austria, Belgium, France, Germany, Ireland, Italy, Netherlands, Spain, and United Kingdom the following definitions apply to the Format pull-down:

   • All items - Total number of listings on the site including Auction, Fixed Price and Classifed Ads.
   • Fixed Price Items - Listings offering the Buy It Now option. Note: The name of the value in this pull-down menu was previously Buy It Now Items. Selecting this option does not include Store Inventory items.
   • Auction Items - Listings available through online auction.
   • Classifed Ads Listings - Listings in the Classifed Ads.
   • Store Inventory Items - Listings in Store Inventory format with longer durations that have different Insertion and Final Value Fee structures. This option is a subset of the next option.
   • All Items in Stores - Listings by sellers with Stores, regardless of format.

   Selecting All Items in the pull-down menu will result in the total number of Auction, Fixed Price and Classifed Ads listings only. This option does not include Store Inventory format listings. You must count Store Inventory items separately (select Store Inventory Items in the pull-down menu) and add the two totals together to obtain the total number of Auction, Fixed Price, Classifed Ads and Store Inventory listings for the site.

   For Hong Kong, India, Poland, Singapore and Switzerland the following definitions apply to the Format pull-down:

   • All items - Total number of listings on the site including Auction, Fixed Price, Classifed Ads and Store Inventory items.
   • Fixed Price Items - Listings offering the Buy It Now option and Store Inventory Items. Note: The name of the value in this pull-down menu was previously Buy It Now Items.
   • Auction Items - Listings available through online auction.
   • Classifed Ads Listings - Listings in the Classifed Ads.
   • Store Inventory Items - Listings in Store Inventory format with longer durations that have different Insertion and Final Value Fee structures. This option is a subset of the next option.
   • All Items in Stores - Listings by sellers with Stores, regardless of format.

   To count the total number of Auction, Fixed Price, Classifed Ads and Store Inventory listings, select All Items in the Format pull-down menu. Please note that the All Items and Fixed Price Items tabs include Store Inventory format listings.

5. Use the Listings pull-down menu to track listings on a daily or weekly basis. Both are generally accepted methods for capturing listings.
   
   
   1. Select Starting Today if you track listings on a daily basis.
      
      This captures all listings added to the site within the previous 24 hours. To capture listings accurately using this method, you should count listings at approximately the same time each day.
      
      
   2. Select All Active if you track listings on a weekly basis.
      
      This captures all items that are currently available on the site. If you choose this approach, you will need to make an estimate for the average duration (number of days) per listing. eBay has stated in the past that for Auction and Fixed Price listings this number is fewer than 7 days. For example, if you assumed that the average listing duration is 6 days (i.e. a given live listings count represents 6 days of new listings), then divide your average weekly count by 6. This duration number is an example given only for the purpose of illustration; you should arrive at your own assumption based on primary research. Store Inventory format items have a much longer duration and should be calculated separately.
      
      
6. Use the Location pull-down menu to count items by location.
   
   Select Listed on eBay.com to capture items located both in the US and items listed by non-US sellers on ebay.com.
   
   Note: These listings will not directly correspond with revenues derived in the U.S., because they also include revenues from non-US sellers on eBay. As a reminder, eBay revenue is recognized based on the location of the seller.
   
   
   
   
7. Click the Show button to refresh the page with listing counts by category that correspond with your selections. Once you have recorded the listing counts on this page, repeat the process with a different selection in the Format pull-down menu (for example, suppose that you previously selected All Items, now select Store Inventory Items).
   
   

After tracking listings using the steps outlined above, you will have successfully recorded substantially all of the listings on the ebay.com site.

Tracking eBay's worldwide listings

To capture substantially all listings on the eBay worldwide platform, you will need to repeat the process for other eBay sites that are wholly or majority owned by eBay. A quick way to find eBay's other sites is to go the eBay's Home page (www.ebay.com). Locate the Global Sites pull-down menu at the bottom left of the page, select the site you are looking for, and click Go. Or you may see a list of eBay international site links at the bottom of the page that you can click to access a site directly. When you access the individual site of your choice, you can begin counting listings.

If you find it difficult to navigate any of the non-English language sites, you may choose to translate the site using any of the numerous translation services that can be found on the Internet.

Please refer to the instructions in the previous section to determine how to calculate listings for the following sites: Australia, Austria, Belgium, Canada, France, Germany, India, Italy, The Netherlands, Spain, Switzerland, United Kingdom, Singapore and Poland.

Note: The location of the Buy tab on the navigation bar at the top of the Home page is consistent on each of these eBay sites. The Buy tab always appears on the far left of the navigation bar at the top of the site's Home page. For example, on the Germany (www.ebay.de) site, the Buy tab ("Kaufen") is located in the same location as on ebay.com. Similarly, the link to the "All Categories" page can be found by scrolling to the bottom of the page and clicking the "See all categories…" link ("Alle Kategorien aufrufen..." on the German site).

Note: The Listed On pull down menu on the Austria site includes listings from the Germany site.

Items found when searching or browsing the eBay New Zealand site are actually listed on the ebay.com site; therefore, these are included in the ebay.com item counts.

The sites with direct links on the ebay.com Home page that have a different tracking process are Korea, Hong Kong, Malaysia and Philippines.

Korea

To track listings on Internet Auction, eBay's Korean subsidiary, go to the Internet Auction Home page (http://www.auction.co.kr). From the ebay.com Home page, scroll to the bottom left of the page, locate the Global Sites pull-down menu, select Korea and click Go or click the "Korea" link at the bottom of the page. On the top left portion of the page, you'll find the list of categories. Click into the bold categories. You'll find the list of categories in the selected category. Click into the bold categories again. The number on the right side of the name of the category is the total number of live listings. Repeat this process for each of the bold categories.

Note: This site does not have a "Starting Today" option; therefore, you will need to track this site on weekly basis.

Hong Kong, Malaysia, Philippines and Poland

To calculate listings on the Hong Kong, Malaysia, Philippines and Poland sites, begin at each site's Home page. As a reminder, a quick way to find the individual global sites is to go eBay's Home page (www.ebay.com). Locate the Global Sites pull-down menu at the bottom left of the page, select the site you are looking for, and click Go. Or you may see a list of eBay international site links at the bottom of the page that you can click to access a site directly. On the individual Home pages, enter an asterisk (*) in the "What Are You Looking For?" text box located at the top of the page and click Find It. This gives you the total number of listings available on the site. Alternatively, you can click into the individual categories located on the left side of each site's Home page, where you will find the total number of listings in each category.

Listings from Argentina, Brazil, Mexico, and the other Latin American sites are not included in eBay's consolidated results under transaction revenues, because eBay does not hold a majority ownership stake in MercadoLibre. Similarly, listings on craigslist—in which eBay holds a minority investment—are not included in eBay's consolidated results under transaction revenues.

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Estimating eBay transaction revenues

Starting with your listings count, you can estimate eBay transaction revenues by using a number of assumptions. The most precise way to perform these estimates is to build your model by category in the largest markets (currently the US, Germany, and the UK) and by market for the rest. A simpler (less accurate) method is to build your model with a single set of assumptions. The eBay transaction revenue can generally be estimated using the following formula:

	Total Quarterly New Listings
x	Conversion Rate
x	Average Sales Price (ASP)
=	Gross Merchandise Volume (GMV)
	GMV
x	Take Rate
=	Transaction Revenues

Conversion rate = The percentage of listings that successfully close through an Auction or a Fixed Price or Store Inventory format purchase.

Average Sales Price (ASP) = The average sales price for successfully sold listings.

Gross Merchandise Volume (GMV) = The total value of all successfully closed listings between users on eBay's trading platforms, regardless of whether the buyer and seller actually consummated the transaction.

Take rate = The percentage equivalent of GMV that eBay earns in revenue (eBay transaction revenue divided by GMV).

You will need to develop separate assumptions for quarterly new listings, ASP, and take rate for Auction and Fixed Price listings than for Store Inventory listings.

Total quarterly new listings

Historical total quarterly listings are disclosed in eBay's earnings press releases and on the Investor Relations section of eBay's Web site located at http://investor.ebay.com/fundamentals.cfm.

1. If you are tracking listings daily, simply add your daily new listings counts for the quarter.
   
   
2. If you are tracking listings weekly:
   
   
   • Estimate an average of your weekly listings counts by summing your weekly counts and dividing by the number of weeks.
     
     
   • Divide average weekly listings by average auction duration to estimate average daily listings. For example, if you assumed that the average listing duration is 6 days (a given live listings count represents 6 days of new listings), then divide your average weekly count by 6. This duration number is an example given only for the purpose of illustration; you should arrive at your own assumption based on primary research. Note that Auction and Fixed Price items can begin with durations of 1, 3, 5, 7 or 10 days.
     
     
   • Multiply average daily listings by the number of days in the quarter (for example, in 2006 there are 90 in Q1, 91 in Q2, 92 in Q3 and 92 in Q4) to estimate total quarterly listings.
     
     

To estimate total quarterly listings for Store Inventory format listings:

1. If you are tracking listings daily, add your daily new listings counts for the quarter.
   
   
2. If you are tracking listings weekly:
   
   
   • Estimate an average of your weekly listings counts by summing your weekly counts and dividing by the number of weeks.
     
     
   • Divide average weekly listings by average auction duration to estimate average daily listings. The average duration for Store Inventory listings is significantly higher than for Auction and Fixed Price listings. Store Inventory listings begin with durations of at least 30 days. Your specific assumption for average Store Inventory listing duration should be based on primary research.
     
     
   • Multiply average daily listings by the number of days in the quarter (for example, in 2006 there are 90 in Q1, 91 in Q2, 92 in Q3 and 92 in Q4) to estimate total quarterly listings.
     
     

Conversion rates and ASPs

Conversion rates and ASPs are not regularly disclosed by eBay.

Conversion rates and ASPs vary by category and site. The best way to estimate these metrics is to take a sample of completed items across categories and sites. From eBay's Home page (http://www.ebay.com), click the Buy tab (left side of the navigation bar at the top of the page). This brings you to the "Buy" page. Select a category that you would like to sample. You will now have a choice of several subcategories. Click a subcategory of your choice. On the left side of the page, about half way down, you will see several search options. Click the "Completed listings only" check box and then click Show Items. You will get details that match your search on auctions completed within the last 15 days. From this page you will be able to sample conversion rates and ASPs for that specific category. Repeat this process across a representative sample of categories to get statistically relevant estimates.

Note: You will not be able to sample conversion rates or ASPs for Store Inventory items; however, Store Inventory items generally have lower conversion rates and ASPs than Auction and Fixed Price items.

Take Rate

Take rate can be estimated by dividing eBay transaction revenues by GMV.

To forecast take rate, you can simply estimate the overall number based on historical trends, or you can estimate take rate based on the prices charged for Insertion, Feature, and Final Value Fees on our eBay Web sites. Note that fees vary by site. To estimate specific take rates using data on the site, you will need to take a sample of completed items similar to the process for estimating conversion rates and ASPs.

To view fees for Auction and Fixed Price listings:

• For ebay.com fees, go to: http://pages.ebay.com/help/sell/fees.html
• For eBay Motors fees, go to: http://pages.ebay.com/help/sell/motorfees.html
• For real estate fees, go to: http://pages.ebay.com/help/sell/realestatefees.html

To view fees for Store Inventory format listings, go to: http://pages.ebay.com/help/sell/storefees.html

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Tutorial FAQs

1. The tutorial states that you should select "Listed on eBay.com" as the value for the Location pull down-menu. However, because this includes both U.S. and non-U.S. items, it appears to be double counting when using this option to track listings internationally. Is it correct to assume that selecting Located in: US would give a clearer idea of U.S.-only transactions and hence U.S. revenue projections?

When you select Listed on eBay.com as the value in the Location pull-down menu, it includes all listings listed on ebay.com from both U.S. and non-U.S. users. If you use the same methodology for tracking the non-U.S. sites, you would not double count listings.

When you select Located in: US, it includes the listings that were listed on ebay.com by U.S. sellers, but you will miss the listings that are listed on the same site by users located in other markets.

Both revenue and listings are recognized by the location of the seller. Therefore, choosing the "Listed on" methodology will not be an exact match with revenues and listings by geography; however, it does enable you to capture all listings and apply the appropriate site-specific metrics (ASP, conversion rates, and so forth) to the listings to calculate revenue.

2. Can you explain the difference between "Store Inventory Items" and "All Items in Store"?

"Store Inventory Items" includes all items listed the Store Inventory format by eBay Store owners. "All Items in Stores" includes all Auction, Fixed Price, and Store Inventory items listed by Store owners.

3. Are eBay Taiwan listings included in eBay's quarterly new listings number?

As announced on June 5, 2006, eBay Inc. and PChome Online announced that they have agreed to form a joint venture in Taiwan. Under the agreement, the companies will leverage eBay's global experience and PChome Online's local ecommerce expertise to launch a new co-branded website that will bring new online trading opportunities to buyers and sellers in Taiwan. As of September 30, 2006, users were no longer able to create new listings on the eBay Taiwan site. All of the Taiwan listings will end on October 10, 2006 and the eBay Taiwan site will be shut down shortly after that date.

4. Are eBay China listings included in eBay's quarterly new listings number?

On December 19, 2006, eBay Inc. and TOM Online announced that they have agreed to form a joint venture in China. The agreement was completed on January 31, 2007. As of this date, listings on eBay China will no longer be included in eBay's quarterly listings count.