eBay (EBAY) Risk Analysis

Rapid, significant technological changes continue to confront the industries in which we operate, and we cannot predict the effect of technological changes on our business. We continuously strive to create new initiatives and innovations that promote growth, such as our financial services and advertising offerings, and other features that enhance the customer experience. Developing new features can be complex, time-consuming and costly, and our investments in new innovations may not yield the expected business or financial benefits. If we fail to anticipate or identify technological trends or fail to devote appropriate resources to adapt to such trends, our business could be harmed. For example, the role of AI technologies, including Gen AI, in ecommerce is increasing. We expect the importance of platform referrals from AI technologies to increase over time, as buyers and sellers increasingly rely on AI to help with buying and selling decisions. In particular, we are devoting significant capital and management time and resources to use large language models to improve our products and services and to build and expand our capabilities, including our processing capacity, proprietary datasets, machine learning models and systems. While we have substantial proprietary datasets that we believe can help us develop effective capabilities, like many companies, we are new entrants into the Gen AI space. We may be slower and less efficient than our competitors in developing our Gen AI capabilities and in optimizing and utilizing our dataset assets with other AI technologies. We may also fail to identify the AI technologies that consumers want, fail to invest sufficiently in those AI technologies, or otherwise fail to incorporate those technologies into our products and services in a timely, effective and compliant manner. Any of these outcomes could place our business at a competitive disadvantage compared to our competitors, many of whom may not yet exist or be identified. If we fail, for any reason, to receive sufficient AI referrals to our Marketplace platforms, to acquire, develop or license AI technology capabilities, to utilize our proprietary datasets effectively, or to provide our buyers and sellers the AI features that matter to them, our buyers and sellers or both may choose alternatives to eBay, which could reduce our platform traffic or profits or both, and harm our business. In addition to our own initiatives and innovations, we rely in part on third parties, including some of our competitors, for the development of and access to new technologies. We expect that new services and technologies applicable to the industries in which we operate will continue to emerge. These new services and technologies may be superior to, or render obsolete, the technologies we currently use in our products and services. Incorporating new technologies into our products and services may require substantial expenditures and take considerable time and ultimately may not be successful. For example, Gen AI is a rapidly developing technology in its early stages of commercial use and presents certain inherent risks. There is a risk that our algorithms could produce false outcomes (e.g., Gen AI hallucinatory behavior) or other unexpected results or behaviors that could harm our reputation, business, or buyers and sellers, such as containing third party copyrighted or other protected content. In some cases, we use open source Gen AI software and datasets, which may lead to intellectual property disputes, including intellectual property ownership or copyright infringement disputes. New and changing technologies, industry-wide standards, and laws and regulations can also impact our ability to develop and implement the programs, products and services that our consumers want in a timely, effective and compliant manner. For example, the AI regulatory landscape is still uncertain and evolving, and the development and use of AI technologies, including Gen AI, in new or existing products and features may be subject to new or enhanced governmental or regulatory restrictions and scrutiny, litigation, ethical concerns or other complications over time. Our future success depends not only on our ability to develop new technologies, but also on our ability to identify and adapt to the technological changes that matter to our consumers and evolving legal, regulatory and industry standards that will govern those technologies. A shift in industry standards or laws and regulations could render some of our products and services obsolete or place them at a competitive disadvantage against other consumer buying and selling alternatives. We may lack the time, resources or experience to deliver the products and services that our consumers need when they need them, which could impact our ability to attract buyer and sellers to our platforms and harm our business. For example, our AI technologies will need to comply with AI regulations in all of our markets. We expect AI regulations in certain markets, such as the European Union and the United States, to be more restrictive than in other markets, which can place us at a disadvantage compared to companies that do not focus on markets with the most restrictive AI regulations. It may be more expensive or time consuming to develop an AI technology that satisfies AI regulations in each market that we serve and we cannot guarantee we will have the time or resources to develop multiple, compliant versions of these technologies.

We and our service providers collect, store, use, retain, disclose, transfer and process a significant amount of confidential, personal and sensitive information from our users and employees, including transaction, identity, biometric, health, payments and financial information. In addition, a significant number of our users authorize us to bill their payment card accounts directly for all transactions and other fees charged by us or, in certain cases, third-party service providers utilized in our financial services. We and our service providers face a variety of cybersecurity threats and risks or inadvertent or intentional data breaches and incidents. Cybersecurity threats can take a variety of forms, including malicious software programs that attack our networks and data centers or those of our service providers, social engineering, phishing, credential stuffing, ransomware, denial or degradation of service attacks and similar types of attacks against us, our employees, users and our service providers. Due to the size of our company and the volume of confidential information we possess, we are also at risk from inadvertent and intentional data disclosure, system or access misuse, unauthorized access or other improper actions by employees and service providers. Our increasing use of Generative AI tools could also result in a greater likelihood of cybersecurity incidents, privacy violations and inadvertent disclosures of our intellectual property or other confidential information, any of which could either directly or indirectly harm our business, operations and reputation. Further, if our internal security policies, procedures and practices fail for any reason, improper access, use or disclosure of data may result. We have seen an increase in cyberattacks against us and other companies in our industry, and these attacks are increasing in sophistication. We provide cybersecurity training to our workforce. For example, we regularly train our workforce, upskill teams that handle sensitive data, and carry out bespoke trainings and tabletop exercises for leaders. We have also implemented policy, procedural, technical, physical and administrative controls intended to protect our systems from such incidents. However, no training or program can offer absolute protection against such attacks and incidents. For example, in 2014 we experienced a significant data breach involving unauthorized access to a database containing records of up to 145 million users. In the last two years, we have experienced and reported data breaches to regulators, but we do not believe these recent events were material and they did not result in any penalties or sanctions. However, future events could have a material impact on our business, results of operations or reputation. For more information about our cybersecurity risk management, governance and oversight, see "Item 1C: Cybersecurity." Future attacks are likely to be increasingly sophisticated and highly targeted, particularly due to rapid developments in AI. Within the last year, hackers unsuccessfully targeted us using an AI-generated voice impersonation of a company leader. We expect these types of attacks to continue and evolve. Our information technology and infrastructure have at times been, and may in the future be, vulnerable to cyberattacks, including ransomware attacks, or security incidents and third parties may be able to access our employee and user data, including payment and financial data, that are stored on or accessible through our systems. Any actual or attempted cyberattack, breach or data incident, or even an unfounded public rumor regarding such an attack, breach or incident, could have a material adverse effect on our business, reputation, financial condition or results of operation. eBay does not need to be the direct target of such attacks, breaches or incidents for them to have a material adverse effect on our operations. For example, a cyberattack on a key service provider, or a vulnerability in software that they use, could disrupt our services or compromise user and employee data entrusted to that service provider. We perform risk-based assessments of our service providers, but we do not control our service providers and our ability to monitor their data security is limited, so we cannot guarantee that their security measures will be adequate. In addition, we and our employees, users and service providers also may not discover a cyberattack, breach or other incident for a significant period after the incident occurs, which could amplify any adverse outcomes resulting from such incidents. We maintain cybersecurity insurance and seek to include reasonable contractual and indemnity protections in the contracts we have with our service providers. However, the amounts, if any, that we recover under an insurance policy or service provider contract may not be sufficient to adequately reimburse us from cybersecurity and data breach liabilities and losses, and the reputational damage to our business that such incidents cause.

Our systems may experience service interruptions or degradation due to hardware and software defects or malfunctions, computer denial-of-service and other cyberattacks, human error, earthquakes, hurricanes, floods, fires, natural disasters, sustained drought, power losses, disruptions in telecommunications services, fraud, military or political conflicts, terrorist attacks, computer viruses, or other events. Our systems are also subject to compromise, sabotage and intentional acts of vandalism. Some of our systems are not fully redundant and our disaster recovery planning is not sufficient for all eventualities. We have experienced and will likely continue to experience system failures, denial-of-service attacks, human error and other events or conditions from time to time that interrupt the availability or reduce the speed or functionality of our Marketplace platforms, including our payments services. These events have resulted in the past, and likely will result in the future, in loss of revenue. In addition, our use of AI involves significant technical complexity and requires specialized expertise. Any disruption or failure in our AI systems or infrastructure, or those of our third-party providers, could result in delays or errors in our operations, which could harm our business and financial results. A prolonged interruption in the availability or reduction in the speed or other functionality of our websites and mobile applications or payments services could materially harm our business. Frequent or persistent interruptions in our services could cause current or potential users to believe that our systems are unreliable, leading them to switch to our competitors or to avoid our sites, and could permanently harm our reputation and brands. Moreover, to the extent that any system failure or similar event results in damages to our customers or their businesses, these customers could seek significant compensation from us for their losses and those claims, even if unsuccessful, would likely be time-consuming and costly for us to address. We also rely on facilities, components and services supplied by third parties and our business may be materially adversely affected to the extent these components or services do not meet our expectations or these third parties cease to provide the services or facilities. In particular, a decision by any of our third-party hosting providers to close a facility that we use could cause system interruptions and delays, result in loss of critical data and cause lengthy interruptions in our services. While we carry business interruption insurance, it may not be sufficient to compensate us for losses that may result from interruptions in our service as a result of systems failures and similar events.

Our operating and financial results have varied on a quarterly basis during our operating history and may continue to fluctuate significantly as a result of a variety of factors, including the following risks and other risks set forth in this "Risk Factors" section: - our ability to convert visits into sales for our sellers;- the amount and timing of expenses;- our success in attracting and retaining sellers and buyers;- changes in consumer confidence and discretionary spending trends, including shifts in interests away from any of our major categories;- our success in executing on our strategy and the impact of any changes in our strategy;- the timing and success of product launches, including new services and features we may introduce;- the success of our marketing efforts; and - the impact of competitive and industry developments, including changes in the legal and regulatory landscape, and our response to those developments. In view of the rapidly evolving nature of our business, period-to-period comparisons of our operating results may not be meaningful, and you should not rely upon them as an indication of future performance. It is difficult for us to forecast the level or source of our revenues or earnings (loss) accurately, particularly given that substantially all of our net revenues each quarter come from transactions involving sales during that quarter. Due to the inherent difficulty in forecasting revenues, it is also difficult to forecast expenses as a percentage of net revenues. Quarterly and annual expenses as a percentage of net revenues reflected in our consolidated financial statements may be significantly different from historical or projected percentages. Because our business model is dependent upon consumer spending, our results of operations are sensitive to changes in or uncertainty about macro-economic conditions. Our buyers have at times had, and may in the future have, less capacity for discretionary purchases and may reduce their purchases from our sellers as a result of various factors, including job losses, inflation or inflationary pressure, higher taxes, reduced access to credit, changes in federal economic policy, public health issues such as a pandemic, global economic uncertainty, foreign exchange rate volatility, lower consumer confidence and demand for discretionary goods, elevated interest rates, changes in international tariff and trade policies, and geopolitical events such as the ongoing wars in Ukraine and in the Middle East.

We have acquired a significant number of businesses of varying size and scope, technologies, services, and products, and we maintain investments in certain businesses. We have also at times disposed of significant businesses or investments therein. We expect to continue to evaluate and consider a wide array of potential strategic transactions as part of our overall business strategy, including business combinations, acquisitions, and dispositions of businesses, technologies, services, products, and other assets, as well as strategic investments and joint ventures. These transactions may involve significant challenges and risks, including: - the potential that we cannot complete these transactions on our desired timeline and terms;- the loss of key customers, merchants, vendors and other key business partners of the companies we acquire, or dispose of, following and continuing after announcement of our transaction plans;- declining employee morale and retention issues affecting employees of companies that we acquire or dispose of, which may result from changes in compensation, or changes in management, reporting relationships, future prospects or the direction of the acquired or disposed business;- difficulty making new and strategic hires of new employees;- diversion of management time and a shift of focus from operating the businesses to the transaction, and, in the case of an acquisition, integration and administration;- the need to provide transition services to a disposed of company, which may result in the diversion of resources and focus;- the need to integrate new, different or more complex operations, systems (including accounting, management, information, human resource and other administrative systems), technologies, products and personnel of each acquired company, which is an inherently risky and potentially lengthy and costly process;- the inefficiencies and lack of control that may result if such integration is delayed or not implemented, and unforeseen difficulties and expenditures that may arise as a result;- the need to implement or improve controls, procedures and policies appropriate for a larger public company at companies that prior to acquisition may have lacked such controls, procedures and policies or whose controls, procedures and policies did not meet applicable legal and other standards;- risks associated with our expansion in new international markets and new areas of business;- derivative lawsuits resulting from the transaction;- anti-trust or other similar regulatory enforcements and restrictions that could delay or nullify a transaction, impose restrictions on our operations or lead to subsequent litigation;- increased costs and indebtedness associated with negotiating, financing and completing acquisitions;- exposure to regulatory regimes unfamiliar to our business, which can divert management time and company resources;- liability for activities of the acquired or disposed of company, including intellectual property, payment services and other litigation claims or disputes, violations of laws, rules and regulations, commercial disputes, tax liabilities and other known and unknown liabilities and, in the case of dispositions, liabilities to the acquirers of those businesses under contractual provisions such as representations, warranties and indemnities;- the potential loss of key employees following the transaction;- the acquisition of new customer and employee personal data by us or a third party acquiring assets or businesses from us, which in and of itself may require regulatory approval and or additional controls, policies and procedures and subject us to additional exposure;- any fluctuations in share prices, financial results and fluctuations in exchange rates, and our ability to sell our shares in any company we have invested in;- the possibility that we may not realize the expected benefits from such transactions within the anticipated time frame, or at all; and - our dependence on the acquired business' accounting, financial reporting, operating metrics and systems, controls and processes and the risk that errors or irregularities in those systems, controls and processes could lead to errors in our consolidated financial statements, increase the risk of non-compliance with existing or new laws and regulations or make it more difficult to manage the acquired business. We have made certain investments including through joint ventures and in companies in which we have a minority equity interest and/or lack management and operational control. The controlling joint venture partner in a joint venture may have business interests, strategies, or goals that are inconsistent with ours, and business decisions or other actions or omissions of the controlling joint venture partner or the joint venture company may result in harm to our reputation or adversely affect the value of our investment in the joint venture. Any circumstances, which may be out of our control, that adversely affect the value of our investments, or cost resulting from regulatory action or lawsuits in connection with our investments, could harm our business or negatively impact our financial results. As a result of a prior transaction, we own a significant number of Aurelia Netherlands TopCo B.V. ("Aurelia") shares, representing approximately 8.3% of the outstanding equity of Aurelia. Because Aurelia is a privately held company without a readily determinable fair value and over which we are not able to exercise significant influence, our investment is accounted for under the measurement alternative where the carrying value is measured at cost minus impairment, if any, plus or minus changes resulting from observable price changes in orderly transactions for an identical or similar investment. The value of our investment in Aurelia could fluctuate due to factors outside of our control, and a decline in value could require us to record an impairment, which could have a material adverse impact on our financial results. In addition, any decline in value could impact our ability to exit our investment on favorable market terms or our ability to liquidate the shares. Our ability to sell Aurelia shares is also constrained by certain contractual obligations. Any of these potential issues, if realized, could harm our business or negatively impact our financial results.

Our future performance depends substantially on the continued services of our senior management and other key employees, including highly skilled engineers and product developers, and our ability to attract, retain, and motivate them. Competition for highly skilled individuals is intense, especially in the Silicon Valley where our corporate headquarters are located, and we may be unable to successfully attract, integrate or retain sufficiently qualified employees. In making employment decisions, particularly in the Internet and high-technology industries, employees often consider the value of their total compensation, including share-based awards such as restricted stock units, that they could receive in connection with their employment. In addition, our employee hiring and retention also depend on our ability to build and maintain a welcoming workplace in which our employees feel they belong. If our share-based or other compensation programs cease to be viewed as competitive, including due to fluctuations in our stock price, or our workplace is not viewed as welcoming, our ability to attract, retain, and motivate employees could be weakened, which could harm our business. Additionally, legal or regulatory developments relating to immigration could affect our ability to attract, hire and retain personnel. We do not have long-term employment agreements with any of our key employees and do not maintain any "key person" life insurance policies outside of policies we may assume as part of an acquisition. The loss of the services of any of our senior management or other key employees, or our inability to attract highly qualified senior management and other key employees, could harm our business. Our business is primarily non-unionized, but we have some works councils outside the United States and have seen some unionization amongst the employees of one of our subsidiaries in the United States The unionization or related activism of significant employee populations, including in the United States, could result in higher costs and other operational changes necessary to respond to changing conditions and to establish new relationships with worker representatives. In addition, we have announced restructuring plans that include workforce reductions in the past, such as our announcement in, January 2024, and we may make similar announcements in the future. Any such restructuring plans, reductions in force or other cost-cutting measures could divert management attention, adversely affect employee morale and turnover, and damage our reputation as an employer, which could increase the difficulty of attracting, retaining and motivating qualified personnel and maintaining our corporate culture. Further, our reduced headcount following such restructuring plans and any further turnover may increase the difficulty of executing on our plans, including due to the loss of historical, technical or other expertise, which may have an adverse effect on our business, prospects and results of operations.

A number of third parties provide services to us or to our sellers. Such services include seller tools that automate and manage listings, merchant tools that manage listings and interface with inventory management software, storefronts that help our sellers list items, shipping providers that deliver goods sold on our platform, payments and financial services, item authentication services, services that we leverage for using and developing AI technologies (including Gen AI), and third-party traffic drivers such as search engines and social networks, among others. Financial or regulatory issues, labor issues (e.g., strikes, lockouts, worker shortages or work stoppages), or other problems that prevent these companies from providing services to us or our sellers could harm our business. Price increases by, or service terminations, disruptions or interruptions at, companies that provide services to us and our sellers and clients could also reduce the number of listings on our platforms or make it more difficult for our sellers to complete transactions, thereby harming our business. In addition, domestic or international shipping and postal rate increases may reduce the competitiveness of certain sellers' offerings, and postal service changes and disruptions could require certain sellers to utilize alternatives which could be more expensive, slower or inconvenient, which could in turn decrease the number of transactions on our sites, thereby harming our business. We have outsourced certain functions to third-party providers, including some customer support, payments and financial services, product development functions and some of our item authentication services, which are critical to our operations. If our service providers do not perform satisfactorily, our operations could be disrupted, which could result in user dissatisfaction and could harm our business. Third parties who provide services directly to us or our sellers may not continue to do so on acceptable terms, or at all. If any third parties were to stop providing services to us or our sellers on acceptable terms, including as a result of bankruptcy, we may be unable to procure alternatives from other third parties in a timely and efficient manner and on acceptable terms, or at all.

Our eBay Money Back Guarantee program is intended to compensate users who believe that they have not received the item that they purchased or have received an item different from what was described. We expect to continue to receive communications from users requesting reimbursement or threatening or commencing legal action against us if no reimbursement is made. Litigation, legislation, or regulation involving liability for any seller fraud or non-performance could result in increased costs of doing business, lead to adverse judgments or settlements or otherwise harm our business. In addition, affected users may complain to regulatory agencies that could take action against us, including imposing fines or seeking injunctions. Since transitioning to our payments platform, we have experienced and may continue to experience increased costs from chargebacks on payments, due to instances of forced transaction reversals initiated by buyers through their payment card issuers. These forced transaction reversals can be initiated for a number of reasons, including, but not limited to, alleged seller fraud or nonperformance. Additionally, to further strengthen our buyers' confidence and trust in our services and the goods offered on our Marketplace platforms, we offer authentication services, including our Authenticity Guarantee program. These services are available in certain of our categories and markets. If we are unable to effectively manage the authentication process, including the third-party service providers on which we rely for a significant volume of our item authentication, or if our buyers and sellers do not value these processes, we may suffer harm to our reputation and may be subject to litigation, which could be costly and time consuming for us and harm our business.

The businesses and markets in which we operate are intensely competitive. We currently and potentially compete with a wide variety of online and offline companies providing similar goods and services to consumers and merchants, some of which are well-established brands with greater resources and larger user communities than our own. The Internet and mobile networks provide new, rapidly evolving and intensely competitive channels for the sale of all types of goods and services. We compete as a two-sided marketplace, and we must attract both buyers and sellers to use our platforms. Consumers who purchase or sell goods and services through us have many and increasing alternatives, and merchants have more channels to reach consumers. We expect competition to continue to intensify. The barriers to entry into these channels can be low, and businesses can easily launch online sites or mobile platforms and applications at nominal cost by using commercially available software or partnering with any of a number of successful ecommerce, search, advertising or social media companies. As we respond to changes in the competitive environment, we have made, and expect in the future to make pricing, service, policy or marketing decisions or acquisitions that may be controversial with and lead to dissatisfaction among sellers or buyers. Any increase in seller or buyer dissatisfaction could negatively impact our revenue generation model, our costs or our business operations, any of which could reduce activity on our platform and harm our reputation and profitability. We face increased competitive pressure online and offline. In particular, the competitive norm for, and the expected level of service from, ecommerce and mobile commerce has significantly increased due to, among other factors, improved user experience, greater ease of buying goods, lower (or no) shipping costs, faster shipping times and more favorable return policies. In addition, certain platform businesses, such as Alibaba, Alphabet (Google), Amazon, Apple and Meta (Facebook and Instagram), are larger than we are, have greater resources, have a dominant and secure position in other industries or certain significant markets, or offer other goods and services to consumers and merchants that we do not offer, which can drive consumers to, and keep them locked-in to, their platforms instead of ours. If we are unable to change our products, offerings and services in ways that reflect the changing demands of ecommerce and mobile commerce marketplaces, including if our sellers are unable to source items or we are unable to provide service levels (some of which depend on services provided by sellers on our platforms) in line with consumer expectations, we may not compete effectively with and adapt to changes in larger platform businesses, and our business and reputation could suffer. Competitors with other revenue sources or greater resources may also be able to devote more resources to marketing and promotional campaigns and buyer acquisition, adopt more aggressive pricing policies and devote more resources to website, mobile platforms and applications and systems development than we can. Other competitors may offer faster and/or free shipping, same-day delivery, more favorable return policies and other superior transaction-related services that improve the user experience on their sites, which could be impractical or inefficient for our sellers to match. Competitors may be more narrowly focused on particular types of goods and create compelling communities and may be able to innovate more quickly and efficiently, and new technologies may increase these competitive pressures by enabling competitors to offer more efficient or lower-cost services. Some of our competitors control products and services that are important to our success, including payment processing, Internet search, social media, Gen AI features powered by large language models, shipping and delivery resources and mobile operating systems. Such competitors could manipulate pricing, availability, terms or operation of service related to their products and services in a manner that impacts our competitive offerings. For example, Alphabet, which operates a shopping platform service, has from time to time made changes to its search algorithms that have reduced the amount of search traffic directed to us from searches on Google. If we are unable to use or adapt to operational changes in such services, we may face higher costs for such services, face integration or technological barriers or lose customers, which could harm our business. Consumers that buy goods on our platforms have a wide variety of alternatives that compete against us regardless of their size or resources, including traditional department, warehouse, boutique, discount and general merchandise stores (as well as the online and mobile operations of these traditional retailers), online retailers and their related mobile offerings, direct-to-consumer offerings by makers of goods, online aggregation and classified services, social media platforms and other shopping channels, such as offline and online home shopping networks. In addition to generalist retailers, consumers may also use a large number of online and offline channels that are focused on one or more of the categories of products offered on our sites. Consumers that buy goods on our platforms can also turn to many companies that offer a variety of services that provide other channels to find what they are looking for, including social media, online aggregation and classifieds platforms, such as Facebook Marketplace or craigslist. These consumers can also turn to shopping-comparison sites, such as Google Shopping, or social networks that enable purchases such as Instagram and TikTok. Our competitors may partner with one another and create product offerings or implement advertising or marketing strategies that may be more compelling to customers than our standalone experience. In certain markets, our fixed-price listing and traditional auction-style listing formats are increasingly being challenged by other formats, such as social commerce and business models, such as free-to-sell marketplaces. We use product search engines and paid search advertising to help users find our sites, but these services also have the potential to divert users to other online shopping destinations. These consumers may choose to search for products and services with a horizontal search engine or shopping comparison website, and such sites may also send users to other shopping destinations. In addition, sellers are increasingly utilizing multiple sales channels, including search-related advertisements on horizontal search engine sites, such as Google, to attract new customers. We expect Gen AI to have a significant impact on the future of ecommerce, as AI technologies become increasingly important for consumers buying and selling goods online. If we are unable to identify popular Gen AI providers and AI technologies, or if we fail to utilize those technologies or develop our own technologies, our business may be harmed. For example, consumers may increasingly search for products using chatbots, virtual assistants or other Gen AI technologies powered by large language models instead of using traditional search engines. If current and future AI technologies do not send referrals to eBay at the rate of traditional search engines for any reason, the amount of buyer and seller traffic using our platforms could decrease, which could negatively impact on our business and results of operations. Consumers and merchants that sell goods on our platforms also have many alternatives, including general ecommerce marketplaces, such as Amazon and Alibaba, and more specialized marketplaces that focus on discrete categories of products. Sellers may also choose to sell their goods through alternative channels, such as multi-channel services like Shopify or social media platforms. Consumers and merchants also can create and sell through their own sites and may choose to purchase online advertising instead of using our services. Any of these alternatives or specialists may be able to more quickly and efficiently deliver attractive consumer experiences, which could drive consumers away from our Marketplace platforms and harm our business. Although eBay has global reach, there are ecommerce businesses in many locations that have larger local customer bases or greater brand recognition than we do in those locations and markets. Regardless of their size or brand recognition, local competitors may have a better understanding of local culture and commerce and be better positioned to quickly and effectively deliver the experiences that these local consumers want, which could drive down consumer traffic to our Marketplace platforms and harm our business. We expect to increasingly compete with local competitors in developing countries that have these or other unique advantages, such as a greater familiarity with, and ability to operate efficiently under, local regulatory authorities. Our business is designed to appeal broadly to a diverse global community of buyers and sellers. In recent years, our growth strategy has increasingly emphasized certain specialized categories that we call Focus Categories. Examples of these Focus Categories include motor parts and accessories, collectibles, refurbished goods, and authenticated luxury items. However, buyers and sellers in our Focus Categories often have unique product and service needs. We devote substantial time and resources to ensuring that we provide the platform experiences that our focus category consumers and consumers broadly want. In doing so, we compete with smaller, specialized ecommerce sites that cater to the buyers and sellers in these product categories. Because of the size and complexity of our Marketplace platforms, we may fail to address the unique needs of focus category buyers and sellers as quickly and efficiently as specialist competitors. If we fail to timely deliver the product features desired in our focus and other categories, we may lose customers to the specialist competitors that serve these categories, which could reduce our consumer base and harm our business and operating results. We generate a meaningful amount of our revenue from our Promoted Listings (a first-party advertising offering) and, to a lesser extent, third-party advertising. To sustain or increase our advertising revenue, we must continue to provide customers with compelling advertising products to maintain or increase the amount of advertising purchased through our platform. If we are unable to compete effectively for advertising spend, our business and operating results could be harmed. In addition, certain manufacturers or brands may seek to limit or cease distribution of their products through online channels, such as our sites. Manufacturers may attempt to use contractual obligations or existing or future government regulations to prohibit or limit ecommerce in certain categories of goods or services. Manufacturers may also attempt to enforce minimum resale price maintenance or minimum advertised price arrangements to prevent distributors from selling on our platforms or on the Internet generally, or drive distributors to sell at prices that would make us less attractive relative to other alternatives. The adoption of those or other policies could adversely affect our results of operations and result in loss of market share and diminished value of our brands. The principal competitive factors for us include the following: - ability to attract, retain and engage buyers and sellers;- volume of transactions and price and selection of goods;- trust in the seller and the transaction;- customer service;- brand recognition;- community cohesion, interaction and size;- website, mobile platform and application ease-of-use and accessibility;- system reliability and security;- reliability of delivery and payment, including customer preference for fast delivery and free shipping and returns;- level of service fees; and - quality of search tools. While we believe we compete effectively across these factors, our competitors, including any of the businesses, channels and buying and selling alternatives discussed above, may be more successful across these factors either globally or in important local markets, which could reduce the number of buyers and sellers on our Marketplace platforms, and materially adversely affect our results of operations and business.

Our international businesses, especially in the United Kingdom, Germany and Australia, and cross-border business from greater China, have generated approximately half of our net revenues in recent years. In addition to uncertainty about our ability to generate revenues from our foreign operations and expand into international markets, there are risks inherent in doing business internationally, including: - uncertainties and instability in economic and market conditions resulting from inflationary pressures, increasing interest rates and the ongoing wars in Ukraine and in the Middle East;- uncertainties caused by decreasing consumer confidence and demand for discretionary goods;- expenses associated with localizing our products and services and customer data, including offering customers the ability to transact business in the local currency and adapting our products and services to local preferences (e.g., payment methods) with which we may have limited or no experience;- economic and trade sanctions, trade barriers or other restrictions on foreign trade and changes in trade regulations and restrictions, including between the United States and other countries;- difficulties in developing, staffing, and simultaneously managing a large number of varying foreign operations as a result of distance, language, and cultural differences;- stringent local labor laws and regulations;- credit risk and higher levels of payment fraud;- profit repatriation restrictions, foreign currency exchange restrictions or extreme fluctuations in foreign currency exchange rates for a particular currency;- global or regional economic conditions that impact companies and customers with which we do business;- political or social unrest, economic instability, repression, or human rights issues;- geopolitical events, including natural disasters, public health issues (including pandemics), acts of war (such as the ongoing wars in Ukraine and in the Middle East), and terrorism;- supply chain challenges, including fluctuations in shipping costs, limitations on shipping and receiving capacity, and other supply chain disruptions;- import or export regulations, including the complexities of seller compliance with "de minimis thresholds," trade policies and tariffs in any of the countries where we operate or our users exist, customs and other parallel regulations across the broad range of categories and products offered on our platforms;- compliance with U.S. laws such as the Foreign Corrupt Practices Act, and foreign laws prohibiting corrupt payments to government officials, as well as U.S. and foreign laws designed to combat money laundering and the financing of terrorist activities;- antitrust and competition regulations;- potentially adverse tax developments and consequences;- economic uncertainties relating to sovereign and other debt;- different, uncertain, or more stringent user protection, data protection, data localization, privacy, AI and other data and consumer protection and environmental laws;- risks related to other government regulation or required compliance with local laws;- national or regional differences in macroeconomic growth rates;- payment intermediation regulations;- local licensing and reporting obligations; and - increased difficulties in collecting accounts receivable. Violations of the complex foreign and U.S. laws and regulations that apply to our international operations may result in fines, criminal actions, or sanctions against us, our officers, or our employees; prohibitions on the conduct of our business; and damage to our reputation. The United States government (including the Department of Treasury's Office of Foreign Assets Control and the Department of Commerce's Bureau of Industry and Security) and other jurisdictions and international bodies have imposed sanctions and export controls that prohibit us and our customers from engaging in trade or financial transactions with certain countries, businesses, organizations and individuals. In addition to the aforementioned adverse effects, these restrictions could also require us to divest certain of our businesses and assets and restrict our ability to operate in certain jurisdictions. Export control and economic sanctions laws and regulations are complex and likely subject to frequent changes, and the interpretation and enforcement of the relevant regulations involve substantial uncertainties, which may be driven by political and/or other factors that are out of our control or heightened by national security concerns. Although we have implemented policies and procedures designed to promote compliance with these laws, there can be no assurance that our employees, contractors, agents, or customers will not violate our policies. These risks inherent in our international operations and expansion increase our costs of doing business internationally and could harm our business. Cross-border trade is an important source of both revenue and profits for us. Cross-border trade also represents our primary (or in some cases, only) presence in certain important markets, such as China, and various other countries. The interpretation and/or application of laws, such as those related to intellectual property rights of authentic products, selective distribution networks, and sellers in other countries listing items on the Internet, could impose restrictions on, or increase the costs of, purchasing, selling, shipping, or returning goods across national borders. The shipping of goods across national borders is often more expensive and complicated than domestic shipping. Changes to customs authorities' "de minimis" thresholds, as well as increased costs or fees for third party sellers, logistics providers, or online marketplaces associated with changes in customs policy, tariffs, and any other trade policies that increase the costs of cross-border trade or restrict, delay, or make cross-border trade more difficult or impractical would lower our revenues and profits and could negatively affect cross-border trade in countries where we conduct our business, which could reduce the number of consumers using our platforms and harm our business and results of operations. Several countries are considering or have implemented tariffs or other trade barriers or restrictions, as well as other measures impacting cross-border commerce, which could negatively affect our business and our users. The United States has implemented tariffs on certain foreign goods and may implement additional tariffs in the future. For example, in February 2025, the U.S. administration issued three Executive Orders imposing tariffs of 25% on goods imported from Canada and Mexico and an additional 10% on goods imported from China (including Hong Kong). The tariffs on imports from China took effect on February 4, 2025, while the tariffs on imports from Canada and Mexico were suspended until March 4, 2025. Such tariffs would eliminate the "de minimis" exemption from customs duties and taxes for imported goods falling below a threshold value. The elimination of the "de minimis" rule is paused pending the implementation of a system to collect tariffs on such imports. Such actions could give rise to an escalation of trade measures by the United States and impacted countries. For example, after the tariffs on goods imported from China went into effect, China announced retaliatory tariffs on certain goods imported from the United States. In addition, in February 2025, the U.S. administration announced plans to levy reciprocal tariffs against countries taxing U.S. imports. Developments with regard to the timing and manner in which tariffs will be implemented, the amount, scope and nature of tariffs, the countries subject to new or additional tariffs imposed by the United States, and tariffs imposed by other countries on goods imported from the United States are rapidly evolving and may change unexpectedly at any time. Trade policy developments in the countries in which our buyers and sellers operate or procure their items, could significantly impact the cost of items sold internationally on our Marketplace platforms, limit our ability and the ability of our sellers to offer and deliver products on a timely or cost-effective basis, or otherwise adversely impact our consumers' ability to sell products on our platforms. Further, adapting to new and changed trade restrictions can be expensive, time-consuming and very disruptive to our buyers and sellers. For example, tariffs generally apply based on the manufacturing location, rather than the selling location, of goods. These distinctions can be confusing for our sellers and lead to platform solutions that fail to satisfy all of our consumers. If we fail to quickly develop compliant shipping services that take manufacturing location into account when calculating tariff payments, our business to consumer sellers may be dissuaded from using our platforms. However, those same services may dissuade our consumer to consumer sellers from using our platforms, because they serve to increase the cost of the items they are selling. Any change to the cost of buying and selling goods internationally, or even the public perception that such changes are imminent or could occur in the future, may reduce consumer confidence and the number of consumers using our platforms, drive consumers to alternative competitors or buying and selling channels and lead to a decrease in buying and selling on our platforms. Any such outcome could materially harm our consumers and our business, financial performance and results of operations. Although we are closely monitoring these developments to adapt to changing trade policies, there can be no assurances that we will be successful in mitigating any negative impacts.

Our users may spend less time on our websites and our applications for mobile devices as a result of a variety of diversions and other factors, including: geopolitical events, such as war (including the ongoing wars in Ukraine and in the Middle East), the threat of war, social or political unrest, or terrorist activity; natural disasters; the physical effects of climate change (such as drought, flooding, wildfires, increased storm severity and sea level rise); and potential increases in the cost of energy due to climate change; power shortages or outages; major public health issues, including pandemics; less discretionary consumer spending; social networking or other entertainment websites or mobile applications; significant local, national or global events capturing the attention of a large part of the population; and seasonal fluctuations due to a variety of factors. If any of these, or any other factors, divert or otherwise prevent our users from using or transacting on our websites or mobile applications, our business could be materially adversely affected.

Because we generate approximately half of our net revenues outside the United States but report our financial results in U.S. dollars, our financial results are impacted by fluctuations in foreign currency exchange rates, or foreign exchange rates. The results of operations of many of our internationally focused platforms are exposed to foreign exchange rate fluctuations as the financial results of the applicable subsidiaries are translated from the local currency into U.S. dollars for financial reporting purposes. While from time to time we enter into transactions to hedge portions of our foreign currency translation exposure, it is impossible to predict or eliminate the effects of this exposure. Fluctuations in foreign exchange rates could significantly impact our financial results, which may have a significant impact on the trading price of our common stock and debt securities.