The Power Of Three

Acquisition of Skype

Legal disclosures placeholder This presentation contains non-GAAP measures relating to the company's performance. You can find the reconciliation of those measures to GAAP measures in the tables of our earnings release which is available through our investor relations website located at http://investor.ebay.com/downloads/Reconciliation.pdf. In addition, this presentation may contain forward-looking statements regarding matters that involve risk and uncertainty, including those relating to the future financial results of Skype and eBay, and the impact of the acquisition of Skype on eBay’s financial results. Our actual financial results could differ materially from those represented in this presentation. Factors that could cause or contribute to such differences include, but are not limited to, the receipt and timing of the closing of the transaction, the possibility that the transaction may not close, the reaction of the users of Skype’s services, the future growth of Skype’s user base, the reaction of competitors and regulatory agencies to the transaction, developments in the regulation of voice-over-Internet protocol (VoIP) services including those provided by Skype, and the possibility that integration following the transaction may be more difficult than expected. More information about factors that could affect the company’s operating results is included under the captions “Risk Factors That May Affect Results of Operations and Financial Condition” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in the company’s annual report on Form 10-K, quarterly reports on Form 10-Q, and current reports on Form 8-K, copies of which may be obtained by visiting the company’s investor relations site at http://investor.ebay.com. Undue reliance should not be placed on the forward-looking statements in this release, which are based on information available to the company on the date hereof eBay assumes no obligation to update such statements.

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The acquisition of Skype

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eBay is evolution

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1996 – 1998: US only, collectibles only

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1999 – Moving beyond collectibles

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1999 – Going global

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2000 – Introducing Fixed Price and eBay Stores

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2002 – PayPal: removing friction and building a huge new business

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2004 – 2005: Creating other marketplaces Æ Marktplaats, Mobile, Rent.com, Shopping.com, Kijiji, ProStores

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Common theme – expanding our vision, our market and our opportunity

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Aspirational goal of growing faster than e-commerce

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High performance company (Real 2003 $M)

1,000,000 100,000 10,000 1,000 100 10 1 1

5

9

13

17

21

25

29

33

37

Years Since Incorporation

41

5

High performance company (Real 2003 $M)

1,000,000 100,000 GMV TPV

10,000 1,000 100 10 1 1

5

9

13

17

21

25

29

33

37

Years Since Incorporation

41

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Expanding eBay’s share of e-commerce

• Skype will accelerate commerce on eBay • Skype opens up new lines of business, new monetization models, new geographies • A great standalone communications business • eBay + PayPal + Skype = Unparalleled e-commerce and communications engine

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Agenda

What is Skype? Expanding eBay’s share of e-commerce A great standalone business Financials

8

Simply powerful

Any Skype user in the World (Free)

Internet

9

Simply powerful

Any Skype user in the World (Free)

Internet

Any Regular Telephone in the World (Low cost)10

Easy to set up and use 1 Download and install Skype client from website, get headset

11

Easy to set up and use 1

2

Download and install Skype client from website, get headset

Look up and add buddies

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Easy to set up and use 1

2

3

Download and install Skype client from website, get headset

Look up and add buddies

Start talking with other Skype users

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Rich functionality Find other Skype users

Advanced Instant Messaging

Skype Me…

Send any kind of file

Make conference calls Are you available?

Call any phone Wallet

Get calls from any phone on your Skype number

Leave voicemail Forward calls to any number

14

Viral growth 44.1

On track for 57M registered Users in Q3!

32.9

19.8

11.5 6.8 4.1

Q104

Q204

Q304

Q404

Q105

Q205

Skype Registered Users (M) 15

Viral usage 3.9 3.3

67% CQGR! 2

0.9 0.3

Q104

0.5

Q204

Q304

Q404

Q105

Q205

Skype Quarterly Minutes Served (B) 16

Historic success Number of Reg Users (MM) 60

50

40

30

20

10

0 1

3

5

7

9

11

13

15

17

19

21

23

25 Months(1)

(1) eBay starts Q2 98, PayPal starts Q1 00, Yahoo! starts Q1 95, AOL since Q1 92 17 (IPO) from company data and Merrill Lynch estimates, Skype since launch in 2003

Historic success Number of Users (MM)

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Adding 150K registered users / day

50

40

30

20

10

0 1

3

5

7

9

11

13

15

17

19

21

23

25 Months(1)

(1) eBay starts Q2 98, PayPal starts Q1 00, Yahoo! starts Q1 95, AOL since Q1 92 18 (IPO) from company data and Merrill Lynch estimates, Skype since launch in 2003

A truly global community

SKYPE users Non SKYPE users

Skype has a presence in 225 countries and independent territories worldwide

Skype is a market leader in every major country(1) (1) Skype estimates

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Significant buzz all over the world…

“To ‘Skype’ is to call someone over your computer” USAToday (17 December 2004)

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Agenda

What is Skype? Expanding eBay’s share of e-commerce A great standalone business Financials

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Accelerating e-commerce

• Accelerate existing categories • Create a new way to monetize e-commerce

• Expand into new categories

• Remove a key friction

• Monetize new marketplaces • Expand the global footprint 22

A new way to monetize e-commerce

eBay Today

eBay with Skype

Transactionbased monetization

Transaction and lead-generation monetization

Listing fees Final value fees Feature fees PayPal fees

Listing fees Final value fees Feature fees PayPal fees

+

Pay per call 23

Communication is key to e-commerce The online transaction process requires various communication points along the way “Steve” the seller

“Bob” the buyer Q+A before purchase Closing transaction Order status

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Communication is key to e-commerce The online transaction process requires various communication points along the way “Steve” the seller

5M e-mail messages are initiated per day between eBay buyers & sellers

“Bob” the buyer

30% of eBay bids take place in the last 2 hours!

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Skype is a leap forward in communication

• In transaction flow • Instantaneous and private • Free with rich experience • Advanced functionality

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eBay has historically removed friction Solution

Friction point

Trust & safety

Description

Feedback

Pictures

Payments

Shipping 27

Removing friction is powerful $1.4B $1.4B

eBay UK GMV (USD)

Q1 Q1

Q2 Q2

Q3 Q3

2001

Q4 Q4

Q1 Q1

Q2 Q2

Q3 Q3

2002

Q4 Q4

Q1 Q1

Q2 Q2

Q3 Q3

2003

Q4 Q4

Q1 Q1

Q2 Q2

Q3 Q3

2004

Q4 Q4

Q1 Q1

2005 28

Accelerating e-commerce

• Accelerate existing categories • Create a new way to monetize e-commerce

• Expand into new categories

• Remove a key friction

• Monetize new marketplaces • Expand the global footprint 29

Skype accelerates certain existing categories

Communications can accelerate categories that are:

Motors

Business and industrial

Collectibles

Sporting goods

• High involvement • Expensive • Complex

Music instruments

Jewelry and watches

Motors, collectibles, and B&I alone represent ~40% of eBay GMV 30

Skype accelerates certain existing categories: Example Future motors listing

Firstclassauto – currently online!

“

Firstclassauto – currently online!

” 31

Communications enables expansion into new categories

Skype allows superior access to categories that • Require significant communication • Are less suited to transaction-based monetization

Source: Jupiter, Borrell, NADA, Manheim, eBay estimates

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Communications enables expansion into new categories

Skype allows superior access to categories that • Require significant communication • Are less suited to transaction-based monetization

Source: Jupiter, Borrell, NADA, Manheim, eBay estimates

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Pay Per Call enables monetization of new marketplaces Pay Per Call on Local Classifieds Paris

Listing Sponsorisé Charles de Gaulle Renault Les meilleurs voitures!

Skype moi! Bagnolet Peugeot Skype moi! BelleVille Audi Skype moi!

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Expanding the global footprint Emerging markets

India

China

New markets

Cross-border trade

Japan Nordic

Poland

• • • • •

Brazil

Russia

Large grey markets Limited trust on Internet Culture of haggling Culture of IM/mobile Price sensitivity

• Limited eBay presence • Large growth in Skype users

• Limited trust • Buyers need more interaction and information from sellers 35

Skype on eBay China

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Agenda

What is Skype? Expanding eBay’s share of e-commerce A great standalone business Financials

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A great standalone business

1

A large and growing opportunity

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A strong leadership position

3

Competitive advantage

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An important consumer activity Minutes per user 500 per 450 month(1)

480

44% of all user time online is spent communicating(2)

400 350

435

300

Calls from home(3)

250

195

200

127

150

80

100 50

Share of VOIP calls expected to increase significantly over time

16

45

0 Search

eBay marketplace

Web Email

IM

Skype today

Phone

Communications Source: (1) Nielsen Netratings averages for biggest sites in each category, (2) eBay estimates from Comscore data, (3) Yankee Group as of April 2003

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Increasing penetration Global Broadband subscribers (M) '04-'09 CAGR

350

317.3 300

21.6%

287.8 256.9

250

13.8%

223.1 200

150

185.4 145.7 18.1%

100

50

18.8%

0 2004

2005

2006

United States

2007

Europe

2008

2009

Asia/Pacific

ROW

Source: IDC

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Increasing penetration Global Broadband subscribers (M) '04-'09 CAGR

350

US Broadband and VOIP households (M) 30M VOIP households in US by 2009

80

317.3 300

21.6%

287.8 256.9

70

Total BB

38%

% VoIP

66.9

58.5

60

250

72.3

13.8%

223.1

50.1 50

200

185.4

41.1 40

150

145.7

32.6 18.1%

30 24.6

100 20 29% 50

18.8%

0

10

0 2004

2005

2006

United States

2007

Europe

2008

2009

Asia/Pacific

20% 1%

3%

8%

13%

2003 2004 2005 2006 2007 2008 2009 ROW

VoIP subscribers

Broadband households

Source: IDC

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Increasing usage 1,495

VOIP Annual Minutes of Use (B)

760

367 183 10

17

27

42

72

2001

2002

2003

2004

2005E

2006E

2007E

2008E

2009E

Source: IDC

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A leadership position Skype’s global revenue base

Other 12% EU 48%

NA 13% Asia 27%

% of total

Source: Skype, Sandvine

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A leadership position Skype’s global revenue base

Other 12% EU 48%

Skype segment share in North America

VOIP Minutes

46.2%

Skype is #1

NA 13% Asia 27%

VOIP Users

Skype is #1

35.8%

% of total

0 Estimated ~25% of Skype users are businesses

20

40

60

Percent of total (%)

Source: Skype, Sandvine

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Strong team

• Founders created Kazaa, were executives at Tele2 • Entrepreneurial senior management team from Tele2, Microsoft, Yahoo!, OpenWave

Niklas Zennström CEO & Co-Founder

• Developers pioneered peerto-peer technology Janus Friis Co-Founder 45

Focus matters Commerce Payments

46

Focus matters Commerce Payments

Search Content 47

Focus matters Commerce Payments Communications Search Content 48

Advanced technology Virtual, peer-to-peer architecture brings key advantages • System is massively scalable • No single point of failure • Low CapEx

In addition, Skype has • Better firewall tunneling that allows more calls to be completed • Advanced security and encryption technology

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Many great applications Internet Explorer Toolbar - Beta

Integration with Outlook - Beta

Web Presence Integration

Voice Marketplace

Interactive voice response

Language learning tools

Homework tutoring

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Many great applications Internet Explorer Toolbar - Beta

Integration with Outlook - Beta

Web Presence Integration

Voice Marketplace

Interactive voice response

Language learning tools

Homework tutoring

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Many great applications

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Many great applications Internet Explorer Toolbar - Beta

Integration with Outlook - Beta

Web Presence Integration

Voice Marketplace

Interactive voice response

Language learning tools

Homework tutoring

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Many great applications

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Many great applications Internet Explorer Toolbar - Beta

Integration with Outlook - Beta

Web Presence Integration

Voice Marketplace

Interactive voice response

Language learning tools

Homework tutoring

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Many great applications Internet Explorer Toolbar

Integration with Outlook

Picture share with Kodak

Web Presence Integration

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Many great applications Internet Explorer Toolbar - Beta

Integration with Outlook - Beta

Web Presence Integration

Voice Marketplace

Interactive voice response

Language learning tools

Homework tutoring

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Many great applications

Voice Marketplace

• Create and share innovative voice services • Content providers get a share of call revenue

Valuable content and services

Interactive voice response (eg. traffic reports)

Language learning tools

Homework tutoring

Key partners

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Reinforcing ecosystem

1000+ Developers

200+ Hardware devices labeled as Skype-compatible

200+ Skype-enabled Applications

30+ partnerships with world-class companies 59

The power of three Users invite other users

New users invite more users

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The power of three Users invite other users

Sellers go where buyers are

More sellers offer PayPal

New users invite more users

Buyers go where sellers are

More buyers use PayPal

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The power of three Users invite other users

Sellers go where buyers are

More sellers offer PayPal

New users invite more users

Buyers go where sellers are

More buyers use PayPal

PayPal Wallet Skype Users Skype-Enabled Commerce

eBay Users Skype Users eBay & Skype Usage

eBay Users eBay Usage PayPal Wallet

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Agenda

What is Skype? Expanding eBay’s share of e-commerce A great standalone business Financials

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Valuation considerations • Traditional financial valuation methods – Precedent transactions – Value per user – Discounted cash flow

• Earn out structure based on aggressive goals • A great standalone business, not just VOIP functionality – Leading market position with considerable momentum – Technology leadership – Considerable monetization potential

• Synergistic opportunities with existing businesses 64

The power of three: synergistic opportunities

eBay + Paypal Users • 157M eBay registered users • 79M PayPal accounts • 1% overlap between Skype and eBay US users today(1) eBay Usage • 5M email messages/day • 1.4B new listings/year

PayPal Wallet • Boosts sales of premium services (1) Nielsen Netratings

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The power of three: synergistic opportunities

eBay + Paypal Users • 157M eBay registered users • 79M PayPal accounts • 1% overlap between Skype and eBay US users today(1) eBay Usage • 5M email messages/day • 1.4B new listings/year

PayPal Wallet • Boosts sales of premium services

Skype Users • 54M registered users • ~25% of users are business accounts

Skype Commerce (usage) • Skype-enabled commerce • 200+ Skype hardware applications

(1) Nielsen Netratings

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The power of three: synergistic opportunities

eBay + Paypal Users • 157M eBay registered users • 79M PayPal accounts • 1% overlap between Skype and eBay US users today(1) eBay Usage • 5M email messages/day • 1.4B new listings/year

PayPal Wallet • Boosts sales of premium services

Skype Users • 54M registered users • ~25% of users are business accounts

Skype Commerce (usage) • Skype-enabled commerce • 200+ Skype hardware applications

Skype Users • >80% outside US

Skype Usage • Payment of call services • Send money to buddies

(1) Nielsen Netratings

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Transaction summary

Transaction Value and Structure

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Pay $1.3B(1) in cash

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Deliver $1.3B(1) in eBay stock subject to certain sale restrictions

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Total of $2.6B (4.8% of market cap)

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Earn out of up to an additional $1.5B(1,2) based on high active user, gross profit, and revenue goals in 2008 – Earn out participants received less up-front consideration – All of management opted for the earn out

•

Q4 2005

Performance-based earn out

Expected Closing

(1) Based on an exchange rate of € 1.239 (2) Earn-out value presented on an undiscounted basis

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Strong Business Model

• Large market opportunity • Transaction-based revenues

Rapid revenue growth

• No inventory or warehouses • Efficient customer acquisition • High operating leverage

Outstanding cash generation

• Low capital requirements

(1) Nielsen Netratings

69

Skype revenues

Free services

Premium services

SkypeIn and SkypeOut

Free Skype to Skype calls (cost nothing to provide)

Expressive content (avatars, ringtones, ringbacks)

Hardware royalties

70 Voice services

Strong Revenue Growth

$259.0

Existing Lines Of Business

$200+

$103.8

$60 $47.4

(Dollars in millions)

$7 2004

2005E

2006E

$0.4

$5.7

1996

1997

$12.6

1998

2000

2001

2002

71

Strong Revenue Growth

$259.0

Existing Lines Of Business

$200+

$103.8

$60 $47.4

(Dollars in millions)

$7 2004

2005E

2006E

$0.4

$5.7

1996

1997

$12.6

1998

2000

2001

2002

72

Skype revenues Free services

Premium services

New eBay Opportunities

• Existing eBay Categories SkypeIn and SkypeOut Free Skype to Skype calls (cost nothing to provide)

Expressive content (avatars, ringtones, ringbacks)

• Emerging markets • New geographies • Cross-border trade

Hardware royalties • New categories

Voice services

• New marketplaces (classifieds, shopping.com)

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Leveraged cost structure •

Efficient customer acquisition – Word of mouth significantly reduces user acquisition cost

•

High operating leverage – Minimal incremental cost for each user call – Software business model with low fixed costs

•

Infinitely scalable network infrastructure with low capex – – – –

Peer to Peer technology requires minimal capex Distributed architecture eliminates single point of failure Centralized server(s) for authentication for basic services Centralized server(s) for premium services, e.g. voicemail

Outstanding cash generation capability 74

Financial impact

• Dilutive to Q4-05 pro-forma and GAAP EPS by $0.01 and $0.04, respectively • Dilutive to 2006 pro-forma and GAAP EPS(3) by $0.04 and $0.12, respectively • Breakeven on a pro-forma basis in Q4 2006 • Long term operating margins of 20-25%

(3) Not adjusted for FAS 123

75

eBay Inc Balance Sheet

•

Funding acquisition through internally generated cash flows

•

Balance sheet fundamentals remain unchanged: – Cash reserves of >$1B – Annualized free cash flows of >$1.5B – Low capex requirements: ~$2M in 2006 – No long-term debt

•

Long-term revenue and profit growth will continue to add to already strong cash flow position

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Summary

• A great standalone business with a very complementary business model • Significant growth opportunities: – Build on Skype momentum – Accelerate eBay existing and new businesses – Create entirely new businesses

• The power of 3 77

The power of 3 Sellers go where buyers are

Buyers go where sellers are Users invite other users

More Sellers Offer PayPal

New users invite more users

More Buyers use PayPal

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