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Q3 2008 Financial Highlights
        October 15, 2008




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

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

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

You can find more information about factors that could affect our operating results in our most recent annual
report on our Form 10-K and our subsequent quarterly reports on Form 10-Q (available at
http://investor.ebay.com). You should not unduly rely on any forward-looking statements, and we assume no
obligation to update them. All information in the presentation is as of October 15, 2008, and we do not intend,
and undertake no duty, to update this presentation.



                                                                                                                      ®
1
Q3 08 Summary


    • Revenue in line with guidance… EPS exceeds high end of
      guidance range
       • Revenue… up 12% y/y
       • Non-GAAP EPS… up 11% y/y (24% excluding one-time tax benefit
         from Q3’07)
       • Free cash flow generation… $543M
       • Stock repurchase… $623M (~25M shares at avg. price of $25.09)
    • Announced plans to simplify organization and improve our speed
      of execution… ~10% reduction in force; ~$70 – 80M charge
      primarily in Q4’08; $150M in annualized savings
    • Announced M&A transactions to extend the PayPal Platform
      (agreement to acquire BML) and expand our Classifieds footprint
      (acquisition of dBA and BilBasen)
                                                                         ®
2
Q3 08 Summary… Top-line Up 12%

                                                                                       Revenue
                            (in $millions)


                                                                                                           2,181   2,192    2,196
                                                                                                                                     2,117

                                                                                               1,889
                                                                              1,834
                                                             1,768
                                             1,720


                            1,449




                            Q3 06            Q4 06            Q1 07            Q2 07           Q3 07       Q4 07   Q1 08    Q2 08    Q3 08


Reported Y/Y Growth           31%              29%              27%              30%               30%      27%     24%      20%      12%
 Organic Y/Y Growth          19.6%            21.1%           21.1%            23.4%               23.0%   18.0%    16.2%    13.0%    8.6%

                                                                                                                                             ®
  3     Note: Calculation of Organic Y/Y growth is included in the Appendix of this presentation
Q3 08 Summary... Non-GAAP EPS Up 11%

                                                                             Non-GAAP EPS
                            (in $)




                                                                                                           0.45                          0.46
                                                                                                                         0.42    0.43
                                                                                           0.41*


                                                            0.33           0.34
                                             0.31                                                                                                +24% ex-
                                                                                                                                                 Q3’07 one
                             0.26                                                                                                                 time tax
                                                                                                                                                   benefit




                            Q3 06           Q4 06          Q1 07           Q2 07           Q3 07          Q4 07          Q1 08   Q2 08   Q3 08


 Reported Y/Y Growth         28%             29%             39%             40%             59%            45%           26%     25%     11%
Non-GAAP Op. Margin         32.1%           33.4%           33.6%           32.4%          31.4%           34.6%         32.0%   31.9%   31.8%

                                                                                                                                                             ®
         Note: Calculations of Non-GAAP EPS and Non-GAAP Op. Margins are included in the Appendix of this presentation
   4
         *$0.04 Non-GAAP EPS from one-time tax benefit
Q3 08 Summary… Free Cash Flow Generation Up 6%

                                                                                    Free Cash Flow
                            (in $millions)


                                                                                                     665
                                                                                                             632     617

                                              529                               533                                          543
                                                                                           510
                                                               479

                             385




                            Q3 06            Q4 06            Q1 07            Q2 07      Q3 07      Q4 07   Q1 08   Q2 08   Q3 08


Reported Y/Y Growth          -14%              24%               6%                 45%    32%        26%     32%     16%      6%
Capex % of Revenue             9%               6%               5%                 7%      6%         6%      6%      6%      7%
  FCF % of Revenue            27%              31%              27%                 29%    27%        30%     29%     28%     26%
                                                                                                                                     ®
        Note: Calculation of FCF is included in the Appendix of this presentation
  5
Q3 08 Summary… RoIC Continues to Improve

                                                                      Return on Invested Capital*



                                                                                                                                                               28.8%
                                                                                                                                               28.0%
                                                                                                                               26.5%
                                                                                                               25.5%
                                                                                              23.2%
                                                                              20.5%
                             18.8%                           19.5%
                                             18.4%




                             Q3 06           Q4 06           Q1 07            Q2 07           Q3 07            Q4 07           Q1 08           Q2 08            Q3 08




    *Trailing 12-month Pro-Forma Net Operating Profits After Tax / (Average Total Assets – 95% of Average Cash, Cash Equivalents, and Investments - Average Current Liabilities)
    Note: Skype write down that occurred in Q3’07 lowered our asset base without impacting pro-forma earnings                                                                      ®
6   Calculation of RoIC is included in the Appendix of this presentation
Weak macro environment impacts our business…

                             U.S. ecommerce*                                                           U.S. Merchant Services TPV**
                                                                                                                             (Same-Store Sales)
                             …steady deceleration in 2008
                                                                                                               …lower growth in average payment size




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                                                                                                                                         M
                                 *Source: ComScore                                                                      **3-month moving average


                    eBay Vehicles GMV                                                                        eBay Non-Vehicles GMV
           …Sept was the worst month for industry in decades                                               …impact from lower volume and lower ASPs
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7
Business Update… Marketplaces Revenue and Volume

                        Revenue                                                                     GMV
                            ($millions)                                                            ($billions)

                                                                   Int’l

                                                                   US




                                                                                                   8.9            8.9     8.7
                                                                                   7.8     7.7                                        7.7
                      806            811        813     731
      673     678




                                                                                   6.7     6.7     7.3            7.2     7.0         6.6
      617     643     697            673        645     645



     Q2 07    Q3 07   Q4 07         Q1 08       Q2 08   Q3 08                     Q2 07   Q3 07   Q4 07          Q1 08   Q2 08       Q3 08

$ millions                                                                 $ billions
      1,291   1,321   1,503          1,484      1,458   1,377                     14.5    14.4     16.2           16.0     15.7        14.3
y/y growth                                                                 y/y growth
        26%     26%     21%               19%     13%         4%                    12%    14%      12%            12%          8%      -1%


                                                                                                                                              ®
 8
Business Update… Marketplaces Operating Metrics

                                           Q2 07            Q3 07            Q4 07            Q1 08            Q2 08            Q3 08
Active Users (in millions)
    Global Active Users*                         83.3            83.0             83.2             83.9             84.5             85.7               •Global active users up 6%,
     Y/Y Growth                                   7%              4%               2%               1%               1%               3%                excluding China and Taiwan


New Listings (in millions)
    US                                            244             254              281              281              281              290
     Y/Y Growth                                  -8%             -2%               3%               9%              15%              14%
    Int'l                                         316             301              357              366              386              410               • Continued progress in
      Y/Y Growth                                 -5%             -7%               5%              11%              22%              36%                  increasing selection on the
                                                                                                                                                          site
    Total Listings                                559             556              637              647              667              700
     Y/Y Growth                                  -6%             -5%               4%              10%              19%              26%


GMV (in $millions)
    US                                         6,700            6,729            7,331            7,183            6,983            6,609
     Y/Y Growth                                 10%              10%               8%               7%               4%              -2%
    Int'l                                      7,764            7,666            8,883            8,853            8,701            7,675               • Continue to focus on Finding,
      Y/Y Growth                                14%              17%              16%              17%              12%               0%                  Trust and Safety, and Loyalty
      Fx Neutral Y/Y Growth                      8%              10%               8%               8%               4%              -2%                  to reaccelerate GMV in the
                                                                                                                                                          future
    Total GMV                                 14,464           14,395           16,213          16,036           15,684           14,284
                                                                                                                                                        • Fixed price GMV was $6.5B in
     Y/Y Growth                                 12%              14%              12%             12%               8%              -1%
                                                                                                                                                          the quarter, growing 11% y/y
     Fx Neutral Y/Y Growth                       9%              10%               8%              8%               4%              -2%

    Fixed price as a % of GMV                   39%              41%              42%              42%              43%              46%



       Notes:
       *Global active users number reflects all users, excluding users of StubHub, Half.com and IAC, who bid on, bought, or listed an item within the
       previous 12-month period.                                                                                                                                                          ®
       •More information on these metrics can be found on Page 10 of our Earnings Press Release dated October 15, 2008
9
Understanding GMV growth better …

       Changes to make eBay safer… easier to use… objective to increase velocity on the site with
                  (1) improved selection, (2) improved trust, and (3) improved finding
        New Listings           X        Conversion Rate%*        ~           Sold Items           X    Average Selling Price**    =         Fx-Neutral GMV




                                   0%
                           26%                                       11%                                                          8%
                                                                                10%
             19%                                -8%                                                   -3%                                        4%
                                                                                                 6%
10%
                                                                                                                 -6%
                                                              -18%                                                          -7%                               -2%

Q108       Q208        Q308         Q108      Q208       Q308         Q108     Q208       Q308         Q108    Q208       Q308          Q108     Q208     Q308



       Fee rebalancing                     Traffic flat…              Unit volume growth              Economy impacting                GMV not yet where
      has brought more                                                  up 6% in tough                ASPs as customers                 we’d like it to be…
      inventory onto the                Finding/Best Match                 economic                     trade down and
            site…                           still in early              environment…                      vehicle sales               • Fx-neutral GMV growth
                                                                                                                                        (ex-vehicles): 2%
                                        stages/more work                                                  remain under
                                           to be done…                                                     pressure…                  • Fx-neutral Vehicles
                                                                                                                                        GMV growth: -13%



                                                                                                                                                                    ®
 10     *Year-over-year percent changes in conversion rates
        **ASPs are on an Fx-neutral basis
Continued strength in adjacencies…

                                        Text & Graphical
         Classifieds                                                            StubHub
                                        Ad Partnerships



             +59%                          +127%                               +46%




     Q3'07                 Q3'08       Q3'07                 Q3'08     Q3'07                  Q3'08


     • Averaged 84M unique             • Strategic deals performing   • Partnership with Major League
       visitors per month to our         well… new and different        Baseball
       global classifieds sites          ways of monetizing traffic
                                                                      • Improvements in visitor to
                                                                        buyer conversion
     • Q4: Acquired Danish general
       classifieds site dBA and auto
       site Bilbasen, further
       strengthening our global
       portfolio of classifieds


                                                                                                        ®
11
Business Update… PayPal Revenue and Volume

                            Revenue                                                                TPV
                              ($millions)                                                      ($billions)

                                                            Int’l

                                                            US




                                    253     268     267                                                               5.4      5.3
                      246                                                                    4.9             5.1


       189    201                                                                   3.9
                                                                          3.7




                                            334                                              9.1             9.4      9.5      9.5
                      316           329             330
       265    270                                                         7.4       7.7




      Q2 07   Q3 07   Q4 07        Q1 08    Q2 08   Q3 08               Q2 07      Q3 07    Q4 07        Q1 08       Q2 08    Q3 08


$ millions                                                          $ billions
        454    470     563           582     602     597                   11.1      11.6     14.0            14.4     14.9     14.8
y/y growth                                                          y/y growth
        34%    35%     35%           32%     33%      27%                    32%     34%       35%             34%      35%      28%


                                                                                                                                       ®
 12
Business Update… PayPal Operating Metrics

                                       Q2 07              Q3 07             Q4 07             Q1 08             Q2 08             Q3 08
Active Registered Accounts (in millions)
  Global Active Accounts                    52.8               54.8              57.3              60.2              62.6              65.3        • Increasing merchant
    Y/Y Growth                              16%                16%               16%               17%               19%               19%           penetration… consumer
                                                                                                                                                     preference

TPV (in $millions)
  On eBay                                  6,460              6,513             7,928             7,777             7,674             7,265
   Y/Y Growth                               18%                18%               17%               17%               19%               12%         • Increased penetration on-eBay
  Merchant Services                        4,621              5,055             6,116             6,640             7,256             7,547        • Strong growth… deceleration in
   Y/Y Growth                               57%                62%               66%               61%               57%               49%           Merchant Services TPV
                                                                                                                                                     primarily driven by deceleration
  Total TPV                               11,080            11,569            14,044            14,417            14,930            14,812           in average payment size growth
   Y/Y Growth                               32%               34%               35%               34%               35%               28%


On-eBay Penetration Rate
  Global                                   51.9%             53.6%             54.0%             54.5%             56.5%             59.6%         • 310 bps increase q/q


Transaction rates
  Global take rate                         3.90%             3.87%             3.84%             3.88%             3.89%             3.89%         • Continuing to manage trxn
                                                                                                                                                     costs while scaling
  Transaction exp                          1.18%             1.21%             1.18%             1.18%             1.23%             1.20%
                                                                                                                                                     operations… trxn margin at
  Transaction loss                         0.31%             0.27%             0.27%             0.24%             0.27%             0.29%           62%, up 1pt sequentially

      Notes:
      •Global Active Accounts reflects all registered accounts, excluding non-registered users, that successfully sent or received at least one payment or payment reversal
      through PayPal within the previous 12-month period.
      •TPV has been adjusted to Net TPV, which is the total dollar volume of payments, net of payment reversals successfully completed through the PayPal system during
      the quarter, excluding the payment gateway business.
      •Transaction exp and transaction loss are expressed as % of Net TPV.
      •Penetration Rate has been adjusted to reflect the total dollar volume of addressable GMV paid using PayPal in relation to the total dollar volume of addressable GMV.
                                                                                                                                                                                        ®
 13   •More information on these metrics can be found on Page 11 of our Earnings Press Release dated October 15, 2008
Business Update… Expanding PayPal’s Reach

     •   Announced agreement to acquire Bill Me Later on October 6th, 2008

     •   Bill Me Later is a great stand alone business…
          -   TPV of ~$1 billion in 2008, growing at 36%
          -   Take rate (~12.5% of TPV)
          -   Estimated present value between $500 million and $1.0 billion, depending on
              assumptions

     •   Bill Me Later expected to be more powerful as part of PayPal
          -   Network effects: accelerate consumer and merchant adoption
          -   Low cost processing alternative… improves funding mix for PayPal
          -   PayPal’s data and fraud engine will lower BML’s loss rates
          -   eBay’s strong balance sheet lowers BML’s cost of funds
          -   Estimated present value of synergies worth ~$700 million - $1 billion

     •   Significant opportunity to capture even more value for our
         stockholders in the future
                                                                                            ®
14
     •   Expected to close mid-Q4’08
Business Update… Skype Revenue and Operating Metrics


                                  Revenue
                                     ($millions)



                                                                                                                                 Q2 07   Q3 07   Q4 07   Q1 08   Q2 08   Q3 08

                                                                                         Registered Users (in millions)            220     246     276     309     338     370
                                                                       143                  Y/Y Growth                            94%     81%     61%     58%     54%     51%
                                                          136


                                             126                                         Skype to Skype Minutes (in billions)     10.8     9.8    11.9    14.2    14.8    16.0
                               115                                                          Y/Y Growth                            41%     31%     26%     30%     38%     63%
                   98
      90

                                                                                         Skype Out Minutes (in billions)           1.3     1.4     1.6     1.7     1.9     2.2
                                                                                            Y/Y Growth                            57%     25%      7%     33%     42%     54%


     Q2 07        Q3 07        Q4 07        Q1 08        Q2 08        Q3 08

y/y growth
       103%         96%          76%          61%          51%          46%




        Notes:
        • Registered user number reflects users that may have registered through non-Skype based web sites.                                                                  ®
15      • Skype-to-Skype minutes are estimated; prior period amounts are updated to conform to current estimation methodology.
        • More information on these metrics can be found on Page 12 of our Earnings Press Release dated October 16, 2008.
Total Non-GAAP Operating Expenses

          Sales & Marketing                          Product Development                                General & Admin.
                (% of Revenue)                                (% of Revenue)                                  (% of Revenue)




        24.5%
                                                      7.6%                     7.9%
                                                                                                                          14.1%
                                                                                                      13.6%
                                 20.5%




        Q3 07                    Q3 08                Q3 07                    Q3 08                  Q3 07               Q3 08


     • Improved efficiency                          • Increased investments in key                • Modestly higher fraud losses as
                                                      initiatives… Finding,                         we expand PayPal protections
     • Shift of focus to buyer retention,             improvements to the buyer
                                                      experience                                  • Higher bad debt expense
       recorded as contra-revenue,
       instead of S&M expense




                                         Q3 Non-GAAP Op Inc:             $674M         +14% y/y
                                         Q3 Non-GAAP Net Inc:            $592M         +5% y/y                                        ®
16
Q3 08 Cash Flow / Capital Allocation… Share
 Repurchase Update


                           Cash Balance* / Flows                                                              Free Cash Flow / Other Movements
(in $billions)


                                                                                                              • Free cash flow driven by earnings expansion
                                                                                                              • Capital expenditures: 7% of revenue
                            0.5            (0.6)
                                                           (0.3)
            0.8
                                                                            0.4

                                                                                            U.S.
                                                                                                              Q3 Share Repurchases / Acquisitions
                                                                                            Int'l
                                                                                                              • Repurchased ~25 million shares at an average
            2.9                                                             2.9                                 price of $25.09




       Q2 08 Ending         FCF          Share            Other**      Q3 08 Ending
          Cash*                        Repurchase                         Cash*




                                                                                                                                                               ®
          *Cash balance includes cash and cash equivalents
17
          **”Other“ includes proceeds from options exercised, impact from fx movements, and purchases of investments
Guidance Context


                                                                        Revenue                         Non-GAAP
                                                                     Low          High                    EPS
                                                                       (in millions)

         Previous 2008 Guidance                                     $8,800          $9,050             $1.72 - $1.77
           Implied Y/Y Growth Rate                                   15%            18%                 12% - 16%



           …Lower tax rate / share count                                      --                         ~$0.03             Q3 Impact          f
                                                                                                                       Tax/Shr Cnt    +$0.03
           …Stronger US$                                                   (~$200)                      (~$0.06)       Fx             ($0.01)
                                                                                                                       Belt Tighter   +$0.03
           …Belt tightening / simplifying organization                        --                         ~$0.06

           …Weak economy / more marketing $'s                              (~$150)                      (~$0.05)

           …Acquisitions                                                     ~$30                       (~$0.03)


         Updated 2008 Guidance                                      $8,525          $8,675             $1.69 - $1.71
           Implied Y/Y Growth Rate                                   11%            13%                 10% - 12%




       Note: The impact of the approximately $70-$80 million restructuring-related charge will be taken primarily in                               ®
18           the fourth quarter and is included in GAAP guidance but excluded from non-GAAP guidance
Guidance Summary



                                                                     Q4 08                       2008

                     Financial Guidance

                         Revenues (in millions)                 $2,020 - 2,170             $8,525 - $8,675


                         Non-GAAP Operating Margin                      --                      ~32%


                         Non-GAAP EPS                             $0.39 - 0.41               $1.69 - 1.71


                         Free Cash Flow (in millions)                   --                 $2,350 - $2,450



                     Guidance Assumptions

                         Non-GAAP Tax Rate                              --                     21 - 22%

                         Capex % of Revenue                             --                    6.5 - 7.0%




      Note: The impact of the approximately $70-$80 million restructuring-related charge will be taken primarily in   ®
19          the fourth quarter and is included in GAAP guidance but excluded from non-GAAP guidance
Summary


     • Q3 was a busy quarter:
        • Revenue in line with guidance… EPS exceeded expectations…
          strong FCF
        • Announced steps to simplify org and accelerate decision
          making
        • Repurchased ~25M shares… announced acquisitions to
          strengthen portfolio

     • Confident we are working on the right priorities… focused
       on making it easier for sellers to win and buyers to find
       great deals… however it will take more time to stimulate
       growth in GMV

     • Q4 outlook adjusted for stronger US dollar, tough economic
       environment, and dilution from acquisitions, partially offset
       by lower expenses…                                              ®
20
Q&A




           ®
21
Appendix




            ®
22
Calculation of Organic Revenue Growth

                                                                                            Three Months Ended
                                                                               Mar 31,        Jun 30,     Sep 30,       Dec 31,
                                                                                2006           2006        2006          2006

                          Total revenue growth                                        35%         30%            31%        29%
                           Acquisition impact                                       (10%)         (9%)           (9%)       (3%)
                           Foreign currency impact                                     5%          -             (2%)       (5%)
                          Total organic revenue growth                                30%         21%            20%        21%


                                                                               Mar 31,        Jun 30,     Sept 30,      Dec 31,
                                                                                2007           2007        2007          2007

                          Total revenue growth                                       27%          30%            30%        27%
                           Acquisition impact                                        (1%)         (3%)           (3%)       (3%)
                           Foreign currency impact                                   (5%)         (4%)           (4%)       (6%)
                          Total organic revenue growth                               21%          23%            23%        18%


                                                                               Mar 31,        Jun 30,     Sept 30,
                                                                                2008           2008        2008

                          Total revenue growth                                       24%          20%            12%
                           Acquisition impact                                        (2%)           0%             0%
                           Foreign currency impact                                   (6%)         (7%)           (3%)
                          Total organic revenue growth                               16%          13%              9%




                                                                                                                                   ®
     Note: Acquisition impact includes acquisitions made within 12 months of the quarter
23
Reconciliation of GAAP to Non-GAAP Net Income / EPS

                                                                                              Three Months Ended
                                           Sep 30,      Dec 31,        Mar 31,        June 30,        Sept 30,         Dec 31,      Mar 31,      Jun 30,      Sep 30,
                                            2006         2006           2007            2007           2007             2007         2008         2008         2008
(in millions, except per share data)

GAAP net income (loss)                 $      280.9 $      346.5 $        377.2 $         375.8 $        (935.6) $        530.9 $      459.7 $      460.3 $      492.2
 Stock-based compensation
  expense                                      73.5         74.7            72.0           79.6               80.6         69.7         87.4         91.9         90.3
Employer payroll taxes on
 stock-based compensation                       0.4          0.9             1.8             1.3               2.3          1.5          0.3          1.7          0.5
 Amortization of acquired
                     (1)
   intangible assets                           51.5         49.5            51.8           56.9            57.3            57.7         60.9         61.5         59.4
 Impairment of goodwill                         -            -               -              -           1,390.9             -            -            -            -
 Income taxes associated
  with certain non-GAAP
  entries                                     (38.9)       (41.0)          (42.3)          (42.5)         (31.7)          (48.9)       (46.8)       (47.9)       (50.3)

Non-GAAP net income                    $      367.4 $      430.5 $        460.5 $         471.1 $         563.8 $         610.9 $      561.5 $      567.5 $      592.1

Non-GAAP net income per diluted
share                           $              0.26 $       0.31 $          0.33 $         0.34 $             0.41 $       0.45 $       0.42 $       0.43 $       0.46

Shares used in non-GAAP diluted
share calculation                             1,426        1,403           1,384          1,379           1,373           1,368        1,344        1,325        1,297


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




                                                                                                                                                                    ®
    24
Reconciliation of GAAP to Non-GAAP Quarterly
     Operating Margin

                                                                        Three Months Ended
                                   Dec 31,      Mar 31,      Jun 30,       Sept 30,       Dec 31,      Mar 31,      Jun 30,      Sept 30,
                                    2006         2007         2007          2007           2007         2008         2008         2008
(in millions)

GAAP operating income (loss)   $      449.9 $      467.8 $      456.8 $       (937.7) $      626.1 $      552.8 $      545.4 $      524.1
 Stock-based compensation
  expense                              74.7         72.0         79.6          80.6           69.7         87.4         91.9         90.3
 Employer payroll taxes on
  stock-based compensation              0.9          1.8          1.3            2.3           1.5          0.3          1.7           0.5
 Amortization of acquired
                    (1)
  intangible assets                    49.5         51.8         56.9           57.3          57.7         60.9         61.5         59.4
 Impairment of goodwill                 -            -            -          1,390.9           -            -            -            -

Non-GAAP operating income      $      575.0 $      593.4 $      594.6 $       593.4 $        755.0 $      701.4 $      700.5 $      674.3


Revenues                       $      1,720 $      1,768 $      1,834 $        1,889 $       2,181 $      2,192 $      2,196 $      2,118
GAAP operating margin                 26.2%        26.5%        25.0%         -50.0%         28.7%        25.2%        24.8%        24.7%
Non-GAAP operating margin             33.4%        33.6%        32.0%          31.0%         34.6%        32.0%        31.9%        31.8%




                                                                                                                                        ®
   25
Reconciliation of GAAP to Non-GAAP YTD
 Operating Margin

                                                                  Nine Months Ended
                                                       Sept 30,         Sept 30,       Sept 30,
        (in millions)                                   2006             2007           2008

        GAAP operating income (loss)               $       973.2    $       (13.0) $     1,622.2
         Stock-based compensation
          expense                                          242.7           232.2           269.5
         Employer payroll taxes on
          stock-based compensation                            4.3             5.4            2.5
         Amortization of acquired
                            (1)
          intangible assets                                165.4            166.1          181.9
         Impairment of goodwill                              -            1,390.9            -

        Non-GAAP operating income                  $      1,385.6 $       1,781.6 $      2,076.1


        Revenues                                   $       4,250 $         3,602 $         6,506
        GAAP operating margin                              22.9%           -0.4%           24.9%
        Non-GAAP operating margin                          32.6%           49.5%           31.9%

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




                                                                                                                      ®
26
Calculation of Free Cash Flow

                                                             Three Months Ended
                                          Mar 31,      Jun 30,      Sept 30,      Dec 31,      Full Year
         (in millions)                     2006         2006         2006          2006          2006


         GAAP operating cash flow     $      584.2 $      515.5 $      522.1 $       626.0 $     2,247.8
          Purchases of property and
           equipment, net                   (133.6)      (148.4)       (136.9)       (96.6)       (515.5)

         Free cash flow               $      450.6 $      367.1 $      385.2 $       529.4 $     1,732.3

                                          Mar 31,      Jun 30,      Sept 30,      Dec 31,      Full Year
                                           2007         2007         2007          2007          2007


         GAAP operating cash flow     $      564.5 $      654.6 $      629.5 $       792.5 $     2,641.1
          Purchases of property and
           equipment, net                    (85.4)      (121.3)       (119.3)      (127.9)       (454.0)

         Free cash flow               $      479.1 $      533.3 $      510.2 $       664.6 $     2,187.1


                                          Mar 31,      Jun 30,      Sept 30,
                                           2008         2008         2008

         GAAP operating cash flow     $      766.3 $      738.4 $      693.4
          Purchases of property and
           equipment, net                   (134.7)      (121.7)       (150.4)
         Free cash flow               $      631.6 $      616.7 $       543.0



                                                                                                            ®
27
Reconciliation of GAAP to Non-GAAP Quarterly
      Statement of Income
                                                                                     Three Months Ended                                        Three Months Ended
                                                                                      September 30, 2007                                        September 30, 2008
(in millions, except per share data and percentages)             Reported             Non-GAAP Entries          Non-GAAP        Reported        Non-GAAP Entries          Non-GAAP

Net revenues                                               $              1,889.2 $               -     $           1,889.2 $       2,117.5 $                -     $          2,117.5
Cost of net revenues                                                        446.5                (9.1) (a)            432.0           560.9                (10.4) (a)           543.8
                                                                                                 (5.4) (c)                                                  (6.7) (c)
  Gross Profit                                                            1,442.7                14.5               1,457.2         1,556.6                 17.1              1,573.7
Operating expenses:
 Sales and marketing                                                       485.2                 (22.2)   (a)         463.0           457.2                (23.7)   (a)         433.5
 Product development                                                       164.9                 (21.4)   (a)         143.5           190.9                (23.5)   (a)         167.4
 General and administrative                                                287.5                 (27.9)   (a)         257.3           331.7                (32.7)   (a)         298.5
                                                                                                  (2.3)   (b)                                               (0.5)   (b)
  Amortization of acquired intangible assets                                 51.9                (51.9)   (c)           -              52.7                (52.7)   (c)           -
  Impairment of goodwill                                                  1,390.9             (1,390.9)   (e)           -
    Total operating expense                                               2,380.4             (1,516.6)               863.8         1,032.5               (133.1)               899.4
Income from operations                                                     (937.7)             1,531.1                593.4           524.1                150.2                674.3
Interest and other income, net                                               38.4                  -                   38.4            38.5                  -                   38.5
Interest expense                                                             (2.7)                 -                   (2.7)            -                    -                    -
Income before income taxes                                                 (902.0)             1,531.1                629.1           562.6                150.2                712.8
Provision for income taxes                                                  (33.6)               (31.7)   (d)         (65.3)          (70.4)               (50.3) (d)          (120.7)

Net income                                                 $               (935.6) $          1,499.4      $          563.8 $         492.2 $               99.9     $          592.1
Net income per share:
 Basic                                                     $                (0.69)                        $            0.42 $          0.38                         $            0.46
 Diluted                                                   $                (0.69)                        $            0.41 $          0.38                         $            0.46
Weighted average shares:
 Basic                                                                     1,354                                      1,354           1,289                                     1,289
  Diluted                                                                  1,354                                      1,373           1,297                                     1,297
Operating margin                                                           (50%)                  81%                   31%             25%                   7%                  32%
Effective tax rate                                                           (4%)                 14%                   10%             13%                   4%                  17%
____________________
Notes:
(a) Stock-based compensation expense
(b) Employer payroll taxes on stock-based compensation
(c) Amortization of acquired intangible assets and developed technology
(d) Income taxes associated with certain non-GAAP entries
(e) Impairment of goodwill
                                                                                                                                                                                      ®
    28
Reconciliation of GAAP to Non-GAAP YTD
      Statement of Income
                                                                                       Nine Months Ended                                         Nine Months Ended
                                                                                       September 30, 2007                                        September 30, 2008
(in millions, except per share data and percentages)             Reported              Non-GAAP Entries          Non-GAAP        Reported        Non-GAAP Entries          Non-GAAP

Net revenues                                               $              5,491.7 $                 -     $          5,491.7 $       6,505.4 $                -     $          6,505.4
Cost of net revenues                                                      1,257.0                 (27.5) (a)         1,214.3         1,648.4                (31.9) (a)         1,597.1
                                                                                                  (15.2) (c)                                                (19.4) (c)
  Gross Profit                                                            4,234.7                  42.7              4,277.4         4,857.0                 51.3              4,908.3
Operating expenses:
 Sales and marketing                                                      1,406.3                 (64.5)   (a)       1,341.8         1,497.2                (72.1)   (a)       1,425.1
 Product development                                                        450.4                 (56.8)   (a)         393.6           554.4                (71.6)   (a)         482.8
 General and administrative                                                 849.3                 (83.4)   (a)         760.5         1,020.7                (93.9)   (a)         924.2
                                                                                                   (5.4)   (b)                                               (2.6)   (b)
  Amortization of acquired intangible assets                                150.8                (150.8)   (c)           -             162.4               (162.4)   (c)           -
  Impairment of goodwill                                                  1,390.9              (1,390.9)   (e)           -               -                    -      (e)           -
    Total operating expense                                               4,247.7              (1,751.8)             2,495.9         3,234.7               (402.6)             2,832.1
Income from operations                                                      (13.0)              1,794.5              1,781.5         1,622.3                453.9              2,076.2
Interest and other income, net                                              102.4                   -                  102.4            91.5                  -                   91.5
Interest expense                                                            (10.0)                  -                  (10.0)           (3.5)                 -                   (3.5)
Income before income taxes                                                   79.4               1,794.5              1,873.9         1,710.3                453.9              2,164.2
Provision for income taxes                                                 (262.0)               (116.6)   (d)        (378.6)         (298.0)              (145.0)   (d)        (443.0)

Net income                                                 $               (182.6) $            1,677.9     $        1,495.3 $       1,412.3 $              308.9     $        1,721.2
Net income per share:
 Basic                                                     $                (0.13)                         $            1.10 $          1.08                         $            1.31
 Diluted                                                   $                (0.13)                         $            1.08 $          1.07                         $            1.30
Weighted average shares:
 Basic                                                                      1,361                                      1,361           1,312                                     1,312
  Diluted                                                                   1,361                                      1,379           1,322                                     1,322
Operating margin                                                               0%                  32%                   32%             25%                  7%                   32%
Effective tax rate                                                         (330%)                 350%                   20%             17%                  3%                   20%
____________________
Notes:
(a) Stock-based compensation expense
(b) Employer payroll taxes on stock-based compensation
(c) Amortization of acquired intangible assets and developed technology
(d) Income taxes associated with certain non-GAAP entries

                                                                                                                                                                                      ®
    29
Reconciliation and Calculation of Return on
      Invested Capital

(in thousands, except percentages)
                                                                                           Three Months Ended
Numerator components:                            Q2'06     Q3'06     Q4'06     Q1'07     Q2'07       Q3'07    Q4'07    Q1'08     Q2'08     Q3'08
Non-GAAP operating income                      $ 460,427 $ 464,493 $ 575,007 $ 593,445 $ 594,664 $ 593,445 $ 754,979 $ 701,364 $ 700,487 $ 674,318
Tax rate                                             28%       27%       29%       26%       25%          10%     24%      23%       22%       17%
Non-GAAP operating income after tax            $ 332,889 $ 337,825 $ 406,703 $ 441,523 $ 447,544 $ 531,845 $ 576,276 $ 540,892 $ 549,673 $ 559,684

Denominator components:                          Q2'06        Q3'06        Q4'06        Q1'07        Q2'07        Q3'07        Q4'07        Q1'08        Q2'08        Q3'08
Total assets                                   13,250,251   13,463,118   13,494,011   13,920,051   14,361,157   14,786,812   15,366,037   15,046,305   15,021,625   14,240,157
Total cash, cash equivalents and investments    4,010,778    3,795,865    3,495,486    3,519,880    3,793,677    4,461,775    5,035,692    4,108,141    4,181,717    3,777,482
Current liabilities                             1,719,405    2,220,685    2,518,395    2,250,571    2,328,643    3,272,867    3,099,579    3,080,432    3,006,234    2,854,733


                                               $ 1,240,647 $ 1,318,296 $ 1,402,661 $ 1,518,940 $ 1,633,595 $ 1,827,615 $ 1,997,188 $ 2,096,556 $ 2,198,685 $ 2,226,524
                                                11,253,387  12,139,387  12,912,980  13,339,193  13,697,718  14,005,030  14,385,614 14,696,072 14,916,387 14,892,187
                                                 3,469,757   3,459,673   3,377,148   3,486,641   3,536,980   3,622,670   3,858,237   3,974,641   4,100,390   4,097,313
                                                 1,467,892   1,674,665   1,924,986   2,078,113   2,207,540   2,518,232   2,694,011   2,806,418   2,957,551   3,062,769
                                                     19.6%       18.8%       18.4%       19.5%       20.5%       23.2%       25.5%       26.5%       28.0%       28.8%




                                                                                                                                                                           ®
    30
Reconciliation of GAAP to Non-GAAP Guidance


                                                                      Three Months Ended                         Year Ended
                                                                       December 30, 2008                    December 31, 2008
     (in millions, except per share amounts and percentages)        GAAP           Non-GAAP      (a)     GAAP             Non-GAAP     (a)
     Revenues                                                   $2,020 - $2,170  $2,020 - $2,170     $8,525 -$8,675     $8,525 -$8,675
     Operating Margin                                                  -                -                ~24%               ~32%
     Diluted EPS                                                 $0.25 - $0.27    $0.39 - $0.41       $1.32 - $1.34      $1.69 - $1.71
     Effective Tax Rate                                                -                -            18.0% - 19.0%      21.0% - 22.0%


     (a) Estimated non-GAAP amounts and percentages above reflect estimated quarterly adjustments that exclude the amortization of acquired
     intangible assets and developed technology of approximately $85-$95 million per quarter, stock-based compensation expense and
     employer payroll taxes on stock-based compensation of approximately $90-$105 million per quarter and restructuring-related charges of
     approximately $60-$70 million.




                                                                                                                                              ®
31

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eBay 2008, Q3 Earnings

  • 1. Q3 2008 Financial Highlights October 15, 2008 ®
  • 2. This presentation contains non-GAAP measures relating to the company's performance. You can find the reconciliation of those measures to the nearest comparable GAAP measures in the appendix at the end of this presentation. This presentation may make forward-looking statements relating to our future performance that are based on our current expectations, forecasts and assumptions and involve risks and uncertainties, including those relating to the company’s ability to grow its businesses, user base and user activity. Our actual results may differ materially from those discussed in this call for a variety of reasons, including, but not limited to, the impact of recent global economic events and a potential global economic downturn; foreign- exchange-rate fluctuations; changes in political, business, and economic conditions; our ability to profitably expand our business model to new types of merchandise and sellers; the impact and integration of recent and future acquisitions; our increasing need to grow revenues from existing users in established markets; an increasingly competitive environment for our businesses; the complexity of managing a growing company with a broad range of businesses, our need to manage regulatory, tax, IP and litigation risks (including risks specific to PayPal and the financial industry, and risks specific to Skype’s technology and to the VoiP industry); and our need to upgrade our technology and customer service infrastructure at reasonable cost while adding new features and maintaining site stability. You can find more information about factors that could affect our operating results in our most recent annual report on our Form 10-K and our subsequent quarterly reports on Form 10-Q (available at http://investor.ebay.com). You should not unduly rely on any forward-looking statements, and we assume no obligation to update them. All information in the presentation is as of October 15, 2008, and we do not intend, and undertake no duty, to update this presentation. ® 1
  • 3. Q3 08 Summary • Revenue in line with guidance… EPS exceeds high end of guidance range • Revenue… up 12% y/y • Non-GAAP EPS… up 11% y/y (24% excluding one-time tax benefit from Q3’07) • Free cash flow generation… $543M • Stock repurchase… $623M (~25M shares at avg. price of $25.09) • Announced plans to simplify organization and improve our speed of execution… ~10% reduction in force; ~$70 – 80M charge primarily in Q4’08; $150M in annualized savings • Announced M&A transactions to extend the PayPal Platform (agreement to acquire BML) and expand our Classifieds footprint (acquisition of dBA and BilBasen) ® 2
  • 4. Q3 08 Summary… Top-line Up 12% Revenue (in $millions) 2,181 2,192 2,196 2,117 1,889 1,834 1,768 1,720 1,449 Q3 06 Q4 06 Q1 07 Q2 07 Q3 07 Q4 07 Q1 08 Q2 08 Q3 08 Reported Y/Y Growth 31% 29% 27% 30% 30% 27% 24% 20% 12% Organic Y/Y Growth 19.6% 21.1% 21.1% 23.4% 23.0% 18.0% 16.2% 13.0% 8.6% ® 3 Note: Calculation of Organic Y/Y growth is included in the Appendix of this presentation
  • 5. Q3 08 Summary... Non-GAAP EPS Up 11% Non-GAAP EPS (in $) 0.45 0.46 0.42 0.43 0.41* 0.33 0.34 0.31 +24% ex- Q3’07 one 0.26 time tax benefit Q3 06 Q4 06 Q1 07 Q2 07 Q3 07 Q4 07 Q1 08 Q2 08 Q3 08 Reported Y/Y Growth 28% 29% 39% 40% 59% 45% 26% 25% 11% Non-GAAP Op. Margin 32.1% 33.4% 33.6% 32.4% 31.4% 34.6% 32.0% 31.9% 31.8% ® Note: Calculations of Non-GAAP EPS and Non-GAAP Op. Margins are included in the Appendix of this presentation 4 *$0.04 Non-GAAP EPS from one-time tax benefit
  • 6. Q3 08 Summary… Free Cash Flow Generation Up 6% Free Cash Flow (in $millions) 665 632 617 529 533 543 510 479 385 Q3 06 Q4 06 Q1 07 Q2 07 Q3 07 Q4 07 Q1 08 Q2 08 Q3 08 Reported Y/Y Growth -14% 24% 6% 45% 32% 26% 32% 16% 6% Capex % of Revenue 9% 6% 5% 7% 6% 6% 6% 6% 7% FCF % of Revenue 27% 31% 27% 29% 27% 30% 29% 28% 26% ® Note: Calculation of FCF is included in the Appendix of this presentation 5
  • 7. Q3 08 Summary… RoIC Continues to Improve Return on Invested Capital* 28.8% 28.0% 26.5% 25.5% 23.2% 20.5% 18.8% 19.5% 18.4% Q3 06 Q4 06 Q1 07 Q2 07 Q3 07 Q4 07 Q1 08 Q2 08 Q3 08 *Trailing 12-month Pro-Forma Net Operating Profits After Tax / (Average Total Assets – 95% of Average Cash, Cash Equivalents, and Investments - Average Current Liabilities) Note: Skype write down that occurred in Q3’07 lowered our asset base without impacting pro-forma earnings ® 6 Calculation of RoIC is included in the Appendix of this presentation
  • 8. Weak macro environment impacts our business… U.S. ecommerce* U.S. Merchant Services TPV** (Same-Store Sales) …steady deceleration in 2008 …lower growth in average payment size 8 08 8 8 8 08 08 8 8 08 8 8 8 08 08 8 08 -0 -0 -0 -0 -0 -0 -0 -0 -0 -0 r- n- b- r- p- n- b- g l n ay ar g n l ay ar Ju Ap Ju Ap Au Ju Ja Fe Au Ju Se Ja Fe M M M M *Source: ComScore **3-month moving average eBay Vehicles GMV eBay Non-Vehicles GMV …Sept was the worst month for industry in decades …impact from lower volume and lower ASPs 8 08 8 8 8 08 08 8 08 8 08 ® 8 8 8 08 08 08 8 -0 -0 -0 -0 -0 -0 -0 -0 -0 -0 r- p- n- b- r- g n l p- ay n- b- ar g Ju n l ay Ap ar Au Ju Ju Se Ja Ap Fe Au Ju Se Ja Fe M M M M 7
  • 9. Business Update… Marketplaces Revenue and Volume Revenue GMV ($millions) ($billions) Int’l US 8.9 8.9 8.7 7.8 7.7 7.7 806 811 813 731 673 678 6.7 6.7 7.3 7.2 7.0 6.6 617 643 697 673 645 645 Q2 07 Q3 07 Q4 07 Q1 08 Q2 08 Q3 08 Q2 07 Q3 07 Q4 07 Q1 08 Q2 08 Q3 08 $ millions $ billions 1,291 1,321 1,503 1,484 1,458 1,377 14.5 14.4 16.2 16.0 15.7 14.3 y/y growth y/y growth 26% 26% 21% 19% 13% 4% 12% 14% 12% 12% 8% -1% ® 8
  • 10. Business Update… Marketplaces Operating Metrics Q2 07 Q3 07 Q4 07 Q1 08 Q2 08 Q3 08 Active Users (in millions) Global Active Users* 83.3 83.0 83.2 83.9 84.5 85.7 •Global active users up 6%, Y/Y Growth 7% 4% 2% 1% 1% 3% excluding China and Taiwan New Listings (in millions) US 244 254 281 281 281 290 Y/Y Growth -8% -2% 3% 9% 15% 14% Int'l 316 301 357 366 386 410 • Continued progress in Y/Y Growth -5% -7% 5% 11% 22% 36% increasing selection on the site Total Listings 559 556 637 647 667 700 Y/Y Growth -6% -5% 4% 10% 19% 26% GMV (in $millions) US 6,700 6,729 7,331 7,183 6,983 6,609 Y/Y Growth 10% 10% 8% 7% 4% -2% Int'l 7,764 7,666 8,883 8,853 8,701 7,675 • Continue to focus on Finding, Y/Y Growth 14% 17% 16% 17% 12% 0% Trust and Safety, and Loyalty Fx Neutral Y/Y Growth 8% 10% 8% 8% 4% -2% to reaccelerate GMV in the future Total GMV 14,464 14,395 16,213 16,036 15,684 14,284 • Fixed price GMV was $6.5B in Y/Y Growth 12% 14% 12% 12% 8% -1% the quarter, growing 11% y/y Fx Neutral Y/Y Growth 9% 10% 8% 8% 4% -2% Fixed price as a % of GMV 39% 41% 42% 42% 43% 46% Notes: *Global active users number reflects all users, excluding users of StubHub, Half.com and IAC, who bid on, bought, or listed an item within the previous 12-month period. ® •More information on these metrics can be found on Page 10 of our Earnings Press Release dated October 15, 2008 9
  • 11. Understanding GMV growth better … Changes to make eBay safer… easier to use… objective to increase velocity on the site with (1) improved selection, (2) improved trust, and (3) improved finding New Listings X Conversion Rate%* ~ Sold Items X Average Selling Price** = Fx-Neutral GMV 0% 26% 11% 8% 10% 19% -8% -3% 4% 6% 10% -6% -18% -7% -2% Q108 Q208 Q308 Q108 Q208 Q308 Q108 Q208 Q308 Q108 Q208 Q308 Q108 Q208 Q308 Fee rebalancing Traffic flat… Unit volume growth Economy impacting GMV not yet where has brought more up 6% in tough ASPs as customers we’d like it to be… inventory onto the Finding/Best Match economic trade down and site… still in early environment… vehicle sales • Fx-neutral GMV growth (ex-vehicles): 2% stages/more work remain under to be done… pressure… • Fx-neutral Vehicles GMV growth: -13% ® 10 *Year-over-year percent changes in conversion rates **ASPs are on an Fx-neutral basis
  • 12. Continued strength in adjacencies… Text & Graphical Classifieds StubHub Ad Partnerships +59% +127% +46% Q3'07 Q3'08 Q3'07 Q3'08 Q3'07 Q3'08 • Averaged 84M unique • Strategic deals performing • Partnership with Major League visitors per month to our well… new and different Baseball global classifieds sites ways of monetizing traffic • Improvements in visitor to buyer conversion • Q4: Acquired Danish general classifieds site dBA and auto site Bilbasen, further strengthening our global portfolio of classifieds ® 11
  • 13. Business Update… PayPal Revenue and Volume Revenue TPV ($millions) ($billions) Int’l US 253 268 267 5.4 5.3 246 4.9 5.1 189 201 3.9 3.7 334 9.1 9.4 9.5 9.5 316 329 330 265 270 7.4 7.7 Q2 07 Q3 07 Q4 07 Q1 08 Q2 08 Q3 08 Q2 07 Q3 07 Q4 07 Q1 08 Q2 08 Q3 08 $ millions $ billions 454 470 563 582 602 597 11.1 11.6 14.0 14.4 14.9 14.8 y/y growth y/y growth 34% 35% 35% 32% 33% 27% 32% 34% 35% 34% 35% 28% ® 12
  • 14. Business Update… PayPal Operating Metrics Q2 07 Q3 07 Q4 07 Q1 08 Q2 08 Q3 08 Active Registered Accounts (in millions) Global Active Accounts 52.8 54.8 57.3 60.2 62.6 65.3 • Increasing merchant Y/Y Growth 16% 16% 16% 17% 19% 19% penetration… consumer preference TPV (in $millions) On eBay 6,460 6,513 7,928 7,777 7,674 7,265 Y/Y Growth 18% 18% 17% 17% 19% 12% • Increased penetration on-eBay Merchant Services 4,621 5,055 6,116 6,640 7,256 7,547 • Strong growth… deceleration in Y/Y Growth 57% 62% 66% 61% 57% 49% Merchant Services TPV primarily driven by deceleration Total TPV 11,080 11,569 14,044 14,417 14,930 14,812 in average payment size growth Y/Y Growth 32% 34% 35% 34% 35% 28% On-eBay Penetration Rate Global 51.9% 53.6% 54.0% 54.5% 56.5% 59.6% • 310 bps increase q/q Transaction rates Global take rate 3.90% 3.87% 3.84% 3.88% 3.89% 3.89% • Continuing to manage trxn costs while scaling Transaction exp 1.18% 1.21% 1.18% 1.18% 1.23% 1.20% operations… trxn margin at Transaction loss 0.31% 0.27% 0.27% 0.24% 0.27% 0.29% 62%, up 1pt sequentially Notes: •Global Active Accounts reflects all registered accounts, excluding non-registered users, that successfully sent or received at least one payment or payment reversal through PayPal within the previous 12-month period. •TPV has been adjusted to Net TPV, which is the total dollar volume of payments, net of payment reversals successfully completed through the PayPal system during the quarter, excluding the payment gateway business. •Transaction exp and transaction loss are expressed as % of Net TPV. •Penetration Rate has been adjusted to reflect the total dollar volume of addressable GMV paid using PayPal in relation to the total dollar volume of addressable GMV. ® 13 •More information on these metrics can be found on Page 11 of our Earnings Press Release dated October 15, 2008
  • 15. Business Update… Expanding PayPal’s Reach • Announced agreement to acquire Bill Me Later on October 6th, 2008 • Bill Me Later is a great stand alone business… - TPV of ~$1 billion in 2008, growing at 36% - Take rate (~12.5% of TPV) - Estimated present value between $500 million and $1.0 billion, depending on assumptions • Bill Me Later expected to be more powerful as part of PayPal - Network effects: accelerate consumer and merchant adoption - Low cost processing alternative… improves funding mix for PayPal - PayPal’s data and fraud engine will lower BML’s loss rates - eBay’s strong balance sheet lowers BML’s cost of funds - Estimated present value of synergies worth ~$700 million - $1 billion • Significant opportunity to capture even more value for our stockholders in the future ® 14 • Expected to close mid-Q4’08
  • 16. Business Update… Skype Revenue and Operating Metrics Revenue ($millions) Q2 07 Q3 07 Q4 07 Q1 08 Q2 08 Q3 08 Registered Users (in millions) 220 246 276 309 338 370 143 Y/Y Growth 94% 81% 61% 58% 54% 51% 136 126 Skype to Skype Minutes (in billions) 10.8 9.8 11.9 14.2 14.8 16.0 115 Y/Y Growth 41% 31% 26% 30% 38% 63% 98 90 Skype Out Minutes (in billions) 1.3 1.4 1.6 1.7 1.9 2.2 Y/Y Growth 57% 25% 7% 33% 42% 54% Q2 07 Q3 07 Q4 07 Q1 08 Q2 08 Q3 08 y/y growth 103% 96% 76% 61% 51% 46% Notes: • Registered user number reflects users that may have registered through non-Skype based web sites. ® 15 • Skype-to-Skype minutes are estimated; prior period amounts are updated to conform to current estimation methodology. • More information on these metrics can be found on Page 12 of our Earnings Press Release dated October 16, 2008.
  • 17. Total Non-GAAP Operating Expenses Sales & Marketing Product Development General & Admin. (% of Revenue) (% of Revenue) (% of Revenue) 24.5% 7.6% 7.9% 14.1% 13.6% 20.5% Q3 07 Q3 08 Q3 07 Q3 08 Q3 07 Q3 08 • Improved efficiency • Increased investments in key • Modestly higher fraud losses as initiatives… Finding, we expand PayPal protections • Shift of focus to buyer retention, improvements to the buyer experience • Higher bad debt expense recorded as contra-revenue, instead of S&M expense Q3 Non-GAAP Op Inc: $674M +14% y/y Q3 Non-GAAP Net Inc: $592M +5% y/y ® 16
  • 18. Q3 08 Cash Flow / Capital Allocation… Share Repurchase Update Cash Balance* / Flows Free Cash Flow / Other Movements (in $billions) • Free cash flow driven by earnings expansion • Capital expenditures: 7% of revenue 0.5 (0.6) (0.3) 0.8 0.4 U.S. Q3 Share Repurchases / Acquisitions Int'l • Repurchased ~25 million shares at an average 2.9 2.9 price of $25.09 Q2 08 Ending FCF Share Other** Q3 08 Ending Cash* Repurchase Cash* ® *Cash balance includes cash and cash equivalents 17 **”Other“ includes proceeds from options exercised, impact from fx movements, and purchases of investments
  • 19. Guidance Context Revenue Non-GAAP Low High EPS (in millions) Previous 2008 Guidance $8,800 $9,050 $1.72 - $1.77 Implied Y/Y Growth Rate 15% 18% 12% - 16% …Lower tax rate / share count -- ~$0.03 Q3 Impact f Tax/Shr Cnt +$0.03 …Stronger US$ (~$200) (~$0.06) Fx ($0.01) Belt Tighter +$0.03 …Belt tightening / simplifying organization -- ~$0.06 …Weak economy / more marketing $'s (~$150) (~$0.05) …Acquisitions ~$30 (~$0.03) Updated 2008 Guidance $8,525 $8,675 $1.69 - $1.71 Implied Y/Y Growth Rate 11% 13% 10% - 12% Note: The impact of the approximately $70-$80 million restructuring-related charge will be taken primarily in ® 18 the fourth quarter and is included in GAAP guidance but excluded from non-GAAP guidance
  • 20. Guidance Summary Q4 08 2008 Financial Guidance Revenues (in millions) $2,020 - 2,170 $8,525 - $8,675 Non-GAAP Operating Margin -- ~32% Non-GAAP EPS $0.39 - 0.41 $1.69 - 1.71 Free Cash Flow (in millions) -- $2,350 - $2,450 Guidance Assumptions Non-GAAP Tax Rate -- 21 - 22% Capex % of Revenue -- 6.5 - 7.0% Note: The impact of the approximately $70-$80 million restructuring-related charge will be taken primarily in ® 19 the fourth quarter and is included in GAAP guidance but excluded from non-GAAP guidance
  • 21. Summary • Q3 was a busy quarter: • Revenue in line with guidance… EPS exceeded expectations… strong FCF • Announced steps to simplify org and accelerate decision making • Repurchased ~25M shares… announced acquisitions to strengthen portfolio • Confident we are working on the right priorities… focused on making it easier for sellers to win and buyers to find great deals… however it will take more time to stimulate growth in GMV • Q4 outlook adjusted for stronger US dollar, tough economic environment, and dilution from acquisitions, partially offset by lower expenses… ® 20
  • 22. Q&A ® 21
  • 23. Appendix ® 22
  • 24. Calculation of Organic Revenue Growth Three Months Ended Mar 31, Jun 30, Sep 30, Dec 31, 2006 2006 2006 2006 Total revenue growth 35% 30% 31% 29% Acquisition impact (10%) (9%) (9%) (3%) Foreign currency impact 5% - (2%) (5%) Total organic revenue growth 30% 21% 20% 21% Mar 31, Jun 30, Sept 30, Dec 31, 2007 2007 2007 2007 Total revenue growth 27% 30% 30% 27% Acquisition impact (1%) (3%) (3%) (3%) Foreign currency impact (5%) (4%) (4%) (6%) Total organic revenue growth 21% 23% 23% 18% Mar 31, Jun 30, Sept 30, 2008 2008 2008 Total revenue growth 24% 20% 12% Acquisition impact (2%) 0% 0% Foreign currency impact (6%) (7%) (3%) Total organic revenue growth 16% 13% 9% ® Note: Acquisition impact includes acquisitions made within 12 months of the quarter 23
  • 25. Reconciliation of GAAP to Non-GAAP Net Income / EPS Three Months Ended Sep 30, Dec 31, Mar 31, June 30, Sept 30, Dec 31, Mar 31, Jun 30, Sep 30, 2006 2006 2007 2007 2007 2007 2008 2008 2008 (in millions, except per share data) GAAP net income (loss) $ 280.9 $ 346.5 $ 377.2 $ 375.8 $ (935.6) $ 530.9 $ 459.7 $ 460.3 $ 492.2 Stock-based compensation expense 73.5 74.7 72.0 79.6 80.6 69.7 87.4 91.9 90.3 Employer payroll taxes on stock-based compensation 0.4 0.9 1.8 1.3 2.3 1.5 0.3 1.7 0.5 Amortization of acquired (1) intangible assets 51.5 49.5 51.8 56.9 57.3 57.7 60.9 61.5 59.4 Impairment of goodwill - - - - 1,390.9 - - - - Income taxes associated with certain non-GAAP entries (38.9) (41.0) (42.3) (42.5) (31.7) (48.9) (46.8) (47.9) (50.3) Non-GAAP net income $ 367.4 $ 430.5 $ 460.5 $ 471.1 $ 563.8 $ 610.9 $ 561.5 $ 567.5 $ 592.1 Non-GAAP net income per diluted share $ 0.26 $ 0.31 $ 0.33 $ 0.34 $ 0.41 $ 0.45 $ 0.42 $ 0.43 $ 0.46 Shares used in non-GAAP diluted share calculation 1,426 1,403 1,384 1,379 1,373 1,368 1,344 1,325 1,297 (1) Includes amortization of acquired intangible assets within cost of net revenues and operating expenses. ® 24
  • 26. Reconciliation of GAAP to Non-GAAP Quarterly Operating Margin Three Months Ended Dec 31, Mar 31, Jun 30, Sept 30, Dec 31, Mar 31, Jun 30, Sept 30, 2006 2007 2007 2007 2007 2008 2008 2008 (in millions) GAAP operating income (loss) $ 449.9 $ 467.8 $ 456.8 $ (937.7) $ 626.1 $ 552.8 $ 545.4 $ 524.1 Stock-based compensation expense 74.7 72.0 79.6 80.6 69.7 87.4 91.9 90.3 Employer payroll taxes on stock-based compensation 0.9 1.8 1.3 2.3 1.5 0.3 1.7 0.5 Amortization of acquired (1) intangible assets 49.5 51.8 56.9 57.3 57.7 60.9 61.5 59.4 Impairment of goodwill - - - 1,390.9 - - - - Non-GAAP operating income $ 575.0 $ 593.4 $ 594.6 $ 593.4 $ 755.0 $ 701.4 $ 700.5 $ 674.3 Revenues $ 1,720 $ 1,768 $ 1,834 $ 1,889 $ 2,181 $ 2,192 $ 2,196 $ 2,118 GAAP operating margin 26.2% 26.5% 25.0% -50.0% 28.7% 25.2% 24.8% 24.7% Non-GAAP operating margin 33.4% 33.6% 32.0% 31.0% 34.6% 32.0% 31.9% 31.8% ® 25
  • 27. Reconciliation of GAAP to Non-GAAP YTD Operating Margin Nine Months Ended Sept 30, Sept 30, Sept 30, (in millions) 2006 2007 2008 GAAP operating income (loss) $ 973.2 $ (13.0) $ 1,622.2 Stock-based compensation expense 242.7 232.2 269.5 Employer payroll taxes on stock-based compensation 4.3 5.4 2.5 Amortization of acquired (1) intangible assets 165.4 166.1 181.9 Impairment of goodwill - 1,390.9 - Non-GAAP operating income $ 1,385.6 $ 1,781.6 $ 2,076.1 Revenues $ 4,250 $ 3,602 $ 6,506 GAAP operating margin 22.9% -0.4% 24.9% Non-GAAP operating margin 32.6% 49.5% 31.9% (1) Includes amortization of acquired intangible assets within cost of net revenues and operating expenses. ® 26
  • 28. Calculation of Free Cash Flow Three Months Ended Mar 31, Jun 30, Sept 30, Dec 31, Full Year (in millions) 2006 2006 2006 2006 2006 GAAP operating cash flow $ 584.2 $ 515.5 $ 522.1 $ 626.0 $ 2,247.8 Purchases of property and equipment, net (133.6) (148.4) (136.9) (96.6) (515.5) Free cash flow $ 450.6 $ 367.1 $ 385.2 $ 529.4 $ 1,732.3 Mar 31, Jun 30, Sept 30, Dec 31, Full Year 2007 2007 2007 2007 2007 GAAP operating cash flow $ 564.5 $ 654.6 $ 629.5 $ 792.5 $ 2,641.1 Purchases of property and equipment, net (85.4) (121.3) (119.3) (127.9) (454.0) Free cash flow $ 479.1 $ 533.3 $ 510.2 $ 664.6 $ 2,187.1 Mar 31, Jun 30, Sept 30, 2008 2008 2008 GAAP operating cash flow $ 766.3 $ 738.4 $ 693.4 Purchases of property and equipment, net (134.7) (121.7) (150.4) Free cash flow $ 631.6 $ 616.7 $ 543.0 ® 27
  • 29. Reconciliation of GAAP to Non-GAAP Quarterly Statement of Income Three Months Ended Three Months Ended September 30, 2007 September 30, 2008 (in millions, except per share data and percentages) Reported Non-GAAP Entries Non-GAAP Reported Non-GAAP Entries Non-GAAP Net revenues $ 1,889.2 $ - $ 1,889.2 $ 2,117.5 $ - $ 2,117.5 Cost of net revenues 446.5 (9.1) (a) 432.0 560.9 (10.4) (a) 543.8 (5.4) (c) (6.7) (c) Gross Profit 1,442.7 14.5 1,457.2 1,556.6 17.1 1,573.7 Operating expenses: Sales and marketing 485.2 (22.2) (a) 463.0 457.2 (23.7) (a) 433.5 Product development 164.9 (21.4) (a) 143.5 190.9 (23.5) (a) 167.4 General and administrative 287.5 (27.9) (a) 257.3 331.7 (32.7) (a) 298.5 (2.3) (b) (0.5) (b) Amortization of acquired intangible assets 51.9 (51.9) (c) - 52.7 (52.7) (c) - Impairment of goodwill 1,390.9 (1,390.9) (e) - Total operating expense 2,380.4 (1,516.6) 863.8 1,032.5 (133.1) 899.4 Income from operations (937.7) 1,531.1 593.4 524.1 150.2 674.3 Interest and other income, net 38.4 - 38.4 38.5 - 38.5 Interest expense (2.7) - (2.7) - - - Income before income taxes (902.0) 1,531.1 629.1 562.6 150.2 712.8 Provision for income taxes (33.6) (31.7) (d) (65.3) (70.4) (50.3) (d) (120.7) Net income $ (935.6) $ 1,499.4 $ 563.8 $ 492.2 $ 99.9 $ 592.1 Net income per share: Basic $ (0.69) $ 0.42 $ 0.38 $ 0.46 Diluted $ (0.69) $ 0.41 $ 0.38 $ 0.46 Weighted average shares: Basic 1,354 1,354 1,289 1,289 Diluted 1,354 1,373 1,297 1,297 Operating margin (50%) 81% 31% 25% 7% 32% Effective tax rate (4%) 14% 10% 13% 4% 17% ____________________ Notes: (a) Stock-based compensation expense (b) Employer payroll taxes on stock-based compensation (c) Amortization of acquired intangible assets and developed technology (d) Income taxes associated with certain non-GAAP entries (e) Impairment of goodwill ® 28
  • 30. Reconciliation of GAAP to Non-GAAP YTD Statement of Income Nine Months Ended Nine Months Ended September 30, 2007 September 30, 2008 (in millions, except per share data and percentages) Reported Non-GAAP Entries Non-GAAP Reported Non-GAAP Entries Non-GAAP Net revenues $ 5,491.7 $ - $ 5,491.7 $ 6,505.4 $ - $ 6,505.4 Cost of net revenues 1,257.0 (27.5) (a) 1,214.3 1,648.4 (31.9) (a) 1,597.1 (15.2) (c) (19.4) (c) Gross Profit 4,234.7 42.7 4,277.4 4,857.0 51.3 4,908.3 Operating expenses: Sales and marketing 1,406.3 (64.5) (a) 1,341.8 1,497.2 (72.1) (a) 1,425.1 Product development 450.4 (56.8) (a) 393.6 554.4 (71.6) (a) 482.8 General and administrative 849.3 (83.4) (a) 760.5 1,020.7 (93.9) (a) 924.2 (5.4) (b) (2.6) (b) Amortization of acquired intangible assets 150.8 (150.8) (c) - 162.4 (162.4) (c) - Impairment of goodwill 1,390.9 (1,390.9) (e) - - - (e) - Total operating expense 4,247.7 (1,751.8) 2,495.9 3,234.7 (402.6) 2,832.1 Income from operations (13.0) 1,794.5 1,781.5 1,622.3 453.9 2,076.2 Interest and other income, net 102.4 - 102.4 91.5 - 91.5 Interest expense (10.0) - (10.0) (3.5) - (3.5) Income before income taxes 79.4 1,794.5 1,873.9 1,710.3 453.9 2,164.2 Provision for income taxes (262.0) (116.6) (d) (378.6) (298.0) (145.0) (d) (443.0) Net income $ (182.6) $ 1,677.9 $ 1,495.3 $ 1,412.3 $ 308.9 $ 1,721.2 Net income per share: Basic $ (0.13) $ 1.10 $ 1.08 $ 1.31 Diluted $ (0.13) $ 1.08 $ 1.07 $ 1.30 Weighted average shares: Basic 1,361 1,361 1,312 1,312 Diluted 1,361 1,379 1,322 1,322 Operating margin 0% 32% 32% 25% 7% 32% Effective tax rate (330%) 350% 20% 17% 3% 20% ____________________ Notes: (a) Stock-based compensation expense (b) Employer payroll taxes on stock-based compensation (c) Amortization of acquired intangible assets and developed technology (d) Income taxes associated with certain non-GAAP entries ® 29
  • 31. Reconciliation and Calculation of Return on Invested Capital (in thousands, except percentages) Three Months Ended Numerator components: Q2'06 Q3'06 Q4'06 Q1'07 Q2'07 Q3'07 Q4'07 Q1'08 Q2'08 Q3'08 Non-GAAP operating income $ 460,427 $ 464,493 $ 575,007 $ 593,445 $ 594,664 $ 593,445 $ 754,979 $ 701,364 $ 700,487 $ 674,318 Tax rate 28% 27% 29% 26% 25% 10% 24% 23% 22% 17% Non-GAAP operating income after tax $ 332,889 $ 337,825 $ 406,703 $ 441,523 $ 447,544 $ 531,845 $ 576,276 $ 540,892 $ 549,673 $ 559,684 Denominator components: Q2'06 Q3'06 Q4'06 Q1'07 Q2'07 Q3'07 Q4'07 Q1'08 Q2'08 Q3'08 Total assets 13,250,251 13,463,118 13,494,011 13,920,051 14,361,157 14,786,812 15,366,037 15,046,305 15,021,625 14,240,157 Total cash, cash equivalents and investments 4,010,778 3,795,865 3,495,486 3,519,880 3,793,677 4,461,775 5,035,692 4,108,141 4,181,717 3,777,482 Current liabilities 1,719,405 2,220,685 2,518,395 2,250,571 2,328,643 3,272,867 3,099,579 3,080,432 3,006,234 2,854,733 $ 1,240,647 $ 1,318,296 $ 1,402,661 $ 1,518,940 $ 1,633,595 $ 1,827,615 $ 1,997,188 $ 2,096,556 $ 2,198,685 $ 2,226,524 11,253,387 12,139,387 12,912,980 13,339,193 13,697,718 14,005,030 14,385,614 14,696,072 14,916,387 14,892,187 3,469,757 3,459,673 3,377,148 3,486,641 3,536,980 3,622,670 3,858,237 3,974,641 4,100,390 4,097,313 1,467,892 1,674,665 1,924,986 2,078,113 2,207,540 2,518,232 2,694,011 2,806,418 2,957,551 3,062,769 19.6% 18.8% 18.4% 19.5% 20.5% 23.2% 25.5% 26.5% 28.0% 28.8% ® 30
  • 32. Reconciliation of GAAP to Non-GAAP Guidance Three Months Ended Year Ended December 30, 2008 December 31, 2008 (in millions, except per share amounts and percentages) GAAP Non-GAAP (a) GAAP Non-GAAP (a) Revenues $2,020 - $2,170 $2,020 - $2,170 $8,525 -$8,675 $8,525 -$8,675 Operating Margin - - ~24% ~32% Diluted EPS $0.25 - $0.27 $0.39 - $0.41 $1.32 - $1.34 $1.69 - $1.71 Effective Tax Rate - - 18.0% - 19.0% 21.0% - 22.0% (a) Estimated non-GAAP amounts and percentages above reflect estimated quarterly adjustments that exclude the amortization of acquired intangible assets and developed technology of approximately $85-$95 million per quarter, stock-based compensation expense and employer payroll taxes on stock-based compensation of approximately $90-$105 million per quarter and restructuring-related charges of approximately $60-$70 million. ® 31