Key questions from the third quarter earnings call conducted by eBay Inc. on October 15, 2008.

James Mitchell (Goldman Sachs): Your fourth quarter guidance seems to imply no Christmas. Do you see the economic cyclicality hurting the marketplace business or do you also see some impact on the PayPal business?

Robert H. Swan: What we saw during the course of the second quarter, I will characterize as external signs and then internally how it impacted our business. We saw a sharp deceleration in retail sales, in vehicle sales during the course of the quarter. Merchant services, which has a good visibility into what is going on in e-commerce overall decelerated during the course of the third quarter. E-commerce growth rates in the U.S., we do not have as good outside the U.S. but in the U.S. decelerated rather sharply second to third quarter. We felt the effects of that across all aspects of our business. While PayPal had a strong quarter, it did suffer from decelerating growth rates starting in the second and third week of August as it exited the third quarter. We expect those dynamics to impact our business in the fourth quarter.

James Mitchell (Goldman Sachs): On slide 18, you referred to more marketing dollars as part of the reason for the earnings guidance revision for the fourth quarter. Year-to-date, your marketing spend is tracking flat to down. Do you see that turning around sharply in the fourth quarter?

Robert H. Swan: We have generated some improvements in our overall marketing spend during the course of the year. We were 400 basis points down in the third quarter; however, we are spending more on buyer retention programs versus acquisition related programs, through couponing and loyalty programs. Those dollars are impacting revenue in terms of contra revenue as opposed to marketing and expense. We expect in the fourth quarter in this difficult economic environment that we will be spending even more marketing dollars as a percent of revenue than we did in the third quarter that will impact both contra revenue and our marketing, our sales and marketing expense as a percent of total.

John J. Donahoe: The way we are going to spend that is to fight for our sellers. We envision a difficult holiday season and we feel a strong need to get out there and help drive demand on behalf of our sellers, so we will increase Internet marketing, we will increase our couponing, we will increase our cash-back program with Microsoft, promotions, things that we have proven ability to generate returns from.

Youssef Squali (Jefferies & Company): Are you and how long would you wait before considering a potential restructuring of the business as the core continues to weaken?

John J. Donahoe: We are continuing to invest in our areas of strength and we see strong synergies between the core eBay business and the PayPal business, and strong synergies between the eBay business and the other e-commerce formats. I get a question frequently on PayPal of would not we be better off with PayPal being separate? Our sense is no, there are strong synergies between PayPal and eBay, that eBay continues to provide PayPal with new customers, that there is still growth for PayPal left on eBay. We are delighted penetration grew more in the third quarter than it has any quarter in the past. It is now at 60% globally. We think that can go higher. There is nothing about being part of our portfolio that is holding PayPal back -- in fact, the contrary; being part of the overall portfolio allows us to move on an acquisition and opportunity like Bill Me Later. We are focused on trying to take advantage of the synergies. We do not think we have fully realized the synergies between eBay and PayPal and that our classifieds business, advertising, and Stub Hub all have strong synergies with eBay.

Youssef Squali (Jefferies & Company): Could you comment on Skype?

John J. Donahoe: Skype is a great standalone business. The more we let it stand alone, the more it seems to deliver fantastic results. Right now it is not a distraction and we are focusing our attention on eBay and PayPal and the e-commerce businesses and so we will continue to assess its role in the portfolio but right now, it is not a distraction and it is delivering good results.

Christa Quarles (Thomas Weisel Partners): On the PayPal slowdown, international in particular fell off significantly in the quarter. which markets are you seeing strengthen?

Robert H. Swan: We saw more deceleration outside the U.S., a function of a couple of things. One, second to third quarter currency. With the stronger dollar, international revenues are translating at a harder rate. Two, the on-eBay business decelerated second to third quarter, along with the GMV deceleration. And then third, our global merchant services business, we saw some deceleration second to third quarter both here in the U.S. and outside of the U.S.

John J. Donahoe: While there was a deceleration in the market and outside the U.S., PayPal's international business was one of the things we are excited about. We continue to see merchants adopting PayPal in Asia, across Europe, and even in Latin America and other places where we do not have a strong eBay presence because it is driving incremental growth and it is opening up a worldwide, a global marketplace for those merchants. In fact, TPV outside the U.S. was up 37% for the quarter and the merchant services international growth was close to 50%. So the economy is impacting the whole world but the core value proposition PayPal delivers to merchants around the world as a global payment platform is one that we continue to think is powerful and merchants are responding to.
Christa Quarles (Thomas Weisel Partners): Could you give an update on your G-market intentions?

Robert H. Swan: We have said that we are going to continue to maintain the flexibility to invest and grow our businesses through acquisition and we have highlighted three specific areas of focus - one, geographic strengthening; two, adjacencies that leverage and strengthen our core businesses; and three, technologies that enable and strengthen our core businesses. That is the three areas that we have been in focus on over the last three years and that has resulted in acquisitions like Stub Hub, which we feel great about; more recently, Fraud Sciences, which is a technology that enables PayPal. And then recently, Bill Me Later and DBA or classifieds, kind of extensions of our core business. That has been our M&A strategy for the last several years. In terms of Korea, we have got a great business in Korea. Our IAC business has been performing well over the last couple of quarters and we continue to focus on competing and growing in that market. Along the lines, we in conjunction with G-market had filed with the Korean regulators to assess whether it would even be possible to take an equity stake in G-market and recently got a favorable ruling in that regard. We will evaluate on an ongoing basis whether that makes sense in terms of the best uses of how we allocate capital in a disciplined way.

Mark Mahaney (Citigroup): What is the timing or the speed at which you think it is optimal to try to remove sub-par sellers off the network?

John J. Donahoe: We are not assessing sub-par sellers. We are letting our buyers do it and so these detailed seller ratings where buyers are rating our sellers, that is the foundation we are using and so that is an important principal here, where we are creating a marketplace that allows transparency. What is interesting is when you lay out our highest rated sellers – these are sellers that have 4.8 and above and then look at sellers 4.6 to 8, 4.4 to 6, 4.4 and below, you see growth rates now increasingly consistent with those where buyers are increasingly buying from the highest rated sellers and buying less in fact, they have stopped buying from lower rated sellers. And so that tells us the eBay marketplace is getting safer. Some would say we should be moving faster and even more aggressively on that. Our sellers would say we are moving too fast and too aggressive. We are trying to strike that balance where a long-term seller has the opportunity to improve their service on eBay and improve their ratings from buyers but we see clear evidence that the site today is safer and easier to use than it was six months ago. We put these changes in in March it is safer today. Buyers are telling us that in their qualitative data and what is yet to happen is have that convert into more purchases.

Brian Pitz (Banc of America): Would you discuss where you expect the take rates for marketplace to go?

John J. Donahoe: Our goal with our pricing changes. This year was to modestly reduce our take rate. We are significantly rebalancing our fees to reduce the up-front fees and align our success with that of our sellers and the net effect of what we expect in a conversion neutral environment is the take rate will come down modestly over time. We have also gone to category-based pricing because margins for sellers differ significantly by category. So conversion impacted on the short-term but the general direction we are trying to do is to ensure that our marketplace is the most competitive marketplace for sellers to sell on.

Robert H. Swan: In the quarter, our take rate went up, which is a function of modestly lower take rates but also the mix of our business. So our highest take rate business, Stub Hub, continues to demonstrate great growth and our lowest take rate business, Vehicles, has been suffering by the overall economic environment. So those are two degradations about the overall take rate that is reflected in third quarter’s results. In terms of exchange rates, we try to stay away from giving specific rates but what I would say is 90 days ago when we spoke to you and we were looking at a Euro that was about $1.58 to the dollar and a pound that was about $1.98 to the dollar. And today, reflected in our guidance for the rest of the year, it is closer to a spot rate that is about $1.36, $1.37 and a pound that is about $1.78 to $1.77 to the dollar, so what has transpired over the course of the last three months is about a 10% strengthening of the dollar and that will impact our revenues from the last time we spoke to you by about $200 million.

Jeffrey Lindsay (Sanford C. Bernstein): Are you going to be taking any hedging initiatives, or do you have any in place to offset the risk of this dollar appreciation?