First, we have a growing, diversified portfolio of businesses. Led by eBay and PayPal, we have multiple growth sources or growth engines in our Company. We have leadership positions in e-commerce, online payments and communications, each with a global brand and reach. We serve hundreds of millions of users around the world and our proven business models generate solid revenue, healthy profits, and cash flow with minimum capital requirements. We have no inventory, no warehouses or other fixed costs that may impact many companies during a downturn.

Secondly, our portfolio offers consumers and merchants real value during difficult times. On an unprecedented global scale, we bring people together to buy, sell, communicate, and be paid. For consumers looking for value, we offer savings through access to the most deals and biggest selection online. For entrepreneurs or people feeling pinched by the economy, we offer a low cost way to earn money and build a business. And for both consumers and merchants, we provide peace of mind through a low cost, safer way to pay and be paid. And third, our Company has a strong balance sheet. We have the financial flexibility to invest in growth, deliver on our financial commitments, and weather an economic downturn.

The bottom line is that eBay is well-positioned to compete and grow during a challenging and uncertain time. This is when strong companies get stronger and we intend to do just that.

Now let’s take a greater look at the four components of our portfolio. I typically start with our eBay marketplace business but today I will start with PayPal, then our adjacencies and Skype, and I will end with eBay, where I will spend most of my time.
PayPal is a great business with terrific momentum. Today PayPal generates about 28% of our total revenues and is well on its way to becoming more than a third of what we do. On eBay, PayPal''s payment volume grew a healthy 12% in Q3 and PayPal''s worldwide penetration on eBay grew faster in Q3 than any quarter in recent years, reaching almost 60% worldwide. PayPal continues to be the safest way to pay and be paid on eBay.

Off eBay, PayPal''s growth is exploding. Merchant services total payment volume grew 49% in Q3 and both on and off eBay, merchants love PayPal. Why? Because PayPal delivers three things all merchants need -- new customers, incremental sales, and lower costs and in tough economic times like this, merchants need PayPal more than ever. And PayPal''s growth shows that merchants worldwide understand this. Today more than a million merchants use PayPal, which is more than 65 million active user accounts. PayPal''s global user base generates incremental business for merchants and an unmatched experience for consumers.

What excites me about PayPal, however, is not just its performance but also its potential. PayPal''s opportunity is not just the 14% of e-commerce represented by the eBay marketplace. PayPal''s target market goes well beyond that and it includes the other 86% of global e-commerce. In fact, this quarter for the first time the total payment volume traded through PayPal actually exceeded total merchandise volume traded on eBay. This simply reinforces the tremendous growth potential of this business. And PayPal''s growth potential is also why we are excited about our recently announced acquisition of Bill Me Later, which is expected to further strengthen our position in online payments. With this acquisition, we will have the number one and number two online oriented payment brands and as I said last week, Bill Me Later brings complementary and reinforcing strengths to our Company.

The second growth engine in our portfolio is what we call our adjacencies or alternative e-commerce formats. These include advertising, Stub Hub, and classifieds. Together, these businesses represent about 11% of our total revenue and are growing faster than e-commerce.

Our overarching goal is to connect buyers and sellers worldwide regardless of format and our alternative e-commerce formats help us achieve that goal. They enable us to offer buyers and sellers more choice about how they want to trade, where they want to trade, and when they want to trade, and they do so in a way that is complementary to eBay.

Classifieds is just one example. In just four years, we have built classifieds into a global business generating more than a quarter billion dollars in revenue with growth in Q3 of 59%, and today we have the leading classified position in multiple markets around the world and our recent acquisition of Denmark’s leading online classified sites, DBA and BilBasen strengthens this position and gives us another market-leading position in Europe.

Advertising is another dynamic alternative format for us. Advertising on eBay grew significantly in Q3 and this fall we are launching our eBay ad commerce beta program for sellers in the U.S. and Germany. Sellers will now be able to bid for search terms and get their ads placed directly into existing ad space on eBay. Sellers pay only when a buyer clicks on their ad and goes to their listing or eBay store. This is another way we are helping sellers gain exposure and drive demand.

The next part of our portfolio is Skype, which continues to show strong momentum. In the third quarter, registered users increased 51% over the prior year and Skype-to-Skype minutes increased 63% to 16 billion minutes, reflecting the power of a free voice product and a free video product in this challenging economy. SkypeOut minutes also increased 54%, which drove revenue growth of 46% for the quarter. Josh Silverman and his team continue to do a great job there.

Now last but not least, I would like to turn to our core eBay transaction business, which represents roughly half of our revenues. Clearly GMV in the third quarter was not what we would have liked but we remain confident in our overall direction and believe we are on the right path. eBay enjoys a global leadership position in e-commerce but buyer and seller expectations have been rising and we have not kept up. Thus we need to drive bold changes to continue our leadership position and this is exactly what we are doing. At the beginning of the year, I laid out two clear priorities for our eBay business -- one, make eBay safer and easier to use; two, increase selection by blending auctions and fixed price in a uniquely eBay way. To achieve these goals, we have implemented two waves of changes this year. Frankly, some of these changes were overdue and they demonstrate our commitment to better meeting the expectations of sellers and buyers and we are doing this in a manner which is aggressive but responsible, recognizing that every change we make impacts a global eco-system trading more than $60 billion of merchandise each year.

Let me recap what we have done thus far this year. First, in March we implemented a variety of changes geared to making eBay safer and easier to use. Taken together, these changes introduced incentives and rewards for sellers to provide both great deals but also deliver a good shopping experience to buyers. Are these changes working? We believe that we are beginning to drive a better buyer experience, a safer and easier experience on eBay and here’s what we see -- sellers who are meeting or exceeding buyer expectations are growing their businesses on eBay and more and more buyers are reporting positive experiences.

Take this example -- during Q3, the highest rated sellers in the U.S. saw their eBay businesses growth significantly. These are the sellers who buyers rated 4.8 or above and who have been active on eBay for more than 12 months. At a time when most retailers are struggling to stay even, these sellers saw their same-store sales on eBay grow 26% in Q3 and together they accounted for 16% of our total GMV and this group included both large and small sellers, reinforcing the fact that sellers of all sizes can succeed on eBay.

Meanwhile, sellers with lower ratings are seeing their businesses decline. So we are seeing a share shift within eBay where buyers are buying more from the highest rated sellers and less from lower rated sellers. And not surprisingly the entrepreneurial eBay community, selling community is responding and the number of sellers earning ratings by buyers of 4.8 and above is up 20% since we made these changes six months ago.

Now as I said, these are early signs and we do see buyers moving toward sellers with higher ratings. However, this has not yet translated into buyers increasing their overall purchases on eBay. This will take time, especially in light of the current economy, which is a mitigating factor but not an overriding excuse. Our current GMV trend is not where we would like it to be but we remain confident that the improvements we are making will ultimately move the needle.

The second major change we have announced this year was implemented in late September when we significantly rebalanced fees for fixed price inventory. Our goal is to create a marketplace that optimizes for both auctions and fixed price in a uniquely eBay way. We have made it virtually free for sellers to put fixed price inventory on eBay and we have aligned our success with theirs.

Now I’m frequently asked if we are promoting fixed price at the expense of auctions and the answer is no. What we are doing is building a marketplace that lets buyers and sellers choose the format they prefer. Fixed price has been part of eBay for many years and we are simply improving this format as more and more buyers choose to purchase that way.

Our fixed price fee changes will help improve selection and give buyers greater choice. Fixed price represented 46% of GMV in Q3 and grew 11% for the quarter, which we believe is roughly in line with e-commerce growth rates globally.

So overall, we are driving changes to make eBay a more competitive marketplace in today’s environment and we are making these changes into a very challenging economic environment, which makes our job more difficult and lengthens the time it will take for progress to flow through to the financials, but we remain committed to reinvigorating growth in our core business and we believe we are on the right path.