John J. Donahoe - Chief Executive Officer, President, Interim President of eBay Marketplaces and Director Jennifer Ceran - Robert H. Swan - Chief Financial Officer and Senior Vice President of Finance

Mark S. Mahaney - Citigroup Inc, Research Division Spencer Wang - Crédit Suisse AG, Research Division Justin Post - BofA Merrill Lynch, Research Division Matthew R. Nemer - Wells Fargo Securities, LLC, Research Division Douglas Anmuth - JP Morgan Chase & Co, Research Division Colin A. Sebastian - Robert W. Baird & Co. Incorporated, Research Division Scott W. Devitt - Morgan Stanley, Research Division Benjamin A. Schachter - Macquarie Research Gil B. Luria - Wedbush Securities Inc., Research Division

Good day, ladies and gentlemen, and welcome to eBay's Third Quarter 2011 Earnings Conference Call. [Operator Instructions] As a reminder, this conference call may be recorded. I would now like to hand the conference over to Ms. Jennifer Cerran, Vice President of Investor Relations. Ma'am, you may begin.

Thank you, and good afternoon. Thank you for joining us, and welcome to eBay's earnings release conference call for the third quarter of 2011. Joining me today on the call are John Donahoe, our President and Chief Executive Officer; and Bob Swan, our Chief Financial Officer. We're providing a slide presentation to accompany Bob's commentary during the call. All gross rates mentioned in Bob and John's prepared remarks represent year-over-year comparisons unless they clarify otherwise. This conference call is also being broadcast on the Internet, and both the presentation and call are available through the Investor Relations section of the eBay website at investor.ebayinc.com. In addition, an archive of the webcast will be accessible for 90 days through the same link. Before we begin, I'd like to remind you that during the course of this conference call, we will discuss some non-GAAP measures in talking about our company's performance. You can find a reconciliation of those measures to the nearest comparable GAAP measures in the slide presentation accompanying this conference call. In addition, management will make forward-looking statements relating to our future performance that are based on the current expectations, forecasts and assumptions and involve risks and uncertainties. These statements include, but are not limited to, statements regarding expected financial results for the quarter and full year 2011 and the future growth in the Payments, Marketplaces and GSI businesses. Our actual results may differ materially from those discussed in this call for a variety of reasons including, but not limited to, global economic events; changes in political, business and economic conditions; foreign exchange rate fluctuation; our ability to integrate, manage and grow businesses recently acquired or that may be acquired in the future, including GSI; our increasing need to grow revenues from existing users, particularly in more established markets; an increasingly competitive environment for our businesses; the complexity of managing an increasingly large enterprise with a broad range of businesses at different stages of maturities; and our need to manage regulatory tax, IT and litigation risks, including risks specific to PayPal, Bill Me Later and the financial industry; and our need to timely upgrade our technology and customer service infrastructure at reasonable cost or adding new products and features and maintaining site stability and performance. 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 investor.ebayinc.com. You should not rely on any forward-looking statements. All information in this presentation is as of October 19, 2011, and we do not intend and undertake no duty to update this information. With that, let me turn the call over to John John J. Donahoe: Thanks, Jenny. And good afternoon, everyone, and welcome to our Q3 earnings call. Q3 was another strong quarter for our company. eBay, PayPal and GSI all performed well, and we see significant global growth opportunities and synergies across our portfolio. Before taking a look at our results, I want to take a moment to recap our strategy. Our company is focused on enabling commerce. This means giving consumers a seamless shopping experience across multiple channels, whether they're shopping online, offline or on a mobile device. Consumers want to shop anytime, anywhere. And this requires retailers of all sizes use the ability to engage consumers where, when and how they want to shop. In today's commerce environment, a physical retail store is just another point of access. Location alone can't compete when consumers have shopping malls in their pockets. Retail must be technology-enabled and consumer-led. Global technology platforms increasingly enable commerce, and we have powerful commerce platforms in our core eBay, PayPal and GSI businesses. We're also building valuable commerce capabilities in mobile, local and social. This includes technologies such as Milo, RedLaser and Zong. And last week, we launched X.commerce, our open commerce ecosystem. X.commerce makes our technology and global platforms available to third-party developers, which we believe will accelerate commerce innovation. We believe that technology-led innovation is changing shopping and rapidly influencing customer behavior. We are at an inflection point in global commerce. In fact, we believe we'll see more change in how people shop and pay over the next 3 years than we've seen in the last decade. And as we enter this new wave of global commerce innovation, I feel very good about our ability to compete, win and lead. Now let's take a look at our results in Q3. We had a strong top line and bottom line quarter. Revenue grew 32% in Q3, and non-GAAP EPS was up 20%. PayPal continued to drive strong momentum, surpassing $1 billion in revenue for the second consecutive quarter. Marketplaces had a strong quarter, with 17% revenue growth supported by strong momentum in the U.S. market and solid growth internationally. Q3 marked our first full quarter with GSI, and we're excited about the opportunities we have to serve large retailers and brands. Every retailer that I speak with around the world is grappling with change. They know they must adapt to the changing commerce environment, and we believe we can be a valuable partner to retailers with our combined GSI, PayPal and eBay capabilities. Now let's take a look at the results from each business unit. PayPal had strong continued growth in active registered accounts, total payment volume and revenue. PayPal continues to add about 1 million new active registered accounts per month. Payment volume was up 29% in Q3 year-over-year. In the Merchant Services business, FX-neutral TPV was up 33%. In North America, PayPal is now available on 63 of the top 100 Internet retailers, up from 56 last year. New merchants are offering -- new merchants offering PayPal include Target, J. Crew and Zara. And we see significant runway globally for continued growth of new merchants and consumer adoption. PayPal also continues momentum on eBay, with TPV up 18% for the quarter. Penetration on eBay accelerated nearly 2 points in Q3, exceeding 73%. And Bill Me Later had another strong quarter. This business is driving strong incremental spend and engagement among eBay and PayPal shoppers. We feel very good about BML's traction and potential, and Bob will cover this business in more detail in his remarks. In mobile payments, PayPal continued to accelerate, driving strong sales and new customer acquisition for merchants. We now expect mobile payment volume to exceed $3.5 billion this year, 5x the volume in 2010. And with acquisitions such as Zong and the expansion of Mobile Express Checkout, PayPal is driving innovation and customer convenience in the mobile arena. At a recent top customer summit in September, PayPal unveiled new payment innovations designed to extend PayPal's capabilities to point of sale retail locations. This will give consumers better shopping experiences and more flexible payment choices. And for retailers, this will mean the opportunity not only to engage consumers at checkout, but also throughout their entire shopping experience. In Q4, we expect to begin testing these innovations on a limited family and friends basis with a national retailer to U.S. markets. This will help us refine the consumer experience and prepare for the anticipated national rollout with this retailer and other partners in the second quarter of next year. Meanwhile, we'll continue to share our vision and product innovations with other potential retail partners throughout the quarter. We're excited about our plans to deliver an entirely new payments experience for consumers and merchants and offline retail environments. Turning to Marketplaces. eBay had another strong quarter. In the U.S., core GMV grew 14%, up year-over-year for the second consecutive quarter and in line with market rates of growth. eBay also continued solid growth internationally in Q3, led by the U.K., Australia and strong cross-border trade out of China, which was up 29%. Our focus on improving the shopping experience is paying off. Top-rated sellers now account for 45% of GMV in the U.S., and same-store sales from these sellers grew 23% year-over-year in Q3, outpacing e-commerce growth. Items sold with free shipping on eBay grew 10 points year-over-year in Q3 to almost 40% in the U.S. More than 0.5 million items are shipped free each day on eBay in the U.S. eBay's focus on creating tailored vertical shopping experiences in key categories continues to show strong results. For example, global GMV for eBay motors parts grew 23% year-over-year, gaining share and outpacing the market. eBay Fashion global GMV was up 18% year-over-year. In Q3, eBay Fashion outlet launched in the U.S. featuring top lifestyle brands and retailers such as Neiman Marcus' Last Call, Brooks Brothers and Timberland. eBay Mobile is also driving great shopping experiences. We now expect eBay Mobile GMV to reach almost $5 billion for 2011, more than double Mobile GMV last year. Our mobile apps have been downloaded more than 50 million times. And today, consumers are making 3 purchases per second on eBay Mobile applications. And with an improved eBay user experience, we're now investing in marketing in the U.S. again to engage consumers. Our campaign, "When it's on your mind, it's on eBay" launched in the U.S. in September and will continue throughout the holidays. Focused on 3 categories: fashion, electronics and motors parts, the campaign highlights the range of new merchandise available on eBay and the ease and convenience of eBay Mobile shopping. Turning briefly to our adjacent marketplaces formats. Classifieds revenue was up 19% in Q3 on an FX-neutral basis, and StubHub had another strong quarter. GSI also had a strong quarter, and our integration efforts are well underway. Our RedLaser and Milo technologies have been integrated into the GSI platform, enabling shoppers to search local store inventory realtime and aid GSI merchants who are now selling on eBay. In addition, we're significantly enhancing GSI's technology organization. Former PayPal CTO, Scott Guilfoyle, has transitioned to Head Technology at GTI (sic) [GSI], and we're focused on ensuring that GSI leverages eBay Inc.'s full capabilities and consistently provide world-class technology, support innovation to GSI customers. In summary, we had a strong Q3. I feel very good about our continued progress in our eBay business. And with the appointment of Devin Wenig in Q3 as the new President of eBay Marketplaces, I'm confident that our momentum will continue. This business is now playing offense. Meanwhile, PayPal continues to play offense and continues its strong momentum at the forefront of payments innovation. We feel very good about our GSI acquisition and the launch of X.commerce enables us to help developers accelerate innovation in global commerce and serve retail better. Simply put, global commerce is at an inflection point, and our company is well positioned to lead innovation, to partner with retailers, not compete with them, and to enable consumers to shop anytime, anywhere. And now, I'll turn it over to Bob, who'll provide more details on Q3 before we take questions. Robert H. Swan: Thanks, John. During my discussion, I'll reference our earnings slide presentation that accompanies the webcast. Q3 was another strong quarter. From a growth perspective, we grew the top line 32% and showed strength across all of our businesses. From an execution perspective, operational excellence has increasingly become the way we work. We grew the bottom line 20%, while we invest in operating leverage and accelerating innovation and driving top line growth. From a capital allocation perspective, we generated over $500 million in free cash flow, and we've reinvested approximately $300 million to strengthen our portfolio with the acquisitions of Magento, Zong and The Gifts Project. In the third quarter, our combined businesses generated net revenues of $3 billion, up 32%. Organic revenue growth was up 18%. Foreign currency movements increased growth by roughly 3 points and the inclusion of recently-closed acquisition increased growth by roughly 11 points. Third quarter non-GAAP EPS was $0.48, a 20% increase year-on-year. Solid top line growth drove this increase and our outperformance versus guidance. Non-GAAP operating margin was 25.3%, down 340 basis points from Q3 2010. This was due primarily to the inclusion of recently-completed acquisitions. We generated strong free cash flow of $526 million in the quarter. CapEx came in at roughly 10% of revenue, 3 points higher than the year-ago quarter. The increase was due to investments in product and technology to enhance our platforms, as well as the addition of GSI. We expect CapEx to decline to historical levels in the fourth quarter. Now let's take a closer look at our segment results. PayPal posted another great quarter. Revenue growth accelerated to 32%, the strongest revenue growth in 3 years. Total payment volume increased to $29.3 billion, up 31%. We continue to expand our global footprint. International TPV increased 46% and comprise 46% of overall TPV in the quarter. A few quick highlights on PayPal operational metrics. On eBay, PayPal's TPV showed continued strength, accelerating 1 point to 18% on an FX-neutral basis. Penetration of addressable GMV increased 170 basis points sequentially to 73.1%. Merchant Services' TPV grew 33% on an FX-neutral basis in the quarter and accounted for 66% of PayPal's overall TPV. We continue to expand our global footprint, our merchant coverage and our share of checkout. Transaction margin was 61.5% in the quarter, down 60 bps. The decrease was mainly driven by an increase in transaction loss, as we introduce new product and make strategic risk management decisions. We expect transaction loss to trend down modestly over time. PayPal segment margin was 19.5% in the quarter, up 20 basis points from last year. Let me touch on a few key operating metrics for Bill Me Later. BML's TPV was up 64%. More consumers are turning to BML for both convenience and choice, driven by continued strong penetration on and off eBay. BML penetration in the U.S. on eBay and in the PayPal wallet has quadrupled in the past year to over 1% in the quarter. While small compared to other funding methods, this penetration reduces our funding cost as consumers shift away from credit cards to Bill Me Later. Risk-adjusted margins increased 650 bps over prior year to 18%, as improved portfolio performance drove net charge-offs down on a year-on-year basis. Now let's move to our Marketplaces business. Overall, Marketplaces achieved net revenues of $1.7 billion, a 17% increase. Marketplaces' FX-neutral revenue was 12%. This was driven by solid FX-neutral non-vehicle GMV growth of 11% and marketing services revenue growth of 33%. Marketplaces generated 59% of its revenue internationally this quarter. We had a great quarter from our Marketplaces adjacent formats, with marketing services revenue up 33%. The growth rate was primarily driven by strength in ad base revenue, continued strong performance across our global Classifieds businesses and the addition of brands4friends. Today, these adjacent formats represent 18% of Marketplaces' revenue, and they are growing roughly double market rates of growth. A few quick highlights on Marketplaces' operational metrics in the quarter. Active users increased to 99 million, up 6%. Sold items grew 10%, a 2-point acceleration from Q2, driven by growth in our international business. Non-vehicles' FX neutral GMV was up 11% in the quarter. U.S. GMV remained flat at 14% growth, and international GMV accelerated 2 points to 10%. Our global take rate, excluding vehicles and StubHub, was 8.3%, 10 bps lower than last year. Marketplaces' segment margin was 38.5% in the quarter, down 120 basis points from a year ago due primarily to recently-completed acquisitions. Now let's turn to our newest business unit, GSI. Revenue for Q3 was $203 million, up 8%. Adjusting for the impact of the continued shift of clients to the service fee model, year-over-year growth would have been 20%. Global e-commerce merchandise sales or GMS grew at 18% on a comp store basis. This was driven by a strong performance in the beauty and apparel verticals. And in the quarter, we added 2 new e-commerce service clients. The GSI marketing services primarily in its demand gen activities were up 42% in the quarter. Just a quick update on the GSI integration. GSI profitability is improving as we begin to capitalize on synergies. We are expanding ebay.com selection with 8 GSI merchants on eBay, and we are increasing PayPal's ubiquity, with over 80% coverage of GSI volume and 11% share of checkout. We now expect to begin rolling out V11 in the first half of 2012. We have shifted our timing to further enhance the platform's functionality and deployed more robust testing capabilities. All in all, 3 months into the acquisition, we are making good progress integrating GSI into eBay's portfolio of businesses. Turning to operating expenses. In Q3, they were 45% of revenues, slightly higher on a year-over-year basis. This was driven primarily by investment product and an increase in provision for transaction loan losses. In late Q3, we also launched our eBay advertising campaign in the U.S., which will continue into the fourth quarter. From a capital allocation perspective, we generated strong year-to-date free cash flow of $1.6 billion, including $526 million in the third quarter. We have improved our financial flexibility by funding over 40% of the U.S. Bill Me Later loan receivables portfolio with our offshore cash. We've invested approximately $3.2 billion to strengthen our portfolio with the acquisition of GSI and 9 smaller technology acquisitions, including Magento, Zong and The Gifts Project in Q3. We also completed our 2011 share repurchase program for the year. For the full year, we have repurchased 25.6 million shares for a total of $816 million, offsetting dilution from our 2011 stock-based compensation program. We ended the quarter with cash, cash equivalents and non-equity investments of $5.8 billion, including approximately $1.1 billion in cash in the U.S. In addition, last week, we completed the sale of our remaining 30% interest in Skype, generating $2.3 billion in proceeds. Since we have invested $3.2 billion of your dollars in acquisitions year-to-date, I'd like to take a minute to put our M&A strategy in context for you. As John mentioned, we see global commerce at an inflection point. In this new commerce environment, we feel very good about our portfolio and our capabilities, and we have been strategically investing capital to extend our capabilities. We are focused on accelerating innovation, expanding our ability to partner with retailers of all sizes and deeply engaging consumers in all aspects of how they shop and pay. We're excited about each of the acquisitions we made, but we're even more excited about their collective capabilities. With GSI, we've greatly expanded our ability to serve large retailers. With acquisitions such as Where and Zong, we've enhanced our technology capabilities to drive consumer engagement and mobile and local commerce. And with acquisitions such as Magento, we can more closely partner with developers and retailers to accelerate the rate of innovation. Together, eBay, PayPal, GSI and X.commerce is an incredibly powerful set of technology and global commerce assets. Our M&A strategy will continue to focus on strengthening our portfolio and ensuring we are well positioned to lead in this changing environment. Now let me turn to guidance. We are raising our full year revenue guidance to $11.5 billion to $11.6 billion and EPS to $1.98 to $2.01, up approximately $100 million and $0.01, respectively, on the top and bottom line. Let me provide some context. First, we have been building good momentum across our portfolio throughout the year. Second, the trends that we've experienced have been relatively stable throughout the third quarter. We saw a modest deceleration in the U.S. and Germany but not significant as we exited the quarter. And our assumptions are for an okay holiday season. Third, the euro has strengthened in the past few weeks, and this has a big impact on our cross-border trade. We've assumed no dramatic swings in currencies for the remainder of the holiday season. The implications for the fourth quarter, we now expect revenue of $3.2 billion to $3.35 billion, representing growth of 28% to 34%. And we anticipate non-GAAP EPS of $0.55 to $0.58, representing growth of 7% to 12%. So for the year, we feel great about our progress so far. Since January, we've increased our guidance by roughly $1 billion on the top line and almost $0.07 on the bottom line. Our organic revenue growth has accelerated. M&A has strengthened our portfolio, and we expect to end the year with approximately $8 billion in cash and investments. In summary, we had a strong Q3, with double-digit top and bottom line growth. We are executing our strategies with a sharp focus on operational excellence. And that's enabling us to deliver on our commitments while reinvesting our operating leverage and innovation and growth. Our core eBay business is healthy and getting stronger. Our adjacent formats also continue to perform at roughly 2x market rates growth. PayPal has strong momentum and continues to gain share. And the integration of GSI is going well, and we're excited about the potential of this business. Across our portfolio, we're investing in growth and executing well against the 3-year strategies we laid out for you earlier this year. And now, we'd be happy to answer your questions. Operator?

[Operator Instructions] Our first question comes from Gil Luria from Wedbush. Gil B. Luria - Wedbush Securities Inc., Research Division: It looks like one of the really interesting initiatives that you have is around bringing PayPal to the point of sale, but this is a very new endeavor for you. Could you talk a little bit about what the rollout strategy is going to be in terms of how much technology investment the retail is going to have to make at the point of sale? Are you going to need an army of salespeople to convert those point of sales? How are you going to price vis-à-vis the existing merchant acquirers? A little bit of a perspective there would be helpful. And if you could also tell us who that retailer you're going to pilot with in the fourth quarter, that would be interesting as well. John J. Donahoe: Sure, Gil. Let me take that. This has really developed over the last year. We've had a number of offline retailers approach us at PayPal and say they really wanted to bring PayPal to the point of sale because they recognize PayPal was a unique, trusted payments partner for them that could bring great value at it. So our approach to this has been very similar to the approach we took to the Merchant Services business in PayPal 4 or 5 years ago, where we picked a small number of globally-known top tier retailers, and we're working to build a solution that is scalable and that works. And so we have been working with one retailer in particular, where as I said, we'll do what is, in essence, a friends and family pilot here in the fourth quarter. And then, we are working with a number of other retailers in the first -- I mean, the fourth quarter of this year so that in the first half of next year, we'll have a scalable technology that will be able to rollout to these national retailers. And the focus is very much on helping them drive incremental sales, which is the same thing that PayPal has done in the Merchant Services businesses. It's payments as a vehicle to help them get better information about their customers and support them throughout their payment flow. So the -- and it's not dependent. Just as we built Merchant Services so it wasn't dependent on any individual retailer-specific cart because an the airline cart is different than a apparel cart, which is different than a technology retailer's cart. We're building this point of sale so it's not dependent on any form factor. So it doesn't need mobile payments or if it is mobile payments, it doesn't need an STE [ph] or it can work on any device or any operating system. It can work with a card. It can work with hands-free. So this technology is built from the beginning so that it will be relatively easy to integrate for retailers. I don't believe we'll need an army of salespeople. We've got Don Kingsborough who built the Blackhawk Network, who's sort of almost a one-man army of sales and [ph] credible, established partner of retailers. And with respect to how we will monetize, we're going to establish that over the next 3 to 6 months. What we're not going to do is get into a press release force, which is there's a lot of press releases going on around mobile payments and offline payments right now. And we're going to try to get the steak ready before the sizzle. So the retailer will reveal who they are in the fourth quarter when they launch it, and we will, through the rest of the quarter, spend our time with retailers. And in the first half of next year, we'll talk more about it. The last thing I'll say, so I think this is an enormous opportunity for PayPal. It's a huge market and it's the next chapter of PayPal's playbook. But I also want to be clear that we're not taking our eye off the ball, that the numbers we gave you at our analyst day earlier this year, the 3-year growth rate, had no POS in them. And we -- you remember Scott stood up and talked about doubling PayPal's business with our core business as it is, with mobile and with credit. And we're still continuing to have 98% of our focus on delivering on that. And then the point-of-sale opportunity, which we think is enormous, we'll layer on top of that. So we're excited about it, but we're also focusing on building something that's going to be scalable and sustainable over time.

Our next question comes from Doug Anmuth from JPMorgan. Douglas Anmuth - JP Morgan Chase & Co, Research Division: I just wanted to follow up on Payments. Bob, could you explain that increase in loss rate that you saw during the quarter, in particular maybe a little bit more detail on the new products and strategic decisions that you referenced? And also, are you still comfortable with the 24% to 26% margin that you laid out for 2013? Robert H. Swan: Yes, in terms of -- as you are familiar with how we manage the business, simply put, driving growth that we believe can generate greater than 60% trends, max [ph] your margins over time. And that's dependent on 3 variables: what we charge, our take rate; what were charged, our transaction expense; and then how we manage risks and that's our losses. In Q2 and in Q3, we've made some decisions, as we always do, as we fine tune our fraud models. And we drive losses down over time. We increase our protections. And by increasing protections, we improve the experience and drive more growth. And in the short term, the effect is it increases our fraud losses. We began that back in the second quarter. Our fraud losses went up in Q2 and Q3. And net-net, it drives more growth for us and we feel good about those kind of trade-offs. In terms of new products and I'll particularly highlight anytime we introduce a new feature or functionality that our fraud models are not familiar with, we learn. We rapidly innovate around the fraud management, and we drive those losses down over time. Example would be mobile. The mobile is a new app for us. It's growing like crazy. The newness of it requires our engines to become familiar with where those consumers are coming from and how we drive losses down over time. So we've seen from new products and decisions we've made to drive better experiences, losses come up in the last couple of quarters. And as I indicated in the prepared remarks, our expectations of those losses will trend down in Q4 going forward, as we get smarter about this new volume we're contending with. John J. Donahoe: And Doug, it's John. I may just build on that. In a funny way I consider this loss performance in Q3 a good thing because I think it continues to extend PayPal's competitive advantage. There's a lot of talk about mobile payments right now, but mobile payments is a fundamentally risky thing. And PayPal has the best risk models in the world. It's now -- we're now learning based on $3.5 billion of real volume. Our risk models are rapidly learning how to underwrite mobile payments. And we're confident that we're going to be able to provide a great mobile payments solution at very competitive, industry-leading loss performance and that others are going to face those challenges behind us with a lot less experience. And so this is one -- this is the kind of learning that we love to have because we think it extends our competitive position and competitively. Robert H. Swan: And Doug just to the second component of your question. Yes, we laid out our operating margin expansion for PayPal by 2013 to 24% to 26%. And we are confident that Q3 to Q4 this year, as always, we'll see PayPal segment margins expand. And we will be on our way to generate 24% to 26% segment margins for PayPal in 2013.

Our next question comes from Colin Sebastian from RW Baird. Colin A. Sebastian - Robert W. Baird & Co. Incorporated, Research Division: I guess, first following up on Doug's question on the loss rate. I wonder how much of that calculation is based on perhaps using Bill Me Later proactively to drive a more favorable share of PayPal and bank account transactions and whether you're seeing any shift in the funding mix overall. And then the follow up would be related to your comments about Q3 trends at the end of the quarter. It sounds like you're not seeing an immediate impact from the new advertising campaign. So I guess, my question would be what gives you comfort on raising the revenue guidance range for the quarter? Robert H. Swan: On the losses, not the Bill Me Later impact. Net charge-offs came down year-on-year. So while net charge-offs are higher than the transaction losses in the core PayPal business, they did come down year-on-year, and it's just not big enough to move the needle in any meaningful way. So it's not having a big impact. In terms of funding mix shifts, as Bill Me Later grows, it is a lower cost funding source in the wallet. And in turn that drives down our processing cost and therefore, drives up our transaction margins. You've seen a little bit of improvement in that over the past couple of quarters. And in Q4, remember Durbin goes into effect on October 1, so the core PayPal business we expect that to come down in Q4. John J. Donahoe: And then with respect to what gives us confidence in raising guidance in Q3 coming out -- or Q4 coming out of Q3. As Bob said, we saw relative stability coming out of Q3 and into Q4. And I don't think we have a crystal ball about what's going to happen with the economy or what's going to happen with exchange rates. But based on what we see, our planning assumption is a thought set of an okay to solid holiday season. And so that's what we're planning for and that's what we're going to pursue. Lastly, you mentioned eBay advertising. I can't resist. I don't know about you but I love those ads. And the qualitative feedback today has been quite positive. They're clearly cutting through. And they're cutting through the message that we really need to cut through with eBay, which is new merchandise, a new eBay experience. And it's too early to tell although how the material impact on the business. But frankly, they're brand investments that are part of what you all have been asking me about for 2 years now, which is when are we going to begin telling our story to consumers again about the new eBay. And this is really the launch of that. So it's geared to help rebuild our brand and rebuild user growth over the next 3 to 6 to 9 months.

Our next question comes from Matt Nemer from Wells Fargo. Matthew R. Nemer - Wells Fargo Securities, LLC, Research Division: I just wanted to follow up on the marketing campaign. How will you measure success of that campaign in the short term? And can you see any effect on that in terms of either desktop or mobile traffic? And then as a follow-up, I'm just wondering if you can give us any update on the test that you are doing in fulfillments for retail customers? John J. Donahoe: Well, on the marketing campaign, any time you do a TV brand campaign or an integrated brand campaign, the ultimate goal obviously is to grow your business overtime. But the way we're measuring it is: one, what is brand perception, what's the awareness and unaided brand perception of eBay among consumers; second, obviously, we hope that generates incremental users and traffic, which will in turn generate incremental business. And so the time frame, however, we're looking at it is not just within the quarter. Do I hope it has benefit in the quarter? Yes, I hope it's benefit in the quarter. But the time frame and the way that program was designed was to change the perception and reputation of eBay and make people understand that the new eBay user experience, the new eBay inventory is here. And as I've said earlier, the early feedback has been quite positive on that. On the fulfillment test results... Robert H. Swan: I think on fulfillment, I mean, obviously with the acquisition of GSI, we play a critical role in enabling our merchants and retailers to get their product to their consumers, either from a warehouse or directly from the store. It's a core competency of the GSI team, and I think this is a competitive advantage that they have. I think, along the way, one of the questions we got, and this maybe what Matt, what triggers your question is, are you going to begin to do fulfillment for smaller sellers within GSI's infrastructure? And our answer on that is that's not our top priority. Our focus is fulfilling GSI's clients' needs with our warehouses and enabling sellers on the eBay platform to connect with their buyers in more efficient ways, but not necessarily in doing fulfillment tests. John J. Donahoe: One of the interesting things is we mentioned earlier that top-rated sellers represent almost 45% of the GMV on the U.S. site now, U.S. eBay site. And most of our top-rated sellers are reasonably sized businesspeople, and they're not looking for fulfillment support. They actually feel like they've got their fulfillment capabilities and shipping abilities up to retail standard. So it's not a loud crying need we feel with the fastest-growing segment of the eBay seller base.

Our next question comes from Spencer Wang from Credit Suisse. Spencer Wang - Crédit Suisse AG, Research Division: I first want to just go back to the use of cash and M&A strategy, for either John or Bob. Do you guys feel like you have all the pieces in place you need now for the X.commerce platform or the operating system for commerce strategy? And how prominently do you think M&A will figure into the capital allocation plans from here? And then my second question is on mobile payments. I was wondering if you can give us a sense of how mobile users are using PayPal. Is mobile a channel for incremental PayPal users? And is there any sort of difference in terms of source of funds with the traditional business? I'm thinking maybe PayPal balances would be a bigger percent of the total. Robert H. Swan: I'll grab the first one and John the second. First on just the overall use of cash, in our philosophy, no dramatic change. To remind you, our bias is a conservative balance sheet so we have the inherent flexibility to grow our loan portfolio to expand through M&A and return cash to shareholders through a share repurchase program that offsets dilution. So at the macro level, no change. In terms of strategic M&A to enable X.commerce, I mean, obviously the Magento acquisition that we just completed this quarter is a key component of our X.com platform. Going forward, will there be smaller acquisitions to add in X.commerce? Very possibly. But I would say our focus right now is how do we enable and turbocharge developers to come up with new ways to innovate and let them use the X.commerce fabric itself rather than us necessarily having to own all those capabilities. John J. Donahoe: And Spencer, on the PayPal Mobile, what's interesting is when we survey consumers on why they use PayPal Mobile, it's like almost a brand advertising that we hear back. They say it's safe and convenient. And safe, they don't feel comfortable entering their credit card information to a mobile phone. And they're concerned that somehow it will get stolen or intercepted at the airwaves. People have all sorts of fears. And then convenience, you don't need your physical wallet with you. You just -- wherever you are, whether you're sitting on a couch, whether you're standing in line at a coffee shop or whether you're in a retail store, one click and you can check it on your mobile device with PayPal. And we're seeing it in -- on eBay. We're seeing it increasingly with Mobile Express Checkout. Retailers are finding when they put Mobile Express Checkout, they're getting a much higher conversion of their mobile sales. So and funding mix, your question. We don't see really any particular shift or change in funding mix one way or another. That's not a factor in the consumer's choice to use PayPal Mobile.

Our next question comes from Scott Devitt from Morgan Stanley. Scott W. Devitt - Morgan Stanley, Research Division: Two, please. The first one, John, on the large merchant initiative on eBay. I was just wondering if you can quantify the success that you've had there, either maybe in terms of the increasing large merchants SKUs on the site or change in GMV mix between SMB and large branded retailers in the last few quarters. And then secondly, Bob, you mentioned in the Q4 guide, the cross-border. And keeping that in mind in terms of wild swings in currency and you certainly have those in third quarter, so I was wondering if you could tell us if there's any noticeable change in cross-border mix in the third quarter. John J. Donahoe: Scott, on the large merchant initiative, I would characterize us in the learning phase, where we're bringing large merchants on to eBay and we're able to bring large merchants on to eBay. And we're still learning how to really drive powerful incremental volume for them. And so we had -- an example, in the third quarter, we had a nice promotion with Coach, a luxury brand. And we were able to drive through a combination of, in essence, a flash sale and some other things, some nice incremental volume. We've added Neiman Marcus Last Call, as I mentioned earlier, in our fashion outlet. And we're making working with the Neiman team to really optimize how we take advantage of the 100 million active eBay consumers to drive incremental volume. So I feel good about steady progress on that. I feel good about our ability to sign additional merchants. But I don't -- we're not yet really ready to quantify it other than to say we feel a strong need. We're making a good steady progress, and we want to hit some singles and doubles before we start swinging for the fences. Robert H. Swan: Scott, on the second question, first, we feel, both at PayPal and eBay, we are uniquely advantaged to capitalize on cross-border trade. It's almost 20% of the business between the 2 business units, so it's a big part of what we do. As currencies move, the buying power in a particular market changes and our cross-border business is usually affected rather quickly. What we saw happen in the third quarter was as the euro weakened throughout the quarter, the cross-border demand from European consumers for product out of greater Asia or out of the U.S. dropped almost -- dropped in line with the value of the European currency. So it was a -- it negatively impacted our growth rates in the third quarter. Obviously, the euro has rebounded quite a bit in the last 10 to 15 days. And our guidance for fourth quarter, we're assuming that the euro -- for translation purposes, as you know, we hedge. So that's not what we're worried about. We're more worried within the quarter about cross-border flows. With the euro strengthening, that headwind that we experienced at the end of the third quarter, we're not anticipating in the fourth quarter.

Our next question comes from Ben Schachter from Macquarie. Benjamin A. Schachter - Macquarie Research: A couple of mobile questions here. How do you figure out if mobile sales are really incremental or just cannibalistic? And then on tablets specifically, obviously, you've had a lot of success on the iPad. You did a great form factor particularly for e-commerce. Do you expect the same positive momentum on a lower-cost tablet coming from Amazon? Or are there concerns that Amazon itself will try to use that tablet in some way to funnel users more directly to their site? John J. Donahoe: Ben, I'm glad you asked this question because I think our perspective on this from the beginning has actually been one of the factors for our success. And the simple truth is we haven't worried about whether it's incremental. Because from the beginning, we recognized that consumers simply view a mobile device as another screen. And they want to use that screen interchangeably with their desktop, their laptop, mobile device, tablet, increasingly TV. And actually as we talked recently also going into a retail store, and we find a large number of consumers use more than one screen in a given shopping experience. They may do research on one screen. They may be identifying the exact product they want on a different screen. They may actually buy it in a store on a screen. They may pay for it on a different screen. And so we do believe our mobile sales are partially incremental, but we've not spent a lot of time on trying to measure that. We spent more time on absolutely trying to drive very aggressive innovation on mobile on all fronts. Even if it's cannibalistic, it's value-enhancing to the consumer. We do know that the consumers that use mobile devices are more than twice as engaged as those that don't. And then with respect to tablets, I think it's really important, on the Amazon part, to separate digital goods from physical goods. We don't really sell digital goods, the primary digital goods market. And Apple and Amazon and others sell those. And that's where the tablet is a closed system. The sale of physical goods, whether it's the Apple iPad or I believe the Amazon tablet over time, consumers want choice. Consumers want seamlessness across their devices, if you will, their screens. And so we hope, believe and anticipate that, that choice will be available and the consumers will demand that over time. So we won't control that, but we're going to continue to drive what is, in essence, a seamless multiscreen shopping experience and increasingly, online and offline seamless multichannel shopping experience.

Our next question comes from Justin Post from Bank of America. Justin Post - BofA Merrill Lynch, Research Division: Could you talk about the U.S. GMV? I think it grew 14%, which was flat from last quarter. It looks like you've got a lot of large sellers joining the platform and some of the GSI integrations working, also the marketing program. Can that stay at that level as you look out? Do you think you could continue to grow with the market as you look out to the fourth quarter or next year even in the face of tougher comps? Maybe just give us an update on your market share expectations. Robert H. Swan: Yes. First, clearly our expectations are to continue to grow in line with or faster than market rates growth with a variety of different formats that we used to connect buyers and sellers. On U.S. GMV, we've had tremendous momentum here over the last 6 months. Going into fourth quarter, I think, the market rates of growth, I guess, my expectation would be given tougher comps at market rates growth, will likely slow here in the fourth quarter, my crystal ball. I don't know, but the expectation is that market rates will slow. In our guidance, we've put in where we see our internal trends in light of the market over the course of the last 6 months, 6 weeks and 6 days and gave you our best view about what is that we think we can do, which is $100 million better revenue over the second half of the year than where we were just 3 months ago. John J. Donahoe: And Jeff, the other thing I'd add is that as we look into 2012, our focus will continue to be looking at our global business as a portfolio. And we'll have -- we feel very good about the trend in our global business. The global commerce businesses, it's growing. And individual markets may go up or down along the way. The U.K. grew faster than the market last year and sustained that this year. We're delighted that the progress in U.S. this year, and we hope and believe it will extend into next year. But what we're confident, where we're most confident is that the global portfolio we will continue to improve our growth relative to the market.

And our final question for today comes from Mark Mahaney from Citi. Mark S. Mahaney - Citigroup Inc, Research Division: I want to get real specific on Merchant Services and FX-neutral year-over-year growth. I don't want to over extrapolate from a quarter but that 33% growth year-over-year, it was a bit of an outlier if you look at the last 2 years. Is there anything that makes you think -- and I know these results can be lumpy in the quarter. But is there anything that makes you think that, that isn't the negative inflection point? Any color around that would be really helpful. Robert H. Swan: Yes, Mark, I think a couple of things. One, last year in the second and third quarter of 2010 is when PayPal growth, Merchant Services in particular, really began to accelerate. So first point I would make is that the comps are a little bit tougher. Secondly, 33% growth is roughly in line with what our expectations were, so we feel pretty good about Merchant Services growth here domestically and it's continued strength outside the U.S. The third point, which is an important point that I referenced to earlier, Merchant Services out of Asia, that cross-border trade business is impacted quite a bit by the strength in European currencies. And we saw a fairly significant drop from Q2 through to September of the growth rate of Merchant Services volume going to Europe, and that's the way it works. When euro gets weaker, demand for PayPal merchants coming out of Greater China immediately changes. In this case, it immediately went south. And as European gets stronger relative to -- for the most part U.S. dollar-denominated currencies, all else equal, PayPal Merchant Services on Asia grows. September was a tough month. As the euro weakened, demand out of Asia slowed dramatically, and it did impact Merchant Services' growth. Going into the fourth quarter, 33% top line growth, nice global business; 66% of our overall TPV coming out of Merchant Services with a nice global footprint and getting bigger. We feel pretty good about the prospects. John J. Donahoe: All right. Thanks, everyone. We'll see you next quarter.

Ladies and gentlemen, thank you for participating in today's conference. This concludes our program for today. You may all disconnect, and have a wonderful day.