Robert Swan - Chief Financial Officer and Senior Vice President of Finance Jenny Cerran - John Donahoe - Chief Executive Officer, President, Interim President of eBay Marketplaces and Director

Sandeep Aggarwal - Caris & Company Scott Devitt - Morgan Stanley Spencer Wang - Crédit Suisse AG Colin Sebastian - Lazard Capital Markets LLC Colin Gillis - BGC Partners, Inc. James Mitchell - Goldman Sachs Group Inc. Mark Mahaney - Citigroup Inc

Good day, ladies and gentlemen, and thank you for standing by. And welcome to eBay's First Quarter 2011 Earnings Call. [Operator Instructions] And now, I'll turn the program over to Jennifer Cerran, Vice President of Investor Relations. Please go ahead.

Thank you. Good afternoon, everyone, and thank you for joining us, and welcome to eBay earnings release conference call for the first 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. 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 the 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 current expectations, forecasts and assumptions and involve risks and opportunities. These statements include, but are not limited to, statements regarding expected financial results for the second quarter and full year 2011 and the future growth in the payments and marketplaces businesses. Our actual results may differ materially from those discussed in this call for a variety of reasons, including but not limited to: The after effects of the global economic downturn; changes in political, business and economic conditions, foreign exchange rate fluctuations; the impact and integration of recent and future acquisitions; our increasing need to grow revenues from existing users, particularly in more established markets; an increasing competitive environment to our businesses; the complexity of managing an increasingly large enterprise with a broad range of businesses at different stages of maturity; our need to manage regulatory, tax, IP and litigation risks, including risks specific to PayPal, Bill Me Later and the financial 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 investor.ebayinc.com. You should not rely on any forward-looking statements. All information in this presentation is as of April 27, 2011, and we do not intend and undertake no duty to update. With that, let me turn the call over to John.

Thanks, Jenny, and good afternoon, everyone, and welcome to our Q1 earnings call. At our February Investor Meeting, I outlined a rapidly changing external environment, where the lines between online and offline commerce are blurring, driven by fundamental changes in how consumers shop and pay. And this is requiring merchants around the globe to adjust to a new commerce environment. I also described a different eBay, a company positioned to capitalize on these trends by partnering with merchants of all sizes and delivering innovative consumer experiences. In this emerging new retail environment, we are playing offense. And that's just what we did in the first quarter. We hit 2011 running. Our strong start to the year underscores our growing opportunities and momentum. We're focused on redefining retail and leading the next generation of commerce and payments. As we execute our 3-year growth plans, our core businesses continue to get stronger, we're innovating faster, which means we're serving our customers better, and we're investing in growth. In Q1, both revenue and non-GAAP earnings per share exceeded our guidance. Revenue grew 16% and non-GAAP EPS was up 12% year-over-year and we generated $551 million in free cash flow during the quarter. PayPal drove strong growth in total payment volume, revenue and active accounts. And eBay delivered solid revenue growth including a 5-point acceleration in core GMV in the U.S. and stable growth in Europe. We also made several moves in Q1 to strengthen our portfolio. We completed our brands4friend acquisition in Germany, and we announced agreements to acquire GSI Commerce, Where and GittiGidiyor. We believe these acquisitions help extend our commerce capabilities and accelerate innovation. For example, GSI significantly expands our commerce capabilities and deepens relationships with large merchants. Where adds important innovation capabilities to our local commerce efforts. And GittiGidiyor extends our geographic footprint into Turkey, which is the world's 12th largest market for Internet usage. Let me now turn to Q1 results for each business unit. PayPal had another great quarter with strong revenue, active account and Merchant Services growth. In fact, PayPal's Merchant Services business now accounts for almost 2/3 of global TPV. Overall, PayPal continued to gain share and expand its presence on websites around the world, including launching on Singapore Airlines and L.L. Bean during Q1. Active account growth remains strong. During Q1, PayPal added over 1 million active accounts per month, something we've accomplished for 6 consecutive quarters. In fact, in our current trajectory, PayPal will pass 100 million active accounts during Q2. In addition to a strong core business, PayPal also has several adjacent growth opportunities. For example, Bill Me Later is hitting its stride with 42% growth in total payments volume. This growth is driven both on and off eBay. eBay continues to be an important source of new customer acquisition and payment volume for BML. And off of eBay, BML is now widely available in the PayPal wallet with integration across all of PayPal's standard and Express Checkout platforms in the U.S. So virtually anywhere PayPal is offered on U.S. merchant sites, Bill Me Later will be an option for qualified buyers when they choose PayPal at Checkout. Mobile payments also has strong traction and momentum for PayPal. Merchants everywhere are recognizing the growing importance of mobile commerce. And they're turning to PayPal Mobile Express Checkout to give their consumers the ability to buy merchandise using their mobile phones. While others are talking about mobile payments, PayPal is delivering real mobile payments volume. PayPal expects to almost triple TPV, mobile TPV from $750 million last year to more than $2 billion in 2011. Digital goods are another area where PayPal is driving innovation and momentum. The New York Times joined the Financial Times as the first major news companies to add PayPal as a way to pay for online subscriptions. PayPal for Digital Goods went live in Q1 and is now generally available for merchants around the world. By offering a quick and easy experience for consumers and very competitive pricing for merchants, we believe PayPal's model for Digital Goods can help transform industries like gaming, social commerce and news media. Turning to eBay. I continue to be pleased with the progress our team's making in improving the customer experience and driving better, more innovative ways to connect buyers and sellers. Our U.S. business is clearly turning the corner with core GMV up strongly in Q1. We've made the adjustments necessary to fine tune the change we made in Q2 of last year, and this positions our U.S. business to improve its competitive position going forward. Both GMV and sold items accelerated in the U.S. for the second quarter in a row. In Europe, eBay showed stable growth in Q1, achieving the same double-digit growth rate we experienced in Q4. Growth in our U.K. business continues to outpace the market and our German business continues to make solid progress. Our Q1 Asia-Pacific growth was flat year-over-year, driven by our balanced approach toward a highly competitive market environment in Korea and by actions we took to raise seller standards for Asian cross-border trade. While these actions are hurting our Asian growth in the short term, we believe we're making the right decisions for this business over the medium to long term. Improvements to eBay's search and overall user experience are paying off. Buyers are happier and our bestsellers are winning. By removing duplicate listings from search results and making other search improvements, we are making it faster and easier for shoppers to find what they want, leading to more successful purchases across all categories and price points. And consumers are noticing. Worldwide, active users were up 5% year-over-year with growth in North America, the U.K., Germany and Australia. Net promoter scores also increased for top buyers in our 3 largest markets. At the same time, eBay's top-rated sellers in these markets also gained ground in Q1, accounting for approximately 1/3 of GMV. And the same-store sales from these top-rated merchants grew 18% year-over-year, continuing to outpace e-commerce. Simply put, sellers who deliver superior customer service are succeeding on eBay and buyers are benefiting. The tailored shopping experiences eBay's creating in categories such as a fashion and electronics continue to build momentum. For example, we saw great results this quarter from our Instant Sale Consumer Electronics Program, which offered terrific deals on trade-ins of popular smartphones and tablets. We also strengthened the ability for consumers to sell on eBay, which is helping our Auctions business. For instance in the U.S., we announced the elimination of insertion fees for consumers to list in the auction format. This has brought more inventory and deals onto eBay. And consumers who successfully sell on eBay also buy more on eBay. eBay Mobile is also continuing to see very strong growth. Once again, while other retailers are formulating their mobile plans, consumers are actively buying and selling through the eBay Mobile app. We see strong accelerating momentum across multiple mobile devices in almost every geographic market around the world. We're on track to double eBay's mobile GMV this year to $2 billion -- to $4 billion in 2011. Turning briefly to our adjacent formats, classifieds were up 15% in Q1 with strong growth in Canada. And our Mobila and Marketplaces businesses grew as well. StubHub had another excellent quarter with revenue up and acceleration in ticket sales across all categories. So in summary, 2011's off to a strong start. I'm pleased with PayPal's strong performance and the continued progress of eBay. And we believe the acquisitions we announced during the quarter will further strengthen our competitive position. As I said in February, we have 2 strong core businesses with substantial growth and opportunity ahead. We're utilizing all of our assets to create new opportunities and define the new retail landscape. We feel good about the quarter and our outlook for the year. We believe our company is well positioned to lead the future of commerce and payments. And now before taking questions, I'll turn it over to Bob, who will provide more details on our Q1 performance and our guidance for Q2 in the full year.

Thanks, John. During my discussion, I'll reference our earnings slide presentation that accompanies the webcast. All growth rates mentioned in my prepared remarks represent year-over-year comparisons unless I clarify otherwise. In February, we shared with you our 3-year plan, including a framework for growth, a framework for execution and a framework for capital allocation. Our Q1 results reflect a strong start to 2011 and our 3-year journey. In summary, we exceeded our Q1 guidance on the top and bottom line as we continue to execute against our strategic priorities. From a growth perspective, we grew the top line 16% with contributions from our core businesses, our adjacent formats and our seeds. Our core businesses generated solid growth with non-vehicles GMV, up 8% and PayPal TPV, up 28%. Our Marketplaces' adjacencies grew 26% with strong organic growth from classifieds and advertising, and inorganic growth from the acquisition of brands4friend, which we closed in the quarter. Our seeds are today's investments that will drive tomorrow's growth and these continue to contribute as well from Bill Me Later, Mobile and PayPal Digital Products. From an execution perspective, operational excellence has increasingly become the way we work. Net promoter scores are up, the rate of innovation is accelerating and we are realizing good operational leverage and we continue to invest for the future. And finally, from a capital allocation perspective, we continue to generate strong free cash flows. We strengthened our portfolio with the acquisition of Brands4friends and the announcements of GSI, Where and GittiGidiyor, while also continuing our share repurchase program. Q1 2011 is the first step in our 3-year plan, and we're pleased with our progress and momentum. In the first quarter, our combined businesses generated net revenues of $2.5 billion, up 16%, and approximately $100 million above the midpoint of our guidance. Organic revenue growth was up 14%. Foreign currency movements increased growth by roughly 70 bps and the inclusion of brands4friends increased growth by roughly 1 point. The organic revenue growth was driven by strong performance from both PayPal and Marketplaces and relative to our Q1 guidance, U.S. GMV and stronger advertising revenues drove the outperformance. First quarter non-GAAP EPS was $0.47, a 12% increase year-on-year and $0.02 above the midpoint of our guidance. This year-over-year increase and the favorability versus guidance and EPS were primarily due to solid top line growth. Non-GAAP operating margin was 29.4%, down 120 basis points from Q1 2010 due primarily to strong growth from our lower margin businesses and the inclusion of recently completed acquisitions. Excluding acquisitions, segment margins for PayPal and Marketplaces were essentially flat year-on-year. Free cash flow was $551 million in the quarter, a great start to the year. Q1 cash flow was negatively impacted by annual bonuses paid in the first quarter and the payment of a legal settlement we announced in the fourth quarter, but we benefited from lower CapEx payments in the quarter that are more timing related. We continue to expect CapEx as a percent of revenue to be approximately 8% for the year, which is more in line with last year versus the 6% level in Q1. Return on invested capital increased for the sixth quarter in a row to 25.7%, driven by increased operating income and continued disciplined investment of capital. Now let's take a closer look at our segment results. PayPal posted another great quarter with strong top line growth and stable segment margins. Total payments revenue was $992 million, representing growth of 23% and total payment volume increased to $27.4 billion, up 28%. We continue to expand our global footprint as international TPV increased 39% year-on-year, and now makes up 43% of total TPV in the first quarter. PayPal's strength was driven by Merchant Services, eBay GMV acceleration in the U.S. and increased penetration on eBay globally. PayPal was just shy of its first $1 billion quarter, and now represents 39% of total eBay Inc. revenues. A few quick highlights on PayPal operational metrics for the quarter. Merchant Services TPV grew 38% in the quarter as we continue to expand our global footprint, our merchant coverage and our share of checkout. Merchant Services TPV accounted for 63% of PayPal's total TPV. On eBay, PayPal's TPV showed continued strength, increasing 14% year-on-year. Penetration of addressable GMV increased 300 basis points to 70.8%, an all-time high, with penetration increases in Germany and other international markets. PayPal segment margins were 22.3% in the quarter, essentially flat with last year and significantly above the 18% to 20% target we set back in March of 2009, and well on our way to the 24% to 26% target we set for PayPal margins in 2013. The strong margin performance was driven by stable transaction margins above 63%, solid operating leverage, continued improvement in Bill Me Later performance, all partially offset by accelerating investments in Digital Goods, platform, Mobile and the PayPal user experience. Let me touch on a few key operating metrics for Bill Me Later, which continued to make solid progress in the quarter. Bill Me Later's TPV was up 42% as consumers turn to Bill Me Later for both convenience and choice in the PayPal wallet. The gross receivable balance at quarter end was $993 million, up 55% year-on-year and nearly flat sequentially compared to our seasonally high Q4. Risk-adjusted margin increased 320 basis points over prior year to 14.7% as improved credit quality drove net charge-offs down substantially. It's been over 2 years since the acquisition of Bill Me Later and we feel good about the progress, but even better about the outlook. Now let's move to our Marketplaces business. Overall, Marketplaces achieved net revenues of $1.6 billion, a 12% increase. Marketplaces' FX neutral revenue was up 11%, driven by solid non-vehicle GMV growth of 8%, accelerating growth from adjacent formats like classifieds and advertising and the addition of the brands4friend acquisition. Marketplaces generated 60% of its revenue internationally this quarter. The Marketplace performance was well ahead of our expectations as the North American business got off to a great start for the year. Looking at our GMV format, fixed price continues to be the largest and fastest growing component, currently representing 57% of total volume. Fixed price GMV was up 13% in the quarter. The auction format saw a 2% decline in Q1, but showed continued signs of stabilization as we focus on making it easier and more compelling for consumers to buy and sell on the site. We had another solid quarter from our Marketplaces adjacent formats with marketing services revenue up 25% on an FX neutral basis. The growth rate was primarily driven by strength in the ad-based revenue, continued strong performance across our global Classifieds businesses and the addition of brands4friends, which contributed 11 points to growth in the quarter. Today, these adjacent formats represent 17% of Marketplaces revenue and are an increasing contributor to the overall company growth rate. A few quick highlights on Marketplaces' operational metrics in the quarter. Active users increased to 96 million, up 5% year-over-year driven by strength in North America, the U.K., Germany and Australia. Sold items grew 6.5%, a 3-point deceleration from Q4, primarily driven by softness in Korea. As I mentioned earlier, non-vehicles GMV was up 8% in the quarter. And let me follow on John's comments and provide a little more color from a geographic standpoint. First, U.S. GMV was up 10%, a 5-point acceleration from the Q4 despite relatively tougher comps and a fairly flat market. The improvement was driven by stronger conversion and higher ASPs due to changes we have made to improve the experience, including cleaning up the ecosystem and more effectively serving the most relevant inventory. Additionally, we benefited from high ASPs in collectibles and tech category, primarily driven by higher volume from gold-related items and iPad sales. International GMV was up 6%, a 3-point deceleration from Q4. While Europe growth remains strong and stable, Asia growth declined primarily due to our Korea business and China cross-border trade. A little more color on both. Korea growth, as John indicated, was down due to series of changes we have made to reduce dependency on non-royalty building coupons and our presence on competitive comparison shopping platforms. We believe these changes will drive the right media in the long-term improvements, but will likely negatively impact GMV and revenue for the next several quarters. We expect little impact on regional profitability. In China, we have a vibrant and healthy cross-border business where the majority of greater China sellers provide high-quality, lower cost products to our large developed markets. We've continued to take a series of steps to ensure consumers in the U.S., U.K. and Germany have a great experience from sellers in China by increasing the standards required to sell on eBay. This has had the impact of slowing growth from Greater China, but improving the experience for eBay consumers around the world. Again, we believe these are the right medium- to long-term steps that our bestsellers in China will meet the increasing expectations of consumers buying on the Web. So all in all, we had a solid GMV growth with accelerating U.S. GMV growth, strong and stable European growth and a declining but healthier Asian business. Our global take rate, excluding vehicles and StubHub, was 8.2%, roughly flat with last year. Marketplaces' segment margin was 40.5% in Q1, down 150 basis points from a year ago but up 130 basis points from last quarter. The largest component of the year-on-year change was due to the acquisitions we've made over the last several months. Turning to operating expenses. There were 43% of revenue, essentially flat on a year-over-year and sequential basis. We're investing more in online marketing and product development in the quarter, but this was offset by lower G&A cost and a decline in the provision for transaction loan losses from improved risk management and payments and a lower bad debt rate at Marketplaces. From a capital allocation perspective, we generated strong free cash flows of $551 million during the quarter. We've improved our financial flexibility by funding approximately 1/3 of the U.S. Bill Me Later loan portfolio with our offshore cash. We invested approximately $200 million to strengthen our portfolio with the acquisition with brands4friends in Germany. And we continue to offset dilution through stock-based compensation with our share repurchase program. We ended the quarter with cash, cash equivalents and non-equity investments of $8.1 billion, including approximately $2.6 billion in cash in the U.S. This provides us with a flexibility and capacity to finance the U.S.-based acquisitions of GSI and Where while continuing to buy back stock during the year. During the quarter, we announced 3 acquisitions to strengthen our portfolio by extending our commerce leadership position and accelerating innovation. As John mentioned, extending our reach with large merchants, expanding our geographic footprint and strengthening local commerce efforts are important strategic initiatives for our company. We believe that the acquisitions of GSI, GittiGidiyor and Where will help strengthen our capabilities in each of these respective areas. We expect GittiGidiyor and Where, which are expected to close in the second quarter, and brands4friends, which we've closed in the first quarter, to add approximately $150 million in revenue in 2011 and have a non-material impact on non-GAAP EPS. We will provide updated guidance on the implication of GSI after the close, which is expected in the third quarter. Now let me turn to guidance. For the second quarter of 2011, we anticipate revenue of $2.55 billion to $2.65 billion. This represents growth of 15% to 20%. We anticipate non-GAAP EPS of $0.45 to $0.46, which represents growth of 13% to 15%. And just a heads up on free cash flow for the second quarter. Again, we expect strong free cash flow in the quarter, but it'll be impacted by a tax payment of approximately $200 million related to the repatriation of some international cash. Turning to full year guidance. We are raising our guidance on the top line by approximately $300 million and on the bottom line by approximately $0.03. A few things driving the improved outlook. First and foremost, building momentum in the Marketplace business, specifically driven by a stronger GMV in North America. Second, we announced a couple acquisitions in the quarter. And we expect these to add approximately 1/2 a point of growth or contribute little to earnings. Third, we expect a weaker dollar will benefit the top line with little impact on the bottom line as the benefit of top line is mostly offset by the hedges we've put in place to protect our plan. And fourth, we're expecting increased expenditures as we reinvest some of our favorability back into the business, including higher deal-related costs associated with our announced acquisitions. For the full year 2011, we now anticipate revenue of $10.6 billion to $10.9 billion, representing growth of 16% to 19%. And we anticipate non-GAAP EPS of $1.93 to $1.97, representing growth of 11% to 14%. In summary, we had a strong start to the year with double-digit top and bottom line growth. Marketplaces business is gaining momentum, PayPal is on a strong trajectory and our adjacent formats continue to perform well. We continue to invest in growth by accelerating innovation and making strategic acquisitions, while maintaining a dilution-neutral buyback strategic. We are pleased with our progress so far in the year and we are raising guidance to reflect the impact of stronger marketplace performance and a weaker dollar. And now, we'd be happy to answer your questions. Operator?

[Operator Instructions] Our first question in queue is Scott Devitt with Morgan Stanley. Scott Devitt - Morgan Stanley: One in Marketplaces and then a follow-up on payments, if I could. I don't know, Bob, if any of these deals are flowing through the Marketplaces transaction revenue line. But if I take that line and just divide it by GMV, it looks like the core take rate actually went up 30 basis points, sequentially. And I believe you comped the price change in the second quarter. So if that math is correct, what caused the take rate increase in the core eBay business?

So first, Scott, as you know, Milo and RedLaser and Critical Path have relatively little revenue. brands4friends, which is the majority of the revenue in the quarter from M&A, is in our marketing services and other line, so it's not in transaction revenue. If you exclude vehicles and StubHub on a year-over-year basis, take rate for Marketplaces going through transaction revenue was relatively flat in the first quarter, so no dramatic change. Scott Devitt - Morgan Stanley: And then the payments question is, I guess, similar take rate-related. It's used consecutive quarters of 3, 4, 5 in terms of take rate. And so I'm wondering if there's a point in time at which take rates start to stabilize and revenue grows more in line with TPV?

Yes, the 2 biggest drivers on take rate are: first, the larger merchants, all else equal, have a tendency to command a lower take rate. So as the base book of business from larger merchants grows, that has a downward effect on take rate. On the flip side, our expanding international presence in both Europe and Asia take rates have a tendency to be higher and continuing increase cross-border trade drives up take rate as well. I think the way you've seen them net together over time is a continued gradual trend down. And honestly, I don't expect that to change a whole lot. At the same time, Scott, as you know, we think more about the transaction margins for the business and the interrelationship between what we charge the take rate, what we pay transaction expense and how effectively we manage risks, i.e. fraud losses. And the interrelationship between those 3 is what we look at in terms of the health and vibrancy of the PayPal business and the economic margins that we generate. And as Scott shared with you back in February, we believe that over the next 3 years, we'll continue to generate transaction margins at 60% or above. And one quarter into the 12-quarter journey, we're above 63% and feel pretty good about the interrelationship going forward.

Our next question in queue is from Colin Sebastian with Lazard. Colin Sebastian - Lazard Capital Markets LLC: A question on the U.S. GNV, you mentioned stronger conversion in higher ASPs. Is part of the higher ASPs possibly a result of sellers baking in shipping costs into prices? Or was it really a function of the category and product mix? And as a follow-up on the Vehicles business, which appears to have stabilized, any relation on that from perhaps shortages of parts or cars from Japan? Or is that stabilization you think is going to continue?

Why don't I take that up? On U.S. GMV first quarter, the way we see this is a year ago, we put in place the fundamental pricing and format changes that we in the U.S. that we'd done in Europe. And we knew that would have a short-term negative impact on the business. We said it would take 3 to 4 quarters for that work its way through in the U.S. just like it had in Europe. And what we saw in the first quarter is, in fact, in the fourth quarter, it's worked its way through the system. And in particular, we reduced duplicate listings in the fourth quarter of last year, and we've made some tweaks to search in the first quarter of this year that got the U.S. business back to what I would call baseline. And a baseline off which we can now build, much like what we did in the U.K. and Germany after we went through that period in Europe. So the impact in ASPs was more a derivative function of that. It was not shipping x cost being transferred in the pricing. It was more just higher ASP items getting more visibility in search and fewer duplicate low ASP items crowding out others. So I would characterize it as kind of fine tuning to get us back to a baseline. And it was pretty consistent across categories and products. As Bob mentioned, there were a couple of categories that were a little higher, gold and iPads, but by and large, I think it reflected a healthy ecosystem. And then vehicles, I don't think there's any -- I don't think we can tie anything to Japan in specific. I think the economy is a little bit better. And I don't know if we're at an equilibrium between transaction vehicle format and advertising-based vehicle format. We've been in a transition more towards advertising base vehicle format or lead generation, so we'll see. We'll take a couple more quarters. We're now indifferent between the 2 formats, and we give sellers and buyers the choice of which format they want to sell in and which format they want to buy in with vehicles.

The only thing I'd add on that latter point, Colin, is as opposed to vehicles, parts and accessories has continued to generate demonstrate strong performance and growing performance, and that's been a trend that you've seen for the last 3 to 4 quarters as opposed to any short-term dynamics associated with supply shortages coming out of Japan.

Our next questioner in queue is Sandeep Aggarwal with Caris & Company. Sandeep Aggarwal - Caris & Company: John, eBay has significant lease trends in its product portfolio for local commerce with a series of acquisitions. Can you articulate by when we can see a fully rolled out eBay strategy for local commerce or maybe by then, eBay will become a significant player for the local market? And then on BML, we see a lot of ad campaigns on ebay.com. Have you done any kind of efficacy analysis in terms of aggressively pushing Bill Me Later on eBay.com or is it basically buyers' experience?

Sandeep, I'll take the first and Bob will take the second. On local commerce, as you've mentioned, we've done a series of things ranging from buying RedLaser to buying Milo. We bought Where, which has local geotargeting this quarter. And what's fascinating, as we've talked an Analyst Day about growing synergies between eBay and PayPal, we're seeing just that, that local commerce is being enabled by mobile commerce. And the fact that we have mobile payments is and PayPal's capabilities, we think will further enable what Scott referred to as POS at Analyst Day. With respect to how fast it'll happen, I don't know. I think it's happening faster than any of us would have guessed 6 to 12 months ago, frankly, driven by consumers and driven by consumer behavior with their mobile devices. So we're focused on is ensuring that we have the best mobile commerce and mobile payments capabilities, which I think our volumes speak to. With Milo, we've got what we believe is the best technology to bring local products online and give a consumer a choice between, regardless of where they are on their mobile device, being able to buy online or see the offline inventory in their area. And we now have some live examples of that and as couple of categories or small lease on eBay. And then buying the Where property gives us geotargeting, which we think is another element of local commerce, where it will enable us to deliver relevant online and offline product results to a consumer based on where they are. So we like the pieces we're putting together in the puzzle. We're not trying to talk a lot about it externally. We're trying to build working prototypes and working examples that work with consumers. And as we said in our Analyst Day, we think local represents a significant growth opportunity for both eBay and for PayPal in the coming years. But frankly, we didn't put any of that in the numbers we talked about on Analyst Day. So we're focused on it but we're not getting distracted by it.

And Sandeep, one other aspect of our local business is our Classifieds business, which is primarily a local business with medium positions in several countries around the world, which as we indicated earlier, is growing about 15%, given us great traction in the markets in which we operate. On your second question, one of the benefits of the multi-business portfolio, if you will, is we can take great innovations from one business and use them on this big ecosystem called eBay as a test bed to drive rapid adoption. That's what we're doing with Bill Me Later. We launched or we strengthened the offering of Bill Me Later on the eBay platform back in the fourth quarter. It got wonderful traction in the fourth quarter. We continue to, in a sense, market it to the 40 million-plus active users on eBay in the U.S. to get them to adopt. And the feedback we've gotten from them is increased growth and increased usage as exhibited in the Bill Me Later results. So with that is one of the benefits we have to pilot new innovations in one business on eBay platform. As a related but may be a complete aside, that's one of the powers for us of the GSI acquisition, leveraging that business and its group of merchants and clients to help them grow on the eBay platform and/or to leverage PayPal as a way to pay for GSI merchants with their consumers. So I characterize it a bit as a power the portfolio and Bill Me Later on eBay is an example of that.

Our next questioner in queue is Colin Gillis with the BGC Financial. Colin Gillis - BGC Partners, Inc.: Gentlemen, I was wondering if you can talk a little bit about Marketplace leadership and your thoughts there. The current guys are doing a pretty good job.

I don't know. I still have an active search going on. What I've said and have said before, I have a very high bar. Frankly, the Marketplace performance is being driven by a very strong Marketplace team. You guys that came to Investor Day saw Mark Carges and what he's doing with product and technology. You got a chance to meet Doug McCallum who's running Europe. You got a chance to meet Christopher Payne, who's running North America. You didn't have a chance to meet Jay Lee who runs Asia. Chad O'Meara runs CS and ops. We've got a strong team in that Marketplace business. And so we'll keep looking for the right leader. That business deserves someone that's focusing on it full time, not just as I am, but we will keep a high bar. Colin Gillis - BGC Partners, Inc.: And just following up on PayPal and just sort of opening up that platform, there was some good news this quarter regarding that. Can you just talk about how that's getting traction?

You're talking about the external platform? Can you clarify the question just a little bit? Colin Gillis - BGC Partners, Inc.: Just PayPal x and other people who are building on top of that?

Yes. We recognized a couple years ago that we don't want to be the bottleneck on innovation off the PayPal platform. And so we've now got 60,000 developers developing on the PayPal platform, 1,500 live applications. It's being pulled in some areas, we would imagine, like you saw in the Developers Conference last year, in the mobile applications, into social gaming applications, into digital applications. And it's being pulled in some situations we wouldn't have imagined. And that's what's so great about platform. One of the things that we're learning along the way that's interesting is that what developers are telling us, and frankly, merchants are telling us, is they love the PayPal platform, but they want even more. They want commerce, services. They want more from the commerce services stack because they are finding that they need help competing in this multichannel world. And so that was behind -- one of the factors behind our acquisition of GSI that gives us some commerce capabilities for larger merchants. You'll see us taking the eBay open platform and the PayPal open platform and operating those more together to give more of a seamless experience for third-party developers and merchants. And it's also behind our 49% interest in Magento, which is as you know, one of the fastest-growing open-source commerce platforms. And what we're, in essence, doing is building the soup to nuts from the smallest through the largest sellers and the ability to build a commerce services stack so that merchants and developers can really capitalize on the capabilities we have, grow their businesses.

And our next questioner in queue is Spencer Wang with Credit Suisse. Spencer Wang - Crédit Suisse AG: 2 questions, one is just a first, a follow-up for Bob on the marketplace take rate question, if I could maybe ask it a different way. If your core take rate was up year-over-year, but the core take rate was roughly flat year-over-year, is the increase in the former then just a function of lower mix of auto and maybe a higher mix of StubHub?

Yes. Spencer Wang - Crédit Suisse AG: And then maybe for John, your Internet peers are reinvesting and hiring pretty aggressively. So I was wondering if you're seeing any sort of upward pressure in cost as you build out the business and make investments? And are these fully contemplated in your 3-year guidance?

Well, the first thing I'll say is that the labor world -- I divide it into 2 worlds. There is Silicon Valley and the rest of the world. And the thing to keep in mind, at least with our company, is 75% of our employees are outside of Silicon Valley. And while the economy is getting a little bit better in many regions around the world, it does not -- the labor markets don't have quite that sort of white-hot heat that you're seeing in Silicon Valley at the moment. And then in Silicon Valley, what's interesting is yes, there's a lot of competition in the short term for certain classes of engineers. What's interesting is engineers, while money is important to them, what they really care about is working on challenging and difficult problems. And we're having great success hiring engineers to work on eBay Search or to work on PayPal Mobile or PayPal Local. And so we are while -- and we have a number of rep positions open right now. So we're hiring, but just not quite at the rate some of the others are. So we feel good about our ability to add that, and we feel like by and large, what it's going to be necessary to compete is in the 3-year guidance we gave. If the changes, we'll say so. But we're trying not to get too distracted by what I think is a little bit of a short-term bubble-ish effect in certain classes of engineers in Silicon Valley.

The only thing that I would add is we talked back in March '09 and again in February of this year about what we call our framework for execution or operational excellence. And essentially, over the last 3 years by doing things smarter, we've been able to free up capacity to invest in a variety of different things, whether it's more R&D, whether it's increased protection, whatever it is that we think we need to do to improve our competitive position, we've been able to free up capital by doing things better and reinvest that. In February, we said we'd do the same thing over the next 3 years, that we thought that we could generate about $1 billion of efficiencies by doing things better. But our expectation is that billion dollars would go back into things that are required to help us compete and grow and extend our leadership position in commerce and payment. So along the way, there'll be lots of dynamics that we'll have to deal with. What will be consistent is how we operate, how we free up capacity and how we'll reinvest in the business.

And one of the things we like about our business models is they're not asset intensive. So it allows us to grow them without quite the same level of expenditures.

Our next questioner in queue is James Mitchell with Goldman Sachs. James Mitchell - Goldman Sachs Group Inc.: Digging into Korea a little bit. My Korean's rough, but I think a local newspaper suggested tmarking [trademarking] an auction will allow Naver's price comparison engine to scrape the listings again. Is that correct? Or did Google Translate lead me astray? And do you expect Naver to expand from a price comparison engine into a mainstream marketplace competing directly for sellers?

Yes, James. I think the dynamics of what's going on in Korea on the -- as you know, comparison shopping is a relatively large vehicle for traffic or for eyeballs in that market, more like in the other markets that we operate in around the world. And we have been, as the large search player in the market has extended its reach maybe into commerce, we've continued to think differently about what it is they're trying to do and what we think we need to do to strengthen our position locally. And along the way, we've reduced our presence on comparison, other comparison shopping sites, while in effect building our own organically built comparison shopping site. In Korea, it's called a bout. And we thought it was going to be more prominent over the long term to use that platform to generate eyeballs and traffic. And based on competitive dynamics in the market and the relationships that we have with the other players, we'll determine when to dial down our presence on other comparison shopping and when to dial up. We dialed it way down and recently had been putting up with listings more, and that will ebb and flow, is our guess, as that market evolves. James Mitchell - Goldman Sachs Group Inc.: But the original rationale for dialing it down was concern that the incumbent price comparison site, which will either become more of a marketplace, I think. If that's the local concern or are you less worried about that now?

I think we'll continue to assess how that plays out in the local market to determine and influence whether we're serving up our ads on that platform or not. And the other important factor is we did build our own comparison shopping engine as well. So it gave us an alternative to serve up our listings, our own comparison shopping platform. And again, the dynamics locally will determine how much we dial down or how much we dial up on other comparison shopping sites.

I think that market's still in transition, James. In most markets around the world, if you look at the really successful Internet companies, they're staying really focused on what they're great at. If you're great at commerce, you focus on that. If you're great at search and advertising, you focus on that. If you're great at social networking, you focus on that. And while there's been a little bit of movement into each other's categories, it's hard to be great at more than one thing. And we'll see how Korea plays out. Our hope and perspective is that over time, that we'll be best in class in commerce and others will be best in class in what they do.

Operator, we have time for one more question.

Our final question in queue comes from Mark Mahaney with Citi. Mark Mahaney - Citigroup Inc: I just want to ask a broad question about Mobile. You have a lot of visibility into it from both the commerce and a payments perspective. Some of that numbers you just rolled out in terms of your estimates for the full year against some of our estimates, I assume that Mobile penetration is something like 2% for payments and 6% or something for commerce. Can you draw many broad general thoughts on whether those penetration rates would converge over time? Or are there good structural or behavioral reasons why commerce penetration on Mobile should be higher always going forward than for payments?

Yes, there's a simple reason. I'm looking at Scott Thompson right now. The fact is PayPal is the only safe way to pay on mobile phones. Because what people -- what you're finding is people don't want to enter their credit card information into a mobile device because it's: A, it's inconvenient; and B, has the risk of being unsafe. And not all the mobile platforms have yet proven to be secure, and certain things can be intercepted in Wi-Fi. And so when you pay with PayPal on a mobile device, you are never sharing your financial information. Your financial information is never passing through the airwaves or through that mobile device. And so PayPal is absolutely a superior way to pay on mobile devices. And so I think what you're seeing is the recent penetrations lagging is: one, in general, consumers have to feel comfortable paying on mobile devices; and two, it reflects that PayPal doesn't yet have 100% our share of the market, which is what the goal we set for Scott. More broadly, Mark, what we do see for both is we just see enormous growth in consumer behavior of using their mobile devices. And when we talk to customers, they really like being able to, in essence, have the store, the world brought to them in their pocket, on their mobile device and having that flexibility. And so our mobile penetration curves across both businesses are quite steep, and we're investing a lot in improving our applications and in making sure we have a pretty clear leadership position in that space. All right. Thank you, everyone. We'll see you next quarter.

Thank you, ladies and gentlemen. This does conclude today's program. Thank you for your participation and have a wonderful day. Attendees, you may disconnect at this time.