John J. Donahoe - Chief Executive Officer, President, President of Auction Business Unit, Interim President of Ebay Marketplaces, Interim President of Paypa 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 Heath P. Terry - Goldman Sachs Group Inc., Research Division Brian J. Pitz - UBS Investment Bank, Research Division Youssef H. Squali - Jefferies & Company, Inc., Research Division Thomas Forte - Telsey Advisory Group LLC Ross Sandler - RBC Capital Markets, LLC, Research Division Scott W. Devitt - Morgan Stanley, Research Division

Good day, ladies and gentlemen, and welcome to eBay's Q4 2011 Earnings Call. [Operator Instructions] And as a reminder, today's conference call is being recorded. Now I would look to turn the conference over to your host, Jennifer Ceran, Vice President of Investor Relations.

Thank you, and good afternoon, everyone. Thank you for joining us, and welcome to eBay's earning release conference call for the fourth quarter and full year 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 John and Bob's prepared remarks represent year-over-year comparison, unless they clarify otherwise. The conference call is also being broadcast on the Internet, and both the presentation and call are available through the Investor Relations section of the 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 our 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 fourth quarter and full year 2012, our 3-year outlook 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, including any further downturn or crisis in Europe; foreign exchange rate fluctuations; 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 and increasingly competitive environment for 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 timely upgrade our technology and customer service infrastructure at reasonable costs while 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 January 18, 2012, 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. Good afternoon, everyone, and welcome to our Q4 and full year earnings call. We had a strong fourth quarter and a strong finish to an excellent year. We're delivering on our commitments and our vision of enabling commerce. Our 2011 results highlight the competitive portfolio of global commerce businesses that comprise our company today. eBay, PayPal, GSI and X.commerce are reinventing how people shop and pay. And we're positioning ourselves as an effective partner to retailers of all sizes. 2011 marked an inflection point for shopping. Online and offline retail are rapidly blending into a seamless multichannel world. Consumers are driving this change and technology is enabling it. In this new retail world, our company has powerful global commerce platforms to deliver technology-driven innovation to retailers and consumers. We're leveraging shopping technologies, such as Milo, Where and RedLaser, with a strong leadership position in mobile commerce and payments, and we're innovating in social and local commerce. For consumers and retailers, we intend to make shopping more locally convenient and more globally accessible. This means enabling retailers of all sizes to reach consumers when, where and how those consumers want to shop. New retail is anytime, anywhere. And in this fluid environment, we will help retailers compete, but we will never compete with them. At the beginning of last year, we laid out bold 3-year growth goals. Our strong performance in 2011 was a big down payment toward these goals. And we have increased confidence in our outlook. I will talk more about what this means for 2012 and 2013 in these remarks. Now let's take a look at our results for Q4. We had a strong close to the year. Q4 revenue grew 35% and non-GAAP EPS was up 17%. All of our businesses performed well. PayPal had another strong quarter, eBay had solid growth in its core markets and GSI had a great holiday season driving strong growth for its merchant clients. Both PayPal and eBay now have over 100 million active accounts and active users. And during this holiday season, both PayPal and eBay set new records during peak shopping periods. For example, on Cyber Monday, PayPal saw more than 10,000 transactions per minute during peak periods, a new record for us. We also had our biggest mobile holiday shopping season yet, with consumer spending $180 per second through our eBay mobile apps. Let's take a look at the results for each business unit. PayPal is becoming an increasingly global business. Q4 marked the first time that more than half of PayPal's revenues came from outside the U.S. Consumers and merchants around the world are responding to the benefits PayPal offers, and this business has tremendous opportunity globally. In Merchant Services, TPV was up 29%. PayPal added more than 1 million new active users each month in Q4, ending the year with more than $106 million globally. And PayPal customers continue to steadily increase the number of times they use PayPal, with Q4 transactions increasing 30% year-over-year. PayPal's TPV on eBay was up 16% for the quarter, as penetration on eBay accelerated more than 1 point from Q3 to over 74%. And PayPal's mobile payments business ended the year with strong momentum. For the year, our mobile payment volume hit $4 billion, more than 5x the volume of the year before. The number of PayPal customers regularly making a purchase through their mobile phone more than doubled during the second half of the year. And during the holiday season, mobile payment volume increased more than 500% on Thanksgiving, Black Friday and Cyber Monday. Simply put, consumers are shopping more frequently via mobile and merchants who adopt PayPal Mobile Express Checkout are seeing significantly higher conversion. We expect PayPal's mobile growth to continue with mobile volume in 2012 estimated to hit $7 billion. Meanwhile, PayPal continues to generate excitement around our plans to extend PayPal to point-of-sale retail locations. We anticipate this will give consumers better shopping experiences and more flexible payment choices. And for retailers, we believe this will give them opportunities to not only engage consumers at checkout, but also throughout their entire multichannel shopping experience. Since we opened it in November, over 100 retailers have visited PayPal's Shopping Showcase in New York, where our new payment innovations are being demonstrated in retail-like environments. And in Q4, we began a limited in-store test with Home Depot, our first national retail partner. And later this week, we'll be launching a pilot to 51 Home Depot stores, primarily in the Bay Area. PayPal customers will be able to easily and quickly pay for purchases in these stores, by either swiping their PayPal card, or simply entering their mobile phone number and PIN. You can shop without your wallet, without your credit cards or even your mobile phone, just pay with PayPal. We're excited about our partnership with Home Depot, and we'll continue to be focused on delivering the best possible product experience for consumers and retailers as we expand with Home Depot and other national retailers later this year. Turning to Marketplaces. eBay had a solid quarter. Marketplaces revenue grew 16%, with core GMV up 10% and marketing services up 24%. Let me talk a little more about GMV. Core GMV grew 10%, both in the U.S. and internationally. Fixed price, which now accounts for 64% of total GMV, grew 14% globally and 15% in e-commerce, in line -- or in the U.S., in line with e-commerce. Today, eBay offers consumers more inventory than ever with approximately 300 million listings available at any given time. The site is cleaner, easier and faster to shop than ever before. And our most trusted sellers continue to win. In Q4, nearly half of all GMV on eBay in the U.S. came from top-rated sellers, a reflection of the trusted retail-like experience they're offering shoppers today. Same-store sales for top-rated sellers grew 19% in the quarter, outpacing e-commerce. And eBay sellers offered free shipping on more items this holiday season, representing 43% of transactions, up 14 points over the prior year. eBay also continued its strong mobile commerce leadership, ending the year with $5 billion of mobile volume. That's more than double 2010. And in 2012, we expect eBay mobile volume to grow to $8 billion. Mobile can make any moment conveniently shoppable and consumers love having their favorite store, eBay, in their pocket. And mobile is driving more than just shopping on eBay. In 2011, eBay acquired more than 1 million new active users via mobile devices. And each week, eBay sellers are now uploading on average more than 1 million listings through our mobile apps with each listing taking an average of 60 seconds or less to complete. We also stepped up our marketing in Q4, and we're pleased with how our Buy It New, Buy It Now consumer campaign is beginning to change consumer perception of eBay in the U.S. Early feedback shows the campaign’s been successful in helping to drive brand awareness and position eBay as the destination with a great selection of new merchandise at fixed prices. Turning to our new business unit. GSI had a great holiday season, driving a 26% increase in same-store sales for its merchants. And we're making great progress in the second half of last year in our integration efforts. We're capturing synergies across the portfolio and ended the year with 13 GSI merchants selling on eBay. In Q4, we also launched X.commerce. We're excited about the enthusiastic response to X.commerce and the potential for this open commerce ecosystem to drive innovation for merchants and third-party developers. Today, we already have 800,000 developers, merchants and users on the X.commerce platform. In summary, I'm pleased with our fourth quarter performance, our progress over the past 12 months and our progress in delivering against our 3-year growth outlook we announced last February. In a dynamic and rapidly changing environment, we are operating with discipline and clarity. We have a strong bench of management talent and we will not skip a beat as we manage the transition at PayPal. Across the company, I'm more confident than ever in our ability to execute. We are a different eBay today; technology-driven and customer-focused, with a portfolio of commerce, platforms and products that engage consumers and benefit retailers. We're no longer just an e-commerce leader but a stronger, more diverse global commerce company shaping the future of shopping and payments. Now I'll turn it over to Bob, who'll provide more details on Q4 and the full year before we take questions. Robert H. Swan: Thanks, John. During my discussion, I'll reference our earnings slide presentation that accompanies the webcast. Before I go to the results for the quarter, I'd like to take a moment to put some perspective on the full year. As John mentioned earlier, commerce is at an inflection point. Technology-led innovation, driven by the wide adoption of eBay and other applications on smartphones and tablets, is changing the way people shop. Retail is becoming multichannel and merchants of all sizes must keep up with changing consumer behavior. They have been reaching out to us for help and we are responding. Today, eBay is focused on enabling global commerce by investing in new products and services that extend our capabilities and put us in a position to meet the evolving needs of both merchants and consumers. Simply put, this is the essence of our 3-year plan we outlined at Analyst Day earlier last year. And we've now completed the first year of our 3-year journey. Overall, the first year was an excellent one for eBay. We grew the company's top line 27%, delivered EPS growth of 17% and generated $2.3 billion in free cash flow. And our platforms enabled nearly $150 billion of commerce volume for our customers. First, is the guidance we gave you back in January of 2011. We are $1 billion larger and approximately $100 million better on net income with a balance sheet as strong as ever. We feel great about our portfolio and our capabilities. PayPal is adding merchants and consumers while investing in the next generation of payment capabilities. The Marketplaces' core business overall is healthy, and investments in new features and functionality continue to make the site even better. And GSI is focused on helping larger retailers succeed in a multichannel world. One year into our 3-year plan, we are ahead of our expectations and we are increasingly confident about the future. Now let's take a look at the results from the fourth quarter. Q4 was a great quarter for our company, and PayPal, Marketplaces and GSI all performed well. Revenue increased 35%, non-GAAP EPS grew 17% and operating margins accelerated across all 3 segments. From a capital allocation standpoint, we closed the sale of our remaining investment in Skype for $2.3 billion, we completed 3 product-enhancing acquisitions and we repurchased approximately 8 million shares. We had a strong finish to a great year and we'll carry that momentum into 2012 and 2013. In Q4, our combined businesses generated net revenues of $3.4 billion, up 35%; organic revenue growth was 19%; and the inclusion of recently closed acquisitions increased our growth by approximately 16 points. Third quarter non-GAAP EPS was $0.60, a 17% increase year-over-year. Solid top line growth drove our out-performance relative to guidance. Non-GAAP operating margin was 28.7%, down 80 basis points from Q4 2010. This was driven by operating leverage, offset by business mix and the impact of recently completed acquisitions. We generated strong free cash flow of $691 million in the fourth quarter with CapEx at roughly 9% of revenues. Now let's take a closer look at our segment results. PayPal posted another great quarter. Revenue growth was 28% and total payment volume increased to $33.4 billion, up 24%. We continue to expand our global footprint with international TPV increasing 33% and comprising 47% of overall TPV in the quarter. A few quick highlights on PayPal operational metrics. The number of payments grew 30%, a 1 point acceleration versus the third quarter. On eBay, TPV grew 16% on an FX neutral basis, driven by a 10% increase in GMV and a 4-point increase in PayPal penetration on eBay. Merchant Services TPV grew 29% on an FX neutral basis. This growth was driven by continued expansion on PayPal merchant sites around the world and an increase in share of checkout. While growth was strong, we decelerated 4 points in the quarter. The deceleration was driven by softness in cross-border trade, particularly to Europe, and declines in average payment size from strong growth and low priced categories as well as holiday discounting. Transaction margin was 64.8% in Q4, up 130 basis points. The increase was mainly driven by a higher take rate and lower transaction expense as a result of the Durbin amendment. PayPal's segment margin was 24.7% in the quarter, up 260 basis points from last year and at the highest level over the past 5 years. Let me touch on a few key operating metrics for Bill Me Later. Bill Me Later's TPV was up 44%, driven by a continued strong penetration on and off eBay. BML penetration in the U.S., on eBay and in the PayPal wallet, has increased in the past year to more than 1.6% in the fourth quarter. This penetration reduces our funding cost as consumers shift away from credit cards to Bill Me Later. Risk-adjusted margins in the quarter were at 16.9%, up 250 basis points over last year. Now let's move to our Marketplaces business. Overall, Marketplaces achieved net revenues of $1.8 billion, up 17% on an FX neutral basis. This was driven by a transaction revenue growth of 15% and marketing services revenue growth of 24% from our adjacent format. A few quick highlights on Marketplaces operational metrics. Sold items grew 11%, approximately a 2-point acceleration from Q3, driven by growth in the U.K., China and the U.S. U.S. GMV grew 10%, driven by a strong active user growth in category sales in fashion and parts and accessories. While growth was solid, GMV decelerated 4 points as exports to Europe slowed and ASPs declined, primarily driven by gold prices on the platform. From a format perspective, U.S. fixed price growth was strong at 15% while auctions grew at 2%. International FX neutral GMV grew 10%, driven by acceleration in APAC, strong and stable performance in the U.K. and continued sluggish growth in Germany. Marketplaces segment margin was 40.6% in the quarter, up 140 basis points from operating leverage. Now let's turn to our newest business unit, GSI. GSI had a great quarter. Revenue was $364 million, up 11%, which was driven by a strong volume growth, partially offset by the mix of merchant sales. Adjusting for the impact of the continued shift of clients to the service fee model, year-over-year growth would have been 15%. Global e-commerce merchandise sales, or GMS. grew 26% on a same-store sales basis, which was driven by a strong performance in toys and health and beauty verticals. And GSI Marketing Services, which is primarily demand-generation activities, accounted for nearly 20% of GSI revenue and was up 35% in the quarter. A quick update on the unit -- on the GSI integration. GSI's profitability is improving, as we capitalize on the synergies we laid out earlier last year. The number of GSI merchants selling on the eBay platform is now 13, and we have added 8 new merchants to the eBay platform since the acquisition. And we are increasing PayPal's ubiquity with 89% coverage of GSI volume and 13% share of checkout. We are 6 months post the acquisition of GSI, and we're even more excited about the opportunities ahead. Turning to operating expenses. In the fourth quarter, they were 42% of revenue, slightly lower on a year-over-year basis. This was driven by the impact of GSI, as well as improved productivity from operational excellence initiatives offset by investments in product and the customer experience. From a capital allocation perspective, we generated strong free cash flow of $2.3 billion in 2011, including almost $700 million in the fourth quarter. We've improved our financial flexibility by funding approximately 50% of the U.S. Bill Me Later loan receivables portfolio with our offshore cash. During the year, we invested approximately $3.4 billion to strengthen our portfolio with 3 acquisitions closing in the fourth quarter. For the full year, we repurchased 33.6 million shares. for a total of 1.1 billion. We ended the year with cash, cash equivalents and nonequity investments of $7.5 billion, including approximately $1 billion in the U.S. Now let me turn to guidance. From a macro perspective, we are assuming a relatively stable outlook for the global economy, current foreign exchange rates and a continued low interest rate environment. While we remain anxious about the European economy and the impact of weaker European currencies on our cross-border volume, we are bullish about growth prospects for web-enabled commerce overall and e-commerce, in particular. From an operating perspective, we expect continued strong performance in PayPal, solid performance in Marketplaces with continued investment and platform in new products, strong performance at GSI driven by top line growth and synergy realization and our non-GAAP effective tax rate to be in the 18.5% to 19.5% range for the year. For the full year 2012, we expect revenue of $13.7 billion to $14 billion, representing growth of 18% to 20%. We anticipate non-GAAP EPS of $2.25 to $2.30, representing growth of 11% to 13%. Our non-GAAP EPS growth of 12% is driven by several factors. First, we are expecting strong operating earnings growth of approximately 15% with improving segment margins at PayPal and GSI and stable margins at Marketplaces. Second, we've made several acquisitions in 2011 that we expect to contribute 4 points to the top line and 1 point of growth to earnings. Third, the strong U.S. dollar will negatively impact top and bottom line by approximately 3 points. Lastly, the low interest rate environment and the loss of our 30% portion of Skype's income will negatively impact our EPS growth by approximately 1 point. In summary, strong top and bottom line growth will be tempered by a stronger dollar and a weak interest rate environment. For the first quarter, we expect revenues of $3.05 billion to $3.15 billion, representing growth of 20% to 24%. And we anticipate non-GAAP EPS of $0.50 to $0.51, representing growth of 7% to 9%. EPS will grow slower in the first quarter than the full year due to a more seasonal business magnified by the addition of GSI and higher investments in the first half of the year. Let me take a minute and go back to our Analyst Day of a year ago. You may recognize Slide 19 from the Analyst Day deck where we initially laid out our expectations for 2013. I've updated this outlook to reflect our current view. First, we had strong momentum coming out of 2011. And secondly, we're expecting continued momentum in 2012, with a more diversified portfolio and a stronger set of assets. This has given us the confidence to raise the midpoint of our 2013 revenue guidance by approximately $550 million. Additionally, we are also increasing PayPal's segment margin by 1 point to 25% to 26%. As a result of the strong top line growth and improved PayPal margins, we are raising the midpoint of our 3-year non-GAAP EPS CAGR by 1 point to 14% to 16%. So in summary, we had a strong close to a great year and are well-positioned to capitalize on the opportunities ahead in the external environment. We exceeded the commitments we laid out for you at the beginning of the year. PayPal continues its strong growth, core eBay is healthy and getting stronger and the GSI integration is going well. We are executing our strategies with a sharp focus on operational excellence that's enabling us to deliver on our commitments while reinvesting in commerce innovation and the customer experience. We allocated our capital with discipline, closing 13 acquisitions, repurchasing 34 million shares and selling our remaining minority stake in Skype. And finally, we are more confident in our 3-year operating plan and are increasing the midpoint of our 2013 numbers. And now we'd be happy to answer your questions. Operator?

[Operator Instructions] Our first question comes from Ross Sandler of RBC Capital Markets. Ross Sandler - RBC Capital Markets, LLC, Research Division: I've just got one question for Bob on margins and then one for John on user growth. Bob, you've done a nice job of turning the segment margins around in both Marketplaces and PayPal. Can you just give us a little bit more color on the sustainability of the margins and specifically on the PayPal side prior to the margin increases from Durbin versus other efficiencies? And then, John, on the user growth, you rolled out the advertising program in the U.S. in the fall of this year. Do you feel good about the 6% global user growth? Or do you expect that to potentially tick higher as we get into '12? Robert H. Swan: Yes. First, just to clarify the great job on margins in the segments, it is attributable to the Marketplace, the PayPal and the GSI teams. I'm just adding up their performance, so I'll pass along your comment. Secondly, for PayPal, we had a year-over-year, roughly 5-point improvement, in segment operating margins. And it's 2 fundamental things. One, transaction margins continue to improve and stay well above that 60% level that we laid out 3 years ago. And secondly, we're beginning to get the benefits of operating leverage without constraining investments in new products and capabilities. So those are the 2 primary drivers. In terms of sustainability implied in our guidance, both for '12 and 2013, is: PayPal's margins will continue to expand; Marketplaces margins will continue to stay relatively stable, consistent with the 38% to 42% range that we provided at the beginning of last year; and our expectations at GSI margins will continue to grow as well, with leverage on existing infrastructure, a better mix with its fast-growing marketing services and the synergies that we're able to generate with GSI's part of the eBay portfolio. John J. Donahoe: And, Ross, in your second question on user growth and our advertising, as you know, in the fourth quarter, I finally felt it was time to begin getting the message out about eBay, that our user experience had improved enough, that getting the message out was right. We did some TV advertising around the Buy It New, Buy It Now; intended to begin to shift brand perception. To be clear, this is a longer term -- this is the beginning of that. That's not going to happen overnight. I am pleased that we added more new users in the fourth quarter to eBay than we've done in several years in that 6% growth, but we're just getting started. I'm sitting next to Devin Wenig, who's the new President of Marketplace division. He's made adding new users, one of his key tenets, both in our existing markets and in new markets. And so we think we have a very good user experience and we – you’ll look to us to continue to be on the offense of getting that message out, both to our current users, to last users and increasingly to new users.

Our next question in queue comes from Scott Devitt. Scott W. Devitt - Morgan Stanley, Research Division: Two, if I could, John first. As you continue to position the collection of assets as the technology platform for enabling commerce, I was just wondering what you think the most important metrics or milestones are that we should look toward in measuring the company against those aspirations over the next few years. And then secondly, a follow-up on the marketing campaign. The turnaround in the business seemed to start with increased frequency amongst existing loyal customers, and then with the marketing campaign launch, now that you've reinvigorated user growth. I guess the question is, when would you anticipate a change in frequency amongst these new users? You said it's a long-term endeavor. Is it something that a couple quarters in post marketing campaign you start to see changes in frequency? Or is it a year out? Or something else? John J. Donahoe: Thanks, Scott. You captured exactly where our focus is. We feel this growing opportunity to be the technology platform for enabling commerce. And I'm not sure there's anything -- any of our metrics change business unit by business unit. But here's what I'm focusing on, which is, are we helping our customers win? So for instance, we know that when PayPal merchants add PayPal Express Checkout or increasingly add Paypal Mobile Express Checkout, they grow faster than their competition, they grow faster than the market. So we got a capability that's helping them compete and win in this new environment. I'm thrilled to see the GSI in the fourth quarter. GSI clients grew 26% same-store sales. So GSI clients grew more than 50% faster than the market. So our technology -- GSI technology capabilities and services are helping its clients win. On eBay, I feel -- just particularly in the fourth quarter around top-rated sellers because the fourth quarter is a heavy fixed price, it's kind of a gift-giving quarter, right? And consumers want to be able to get a gift off and a new item in a fixed price format, and our top-rated sellers grew 19% in the fourth quarter. So if you hear me talking about our senior leadership team, I'm talking about, are we helping our customers and clients win as their technology partner across all of our assets? With respect to adding new -- the marketing campaign and adding new users and what the -- I think you're sort of asking what's the cycle of usage for the new users. To be honest, it's too early to tell. We are -- as you said correctly, our existing users have carried a lot of a turnaround, that they've increased their frequency per user, their purchase per user, so we know they're happy with our site. Our customer loyalty is up. Our NPS is up. And now to bring new users into the site, we're trying to ensure that we get them to make that first transaction, then a second and a third. And as we learn with them, and as we try to market to them and drive that cycle, we'll let you know. But I will be lying to you if I can tell you we understood the class curves, as what we call them, for the new sets of users and -- but we have a focus on adding new users, and we're increasingly confident in our ability to grow their share of wallet on eBay.

The next question in queue is from Heath Terry from Goldman Sachs. Heath P. Terry - Goldman Sachs Group Inc., Research Division: John, when you're looking for $7 billion in mobile payments this year that excludes point of sale. Any willingness to kind of venture on what impact you think point-of-sale could potentially have on PayPal this year? And then I guess, Bob, a quick follow-up. You've talked in the past, when discussing cross-border, about efforts to build out the other side of the euro trade. Any update that you can give us on that? John J. Donahoe: Heath, I'll take the first one on mobile payments. I'd say a couple of quick things. One, you're correct. It doesn't include point-of-sale. And the part of mobile payments that I think is very interesting is, as merchants and retailers are adding PayPal Mobile Express Checkout to their application or to their HTML 5 site, or even to a core website that gets pulled up into a mobile device,. Conversion is increasing because we know consumers don't like to enter in their credit card information to a phone. And they see that PayPal Express Checkout button on a phone, and we're getting higher share of checkout and higher conversion for those retailers, and they're noticing. And that's what's involved in the $7 billion. Point-of-sale, the real goal for point-of-sale, I liken this back to what we've done in Merchant Services, where last year was the year of planning and beginning to build the product, this year is a year of learning and adjusting and next year is the year of scaling. And so this year, I look to us to get a product rolled out to retailers, to get early consumer adoption and to get a product that can be rolled out to every vertical around the world, so that we can build another business at point-of-sale like being built in the Merchant Services environment. Robert H. Swan: And, Heath, the only -- just to add in onto John's comments. In terms of our 3-year outlook, we raised the midpoint of the PayPal guidance for 2013 by $250 million. I would say that's primarily based on our confidence and comfort with the core business and Bill Me Later. We're still looking at -- inherent in that guidance is a relatively immaterial portion of TPV from our point-of-sale effort. So it's not a -- we're still going to wait and see in terms of what that could mean for the overall business. It's not a big part of the $6.5 billion to $7 billion business in 2013. On your second question, just cross-border trade, again, just to remind you, the cross-border is a significant component of both the Marketplaces and the PayPal business, representing almost 20% of Marketplaces and approximately 25% of PayPal. So we continue to get better and better about managing cross-border and our community of users, both buyers and sellers, leverage our platforms to access -- to take their goods into global developed economies so it's a significant portion of our business. That being said, there is still opportunities for us to get better and better about enabling the great deals from weaker currency markets for access to consumers from stronger currency markets. And that -- and I'd characterize, while we've made a progress, that still is an opportunity for us to get better and better, and we'll be working on that in both of the businesses in 2012.

Our next question in queue comes from Tom Forte of Telsey Group. Thomas Forte - Telsey Advisory Group LLC: So 2 questions. First, on a consumer standpoint. It looks like in the fourth quarter the free shipping promotions are becoming standard fare. What are you doing to motivate your sellers to offer free shipping more often? And then how is that possibly affecting results? And then second, on the GSI Commerce and Marketplace integration, you talked about adding the additional GSI Commerce clients to Marketplace. Can you talk about the satisfaction of existing GSI Commerce clients who've been on for 1 or 2 quarters? John J. Donahoe: Yes. Tom, let me -- I'll take the first; and, Bob, why don't you take the second? On free shipping, it's quite clear that for retail-like transactions, consumer expectations are growing. They want price transparency and free shipping. And as a Marketplace manager, we want to encourage our sellers to provide that. And so earlier this year, we changed our pricing in the U.S. in a way that would take rate neutral but incented sellers to be very transparent about pricing and shipping costs and wherever possible to offer free shipping. And the results are clear. As I said earlier, that the number of items that have free shipping on the eBay business in the U.S. was up significantly over the year, which is meeting those consumer needs. I know there's been lots of questions about what was the impact of that on your financials. Let me say it was immaterial globally and accounted for roughly 1%, less than 1%, growth of the growth in the U.S. So it's the right thing to do. Our sellers are responding and we think consumers are responding to that. Robert H. Swan: Tom, on your second question, we continue to bring on GSI clients on the eBay platform. I think we and they are very excited about the prospects of getting access to 100 million users around the globe, number one. Number two, primarily today, we're giving them access to our U.S. consumers, which is half of that, and we continue to work with them to try to expose their inventory to our global markets. And number three, we still have some work to do on the technology and the features to enable them to make it very easy to serve up their inventory on the eBay platforms. So I'd say we're working together to ensure it's simple and easy to put their inventory on eBay Marketplace. And we're making sure that we get it right before we rapidly expand additional large merchants on the platform. So, so far, good, but we can get a lot better on this. John J. Donahoe: And I think we'll have some -- over the next 60 to 90 days, we're going to have some nice examples of trying new things with well-known brands and retailers that continue to learn together.

The next question in queue comes from Youssef Squali with Jefferies and Company. Youssef H. Squali - Jefferies & Company, Inc., Research Division: Two quick questions, please. Bob, Q1 outlook implies revenue growth of 20% to 24%. Normalized EPS of about 7% to 9%. Can you maybe speak to the larger discrepancy of the growth rates in this period versus prior periods? I think you talked about seasonality, increased investment. Maybe you can just flesh out the increased investment part. Also, is taxes also part of that? And, John, can you maybe please help us understand the steps you're taking to counter the departure of some PayPal and the depth of the management venture there. We've seen some defections to Google last year and then Scott to Yahoo recently. Robert H. Swan: Youssef, on the first question, just full year relative to Q1, revenue and in particular, organic growth rate, is roughly the same so no dramatic differences Q1 versus full year. Secondly, operating margins will be lower in the first quarter versus the full year, and it's primarily driven by 2 things. First, GSI, a much more seasonal business, lower volume and, therefore, lower margins in the first quarter. And it wasn't part of the portfolio on last year, so that will have an impact. Secondly, we will be increasing our investments earlier in the year this year, to ensure that additional feature and functionality across all 3 platforms is ready before we go into the holiday season. So that's what's resulting in earnings growth, the gap between earnings growth and top line growth in the first quarter. That being said, again, I'll go back to kind of segment margins on a year-over-year basis. And what you can expect to see is PayPal continuing to improve, GSI continuing to improve and Marketplaces remaining relatively stable within that 32% to 42% range we gave you. We will be a more seasonal business than we have been historically with the addition of GSI. Just lastly, no dramatic change in tax rate on a year-over-year basis. John J. Donahoe: And, Youssef, on the PayPal leadership team, let me -- I actually disagree with a couple of your characterizations fundamentally. Let me say 2 things upfront. One, Scott's departure was a surprise, but I wish Scott very, very well in his new role. What I am certain of is the PayPal business has never been stronger and the PayPal leadership team has never been stronger. If you look at that leadership team, we have attracted -- first of all, you step back, over the last 3 years, I've replaced 75 of the top 100 people in this company. We have rebuilt the leadership teams across all of our businesses, including PayPal. And we have attracted over the last 24 to 30 months a excellent team at PayPal. We have no problem attracting top talent. Let me give you 3 or 4 recent examples. Ranjana Clark joined us last year. She was a Senior Line Manager at Wachovia, Chief Operating Officer at Western Union. She's now running Marketing and Data Analytics at PayPal. Rupert Keeley built large parts of Visa in Asia, was the #2 guy of Asia. He's now running PayPal in Asia. Don Kingsborough is by all accounts, or in many accounts, the single best guy in the retail point-of-sale world having built the Blackhawk Network. We bought Zong. David Marcus is one of the best digital Mobile Payments guys in the industry, big innovator. He's now running all mobile commerce and payments. And so I've spent a lot of time with this PayPal leadership team over the last 2 weeks. And I can tell you that they feel enormous ownership over the PayPal vision, that they -- and they developed enormous commitment over the plans and they will not miss a beat. I feel better about that leadership team than at any time in our history. And so I think we have a strong defense there, and I look forward to strong execution by the PayPal team.

The next question in queue comes from Mark Mahaney with Citi. Mark S. Mahaney - Citigroup Inc, Research Division: I apologize, I only have one question, and it has to do with the Merchant Services growth. We've seen over the last 2 quarters year-over-year growth rates x FX closer to 30%, but you called out both quarters some unusual events, maybe unusual currency fluctuations and volatility in maybe lower ASPs. Would you comment on what you expect would be reasonable Merchant Services growth going forward? Are we at the new normal? Or are you calling out those factors to suggest that we could see a pick back up in that growth? Robert H. Swan: Yes. Again, I'm going to take out APVs for a second because I think that's more a nature of the fourth quarter holiday season, and just let me isolate to cross-border trade. To refresh your memory, Europe is the biggest cross-border trade quarter from Asia and the U.S. for our business. And as I indicated earlier, cross-border is a big chunk of PayPal's growth. Secondly, when European currency gets weaker, it does impact, all else equal, it does impact cross-border trade. And likewise, when European currencies get stronger, all else equal, you see an acceleration in growth for the PayPal and for the Marketplace business, for that matter. So currencies does have an impact. All that being said, as we look forward to 2012 and 2013, the PayPal businesses are as strong as it's ever been. We're getting a more expanded global footprint on merchant sites, we're getting increased consumer share of checkout, we adding new features and functionality online and we're expanding our served market offline. And implied in the guidance we gave was that we're more confident on the growth rate of PayPal as we think about '12 and '13 than we were simply a year ago. So we -- currencies are going to move and it will impact the flow of goods for us, but the business is as healthy or healthier than it's ever been. And our prospects are -- we feel pretty good about it. John J. Donahoe: So, Mark, since you only answered -- only asked one question, I'm going to take advantage of it and I'm going to get to ask your second question: "So, John, have you tried the new PayPal point-of-sale down at Home Depot?" John answering, "Yes, I went on the Home Depot in San Jose this morning. I left my wallet and my cell phone in my car. I walked into the Home Depot, and it was 1 of the 5 where we got this pilot going. I picked up a hammer and picked up a tape measure, which I had right in front of me, walked into the checkout lane. Without my wallet, without my mobile phone, on the terminal, I pressed pay with PayPal, I put in my mobile phone number and a PIN, and boom, I was done. The receipt eE-mailed to my e-mail account, texted to my mobile phone and I walked out. So it was a beautiful experience. And as I say, that's going to be available in 51 stores later this week. It's built into the existing hardware at these retailers. It's as fast or faster than swiping your card, doesn't require you to have your wallet or phone with you. By the way, for those that like to swipe, we'll have a PayPal card you can use. And so I'm very excited about this. I think, as I said, it's going to be a learning year. But for early trial in beta, it's a great experience, and frankly an experience no one else can match. The ability to check out with just your mobile phone number and PIN is real good, so I..." Robert H. Swan: Great question, Mark. John J. Donahoe: And by the way, I told my team I came back with a hammer and it's either now going to be used to begin meetings or it's my new people management tool.

Our next question comes from Brian Pitz of UBS. Brian J. Pitz - UBS Investment Bank, Research Division: John, I guess that's what they taught you over at Dane [ph] in terms of management there, with the hammer. But with that said, can you just give us some color on the success of larger merchants coming out your marketplace? Is there a specific type of retailer that's most attracted to the platform right now? And then second, regarding your comment on the 26% same-store sales growth among GSI clients, any color regarding the impact of discounting that may have been helpful in driving this growth? John J. Donahoe: Yes. On larger retailers, here's what we're hearing. Bob and I and others are spending a lot of time with these large retailers, both GSI clients and others. And they want growth. And so increasingly, they're viewing eBay as an incremental distribution channel, one that reaches a new set of users. And so whether it's apparel or Consumer Electronics, if they can find a way to have eBay drive growth, either a post transaction or drive people into their stores for the use of eBay Mobile, RedLaser or Milo, that's the genesis of their interest. And so whether it's retailers like Neiman Marcus, it's brands that are looking at it. And so far, as Bob said earlier, we're in the learning. The other thing these retailers are looking for is growing globally, growing outside the U.S. And eBay is obviously -- almost 60% of our businesses outside the U.S. And so if they can reach customers outside the U.S. without having to build assets, that's attractive. Interestingly, Macy's came and Macy's saw that the euro -- the Australian dollar was very strong. The Australian consumers are very open to import and they're looking for brands. And Macy's opened up a store in eBay Australia. And so they're now reaching eBay-- they're now reaching consumers in Australia on the eBay platform, without having to have assets residence in the country. So that's the kind of opportunity, a need, these retailers have. And we're working hard to try to find ways to use the eBay platform to meet those needs, help them grow their business better. Robert H. Swan: And, Brian, on the second question, I don't want to comment specifically about GSI clients, but I will say that on APVs during the holiday season, on both eBay and on PayPal, there was a degradation year-over-year in APVs or ASPs as merchants were competing earlier and more often for consumers' attention with great deals. So we clearly saw that on the eBay and the PayPal platform. And I think it's fair to say that GSI clients were promoting heavy to compete for consumers here in the U.S. John J. Donahoe: So I think we have time for one more question.

Our final question then will come from Spencer Wang of Credit Suisse. Spencer Wang - Crédit Suisse AG, Research Division: Two quick questions, my housekeepings are for Bob. Bob, in Marketplaces, the take rate was up year-over-year, even when we adjusted that onetime item in the fourth quarter of 2010. Is there anything going on there beside just mix of GMV and a higher mix of fixed price? And then secondly, within payments, the transaction loss ratio ticked up again a little bit year-over-year. I know you cited new products. Could you just elaborate a little bit on what's going on there? Robert H. Swan: First, on the take rate, as you know, we've been moving to less upfront fee, more back-end fee, where our interests are aligned with our sellers' interest. You also noticed sold items increased so sold item growth increased. And when that happens, all else equal, we had a modest increase in take rate. Secondly, good growth at StubHub. And StubHub, as you know, has a higher take rate. So the combination of those 2 resulted in a slightly higher take rate kind of year-on-year and sequentially. In terms of PayPal, Spencer, it's the same story. You saw some -- it's obviously up year-on-year. Sequentially, it's down a little bit, and that's the nature of us -- trial and error with our risk models to ensure we're accepting the right volume in a efficient way. And as you know, whenever we get better and better with the risk models, we open up the spicket to take on more risk, in a real effective way, to help drive profitable growth. So I think you saw spikes during the course of the year as we tried new things. And sequentially, you see it coming down a little bit. We'll continue to leverage our risk models and capabilities to get that right kind of trade-off continuously. John J. Donahoe: Okay. Thank you, everybody. We'll see you next quarter.

Ladies and gentlemen, thank you for joining today's conference. This does conclude the program, and you may now disconnect.