John Donahoe - President and Chief Executive Officer. Robert Swan - Chief Financial Officer and Senior Vice President Tom Hudson - Vice President of Investor Relations

Colin Sebastian - Robert W. Baird Douglas Anmuth - JPMorgan Heath Terry - Goldman Sachs Youssef Squali - Cantor Fitzgerald Sanjay Sakhrani - KBW Ron Josey - JMP Securities Benjamin Schachter - Macquarie Research Gil Luria - Wedbush Securities Mark Mahaney - RBC Capital Markets Ross Sandler - Deutsche Bank Stephen Ju - Credit Suisse

Good day, ladies and gentlemen, and welcome to the eBay second quarter 2013 earnings conference call. At this time all participants are in a listen-only mode. Later we’ll conduct a question-and-answer-session and instructions will be given at that time. (Operator Instructions). As a reminder, today’s conference may be recorded. It’s now my pleasure to turn the floor over to Tom Hudson, Vice President of Investor Relations. Please go ahead.

Good afternoon. Thank you for joining us and welcome to eBay's earnings release conference call for the second quarter of 2013. 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 growth rates mentioned in John and Bob's prepared remarks represent year-over-year comparisons unless they clarify otherwise. This conference call is also being broadcast on the Internet, and both the presentation and call are available through the IR section of eBay’s website at http://investor.ebayinc.com. In addition, an archive of the webcast will be accessible for 90 days through the same link. Before we begin, I'd like to remind you that during the course of this conference call, we will discuss some non-GAAP measures in talking about our company's performance. You can find a reconciliation of those measures to the nearest comparable GAAP measures in the slide presentation accompanying the 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 third quarter and full year 2013 and the future growth in the Payments, Marketplaces, and eBay Enterprise businesses. Our actual results may differ materially from those discussed in this call for a variety of reasons, including, but not limited to, changes in political, business, and economic conditions; foreign exchange rate fluctuations; our need to successfully react to the increasingly importance of mobile payments and commerce and increasing social aspects of commerce and increasingly competitive environment for our businesses, the complexities of managing an increasingly large enterprise with a broad range of businesses at different stages of maturity, our need to manage regulatory tax and litigation risks, including risks specific to PayPal and Bill Me Later and our need to timely upgrade and develop our systems, infrastructure and customer service capabilities at a reasonable cost while maintaining sites stability and performance and adding new products and features. You can find more information about the 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 http://investor.ebayinc.com. You should not rely on any forward-looking statements. All information in this presentation is as of July 17, 2013 and we do not intend and undertake no duty to update it. With that, let me turn the call over to John.

Thanks, Tom. Good afternoon everyone, and welcome to our Q2 earnings call. We had a strong second quarter enabling $51 billion of commerce volume, up 21%. Revenue was up 14% and non-GAAP EPS was up 12%. And double-digit active user growth continued to accelerate for both eBay and PayPal. Our second quarter and first half performance underscores our company's strengths and opportunities. Led by mobile, our commerce revolution is underway and we're well-positioned to capitalize on the accelerated changes happening globally. We're a mobile commerce leader, adding more than 3 million new customers in Q2 through mobile. eBay and PayPal each expect to do $20 billion of mobile commerce and payments volume this year. And our global commerce platforms are a competitive advantage enabling commerce to happen anytime, anywhere. In Q2, we generated $11 billion of cross border trade through our platforms, 22% of total enabled commerce volume for the quarter. With our technology outsets and capabilities, we are enabling new retail interfaces. For example, our partnership in Q2 with Kate Spade Saturday re-imagines the storefront window as a 7x24 shoppable screen. We are also creating diverse new consumer experiences. From more ordering online and picking up in store to ordering via mobile and having the product delivered to you wherever you are. To ordering lunch ahead and skipping a long line, innovation is everywhere and the seamless, web-enabled, omni-channel, multi-screen commerce environment is rapidly emerging. We intend to be a leader in this new commerce world. Before getting into our second quarter results, let me briefly recap three things we shared with you at our investor day earlier this year. First, with technology accelerating change in how consumers shop, our company has a bigger addressable market, the $10 trillion commerce market. By 2015 we expect to enable $300 billion in commerce volume up from a $175 billion in 2012. This is one of the ways we will measure our success. Second, our core businesses are strong. We've proven monetization models and we've built a powerful set of technology and innovation capabilities. And third, we see four emerging battlegrounds of omni-channel commerce, mobile, local, global and data. And our global commerce platforms, technology assets and innovation capabilities leave us well positioned to lead and compete. We have clear strengths, opportunities and capabilities in each area. In this environment, both retailers and brands need a partner and that's who we are, a partner, not a competitor. Our success is strongly tied to enabling others to win, whether an entrepreneur or a global brand. Commerce is never a zero sum game and in this period of disruption and innovation we believe technology should enable more opportunity for everyone. Now let's take a look at the quarter, starting with PayPal. In Q2, PayPal continued to expand its footprint, increasing merchant coverage and share of checkout. Finishing the quarter with a 132 million active accounts globally, PayPal added almost 5 million new accounts during the period, the fifth consecutive quarter of accelerated growth. Merchant services generated strong growth of 29% for the quarter, accelerating three points from Q1 and representing $30 billion of payment volume. PayPal continues to be a global leader in mobile payments, generating strong growth and driving incremental sales for merchants. Mobile is enabling seamless shopping experiences for consumers and PayPal is focused on delivering great product experiences for merchants and consumers anytime, anywhere. For example, RadioShack went live in Q2 with PayPal's point of sale options in the majority of their U.S. locations. PayPal is all also driving innovation for small merchants. The cash for registers program was announced in Q2 and went live earlier this month in the U.S. PayPal is waiving transaction fees for up to $20,000 of transactions per month through January 2014 for the first 10,000 merchants who qualify. With a 132 million digital wallets in the cloud, availability in 193 countries and unmatched global risk management capabilities, PayPal has powerful competitive advantages. PayPal's core business is strong and growing. And as merchants and consumers meet better, more convenient and smarter payment options across every commerce channel, PayPal is committed to leading disruptive innovation. Now let's turn to marketplaces. In Q2, eBay's core or non-vehicles GMV grew 13% over the prior year. And in the U.S. core GMV growth was up 16%. Active user growth was also up making this the fourth consecutive quarter of accelerating double-digit growth. Performance was driven by continued site improvements and by eBay's focus on delivering consumers abundant selection at great value with personalized trusted shopping experiences. Top rated sellers continue to deliver a great experience and outpace e-commerce growth, accounting for 45% of U.S. GMV in Q2. Their same-store sales grew 22%. Fixed price listings accounted for 69% of GMV globally and half of all U.S. transactions included free shipping in Q2. eBay continued to see strong growth in mobile. eBay mobile attracted 2 million new users in Q2 and drove an average of 5.6 million listings per week through eBay sellers. The pace of innovation continues to accelerate at eBay. For example, Cassini, eBay's new search engine was fully rolled out to North America in Q2. And shipping is another way where eBay is continuing to innovate. eBay's global shipping program added eight countries in Q2, bringing the total to 36. This program makes international shipping for sellers easier and it creates a more trusted experience for buyers with shipments now fully trackable. These are examples of the range of product enhancements and initiatives being implemented by eBay to improve the buyer experience, create more consistent retail-like standards and drive increased selection. eBay is driving growth by pulling multiple levers which collectively deliver a great customer experience. Now let me briefly touch on eBay Enterprise. In Q2, we rebranded GSI Commerce to its new name, eBay Enterprise. The new name best captures this business today, a commerce partner of choice for retailers and brands and it captures its role in our company. eBay Enterprise continued its success in Q2 by enabling its retail clients to grow faster than e-commerce. Same-store sales grew 19%. We feel very good about eBay enterprise's ability to deliver omni-channel solutions that leverage eBay Inc. capabilities. So in summary, our company had a strong second quarter and first half. And as we look at ahead to the second half of the year, we expect continued macroeconomic headwinds in Europe and Korea. Despite that, we still expect to deliver within the range of our guidance for the full year. We have a strong core business and we feel very good about our strengths and competitive advantages and global opportunities in the evolving $10 trillion commerce market. We remain confident in our ability to deliver the goal we have set for ourselves. Now I'll turn it over to Bob who'll provide more details on Q2 and our outlook.

Thanks John. During my discussion, I’ll reference our earnings slide presentation that accompanies the webcast. The first half was a strong start to the year and Q2 was another deposit on our multi-year plan. Total enabled commerce volume in the quarter grew 21% to $51 billion. Revenue was $3.9 billion, up 14% and non-GAAP EPS was $0.63, up 12%. User growth accelerated 1 point for both PayPal and Marketplaces. We are maintaining our full year guidance, yet expect to be at the lower end of our range on both the top and bottom line. I’ll provide more context on this later. As we discussed at Analyst Day in March, we're expanding our addressable market, had a portfolio positioned to capitalize and lead and are accelerating our mobile leadership position and the rate of innovation in our company. As the strategic partner of choice for merchants of all sizes, we enabled $51 billion of commerce volume at a take rate of 7.7%. Our take rate has declined slightly as our faster growing business PayPal has a lower take rate. We enabled a $100 billion of commerce volume in the first half of the year with a growth rate in line with our three year plan. Now let's take a closer look through results from the quarter. In Q2 we generated net revenues of $3.9 billion, up 14%. Organic revenue growth was 15% with the divestiture of rent.com in the second quarter last year decreasing growth by approximately half a point. Second quarter non-GAAP EPS was $0.63, up 12%. Non-GAAP operating margin was 26.3%, down 100 basis points due primarily to a benefit from an indirect tax settlement in the second quarter last year as well as business mix. We generated free cash flow of $658 million in the quarter. CapEx was 9% of revenue primarily due to investments in search, data and site operations. Now let's take a closer look to our segment results. PayPal had a strong quarter. Revenue reached $1.6 billion, up 21% on an FX neutral basis. A few quick highlights on PayPal operational metrics. Total active accounts growth accelerated one point to 17%. TPV on an FX neutral basis accelerated three points and grew 25%, driven primarily by continued expansion at PayPal and merchant sites around the world and increase in share of checkout and 160 basis points increase in PayPal penetration on eBay. Merchant services FX neutral TPV grew 29% in the quarter. Transaction margin was 64.4% in Q2, down 190 basis points due primarily to large merchant mix and smaller gains on our foreign currency hedges. PayPal segment margins came in at 23% for the quarter, down 280 basis points due primarily to lower transaction margin and investments in consumer awareness, product initiatives and merchant ubiquity. Let me touch on a few quick highlights for Bill Me Later. BML had a good quarter and is becoming an increasingly important component of our overall portfolio. BML had strong standalone financials with TPV of $934 million, up 34%. BML's penetration as a funding source in the PayPal wallet was 4.1% share on eBay in the U.S. and 1.8% on merchant services. This penetration improved PayPal's funding mix and helped to reduce overall funding costs. We continue to finance the BML loan receivable portfolio using offshore cash which has enabled us to increase the return on this asset. Overall, BML continues to perform well. Now let's turn to Marketplaces. Marketplaces had a strong quarter with net revenues of $2 billion, up 10% on an FX neutral basis. Revenue growth was negatively impacted by two points from lapping a onetime gain from an indirect tax settlement. Growth was driven by FX neutral transaction revenue growth of 10% and marketing services revenue growth of 12% from our adjacent formats. A few quick highlights on our Marketplaces operational metrics. Active user growth accelerated to 14% driven by mobile, site enhancements and emerging markets. FX neutral non-vehicle GMV grew 13%, driven primarily by improvements in the customer experience, mobile and strong performance in the auto parts and accessories and home & garden categories. Sold items increased 11%. The growth was pressured primarily by tougher comps in Korea from low ASP categories added last year and stricter seller standards in China. Take rate, excluding vehicles, Stub Hub and the onetime benefit from indirect taxes was down slightly from last year due to higher promotional activity in our international markets. Marketplaces segment margin was 39.7% in Q2, up 10 basis points primarily due to productivity partially offset by investments in the user experience and trust. Now let's turn to eBay Enterprise. eBay Enterprise continues to deliver on its goal to enable its clients to grow faster than ecommerce market with 19% same-store sales growth. Revenue for Q2 was $246 million, up 11% driven by strong volume growth offset by a lower take rate and channel mix. Segment margins came in at 4.4%, down 30 basis points due to take rate reductions partially offset by productivity. Turning to operating expenses. In the second quarter, our operating expenses were 43.5% of revenue, down 110 basis points. Operating expense was down due mainly to lower sales in marketing from improved marketing efficiencies and a shift in spend to product and user experience, partially offset by provisions for transaction loan losses resulting from higher loss experienced in the quarter and investments in marketplaces trust initiatives. We ended the quarter with cash, cash equivalents and non-equity investments of $11.7 billion, including approximately $3 billion in the U.S. We've improved our financial flexibility, funding 65% of the BML loan receivables portfolio with offshore cash in the quarter. And we repurchased 8.5 million shares of our common stock for approximately $466 million. With that let me turn to guidance. First, a little context on our business outlook. First, the macro environment in Korea is weak and Europe is slower than we expected, impacting both PayPal and Marketplaces. Second, currency has continued to deteriorate through the first six months of the year and we have greater headwinds as the U.S. dollar strengthen versus the Euro, Pound, Australian Dollar and Korean Won. And third, we expect tax rate to be approximately 19.5% at the high end of our previous guidance due to less contribution from our international businesses. Notwithstanding these, we expect to be within our previous full year guidance. But anticipate being at the lower end of revenue and non-GAAP EPS of $16 billion to $16.5 billion and $2.70 to $2.75 per share. We expect modest revenue acceleration from the first half of the year to the second half. For the third quarter, we expect revenue of $3.85 billion to $3.95 billion, representing growth of 13% to 16%. And we anticipate non-GAAP EPS of $0.61 to $0.63, representing growth of 12% to 15%. In summary, we feel good about our performance. Our core businesses had a strong quarter and we continue to test and learn in our adjacencies and see such as local, global and omni-channel. PayPal continues its strong growth with increasing focus on simplifying and improving the customer experience. Marketplaces is strong, particularly in the U.S. driven by investments in buyer and seller experiences. And eBay Enterprise is performing in line with our expectations as we continue to invest in technology and growing the client portfolio. We are investing in our business for the long-term and we are focused on delivering the next generation of global commerce and payments capabilities. And now we'd be happy to answer your questions. Operator?

(Operator instructions). And our first question will come from Colin Sebastian with Robert Baird. Please go ahead. Your line is now open. Colin Sebastian - Robert W. Baird: Obviously PayPal generated very solid growth in transaction volume. But one follow-up in the segment margin, the sequential decline from Q1, is this reflective of the offline payment service kicking in? And wondering how you’re tracking towards the yearend goals in terms of adding merchant acquirers and retail allocations for this initiative?

Thanks Colin. Yes, the PayPal segment margins are consistent with our historical trends where first quarter and fourth quarter tend to be the higher segment margin rates and Q2 and Q3 tend to be lower. And it's more a function of the investments that we're making around ubiquity in the online and omni-channel world, on investments we're making in the consumer product more than anything. The second thing is, as you see on a year-on-year basis transactions margins were down and that is more a function of a higher take rate last year versus this year as our off eBay growth accelerated. Our large merchant expansion is improving. And then as you know, Colin, the impact of hedges flow through the PayPal revenue line in our gains this year -- this quarter were a little less than last year.

And then on point of sale progress, it's marching along pretty much as we outlined in March, with PayPal here as the smallest merchant and continuing to grow. And now the (inaudible) being released in the UK and soon to the other countries. Our Discover partnership is now live and I think we have roughly a quarter million locations and we continue to sign direct point of sale merchants. As I mentioned earlier, Radioshack being the latest. So we are going to continue to march our way out to build over the next 2.5 years, build out ubiquity.

Our next question will come from the line of Douglas Anmuth with JPMorgan. Please go ahead, your line is now open. Douglas Anmuth - JPMorgan: I just wanted to ask if you think that anything fundamental has changed in your business since the investor day four months ago. How do you get comfortable with the international softness in Korea and Europe in particular being macro rather than competitive or something more fundamental? Thanks.

Yeah, Doug, we don't really see anything fundamental in the last 90 days other than what both Bob and I commented on, which is the external environment is a little bit softer in a couple of geographies versus what we anticipated at the beginning of the year. We came into the year feeling like the U.S. economy and e-commerce market was going to be solid. And I'd say it's performing probably at or maybe even a little bit better than we would have guessed. We came into the year thinking Europe was going to be, while it was going to be weak it was going to be kind of stable. And what's happened in the first six months of the year is you read the same things we do, that the Eurozone may actually contract this year. Retail is down in both Germany and the UK. And what's a little different this year than the past couple of years is ecommerce growth rates are also coming down in the UK and Germany. And that last year ecommerce held up even and in spite of a challenging market. So, it's not massive but it's just on the margin, it's softer than we thought. And then Korea. Korea, the ecommerce growth rates have dropped by more than 50% year-over-year. They were almost 9%, 10% a year ago, they are at 4% now. And so as you know, we are reasonably weighted towards Europe, Germany and UK and Korea, and so those things are impacting our businesses in the area. But we are executing. We are executing on all the initiatives and all the plans we discussed at our Investor Day. And as we said earlier, in spite of those headwinds we still feel good about how we're executing and performing and expect to come in within our full annual guidance range.

Hey, Doug, the only thing that I would add which is a fundamental change, not in our business per se but in the environment in which we're operating. Obviously, we're a very global business and international currencies relative to the dollar from beginning of the year are weaker by a little over 4% and from the March, April timeframe weaker by a little over 3%. So, obviously that's not a fundamental dynamic of the business that we operate, that is a dynamic of being a global business exposed to global currencies and that clearly has an impact on us.

Our next question will come from Heath Terry with Goldman Sachs. Please go ahead, your line is now open. Heath Terry - Goldman Sachs: John, just kind of curious, we've now seen over five quarters of accelerating growth in users, particularly Marketplaces, and historically that's had a pretty direct impact on other metrics within the business whether revenue growth or GMV. Is there anything that you are seeing that's sort of different about these incremental users that are coming in now? Are they activating at a lower rate, are they spending less either for geographic reasons, or is there any other sort of context that you can provide around when you expect to see that accelerating user growth translate into the rest of the business?

Yeah. Well, Heath as you said, and actually both Marketplace and in PayPal we've now got I think four and five straight quarters of accelerating double-digit active user growth, and I feel thrilled about that. You recall a couple of years ago, people were asking, when are you going to start marketing to new users and we waited till we felt like our user experience deserve that. And so really ever since Devin came on Board, he’s made this a real focus in the Marketplace business. And what's driving the acceleration of new users is really three things. One, it’s just by a simple and improved user experience and the word of mouth that goes along with that. Two, mobile. Almost 30% of our new users in the second quarter came from mobile. And so that's a way we're relevant to someone on the spot when they want to trade. And then third, BRIC and emerging markets and frankly how much of the BRIC and emerging markets is also registering on mobile. And so these new users they’re in segments we really like. A, they tend to be -- mobile users tend to be younger. So we like that. They may have less disposable income, but they are younger and we love the lifetime value. And the BRIC and emerging markets, new users are people that we are just coming into the global commerce environment. And again they tend to skew a little bit younger and a little bit -- they tend to start with a little bit lower ASP. So we’re very glad to be rolling into these segments. And now we're working on increasing both frequency and our ASP with each of the segments to convert them into long term users. And it's still early to tell. We have something we called class curve which are maturity curves of each new cohort of new user. It's still too early to tell if there is any fundamental difference of the slope of those class curves that are a mobile user or a BRIC or emerging market user. But what we like is they’re in segments that we think are fundamentally important and strong segments for our business over the medium to longer term. So I view it as very positive development.

Our next question will come from Youssef Squali with Cantor Fitzgerald. Please go ahead. Your line is open. Your question please. Youssef Squali - Cantor Fitzgerald: Bob, can you just go back and maybe help explain what drove the declining growth in FX move from Marketplace revenue to that 10% you talked about earlier. This is the lowest we’ve seen in about five or six quarters. I think you spoke to some tax settlement I think 200 basis points related to tax. So maybe you can talk about that. And then can you also make -- I guess as you talk about eBay or as you comment on eBay now, can you just make that business breakeven on the current $5 offering? Or how should we be thinking about it? Is it just more of a transaction accelerating overtime?

First Marketplace revenue deceleration Q1 and Q2 was 13% to 10%. The biggest driver of that was you may remember last year, Youssef, we had an indirect tax settlement in one of our international businesses that was [that] oriented, therefore it went to the revenue line. So that item itself contributes to 1.5 points of deceleration. The second thing is what I'd characterize as promotional activities and they came in two ways. One, in our Korean market more directed coupon orientation, which is more of a constant revenue. And the second was this second aspect of promotional activities is things we were doing in some of our European markets to stimulate the supply side of economics that were getting more selection on the side if you will. So those are the two primary drivers. 13 goes to 10 primarily driven by indirect tax settlement from a year ago that we talked about and things we do to stimulate promotion in both Korea and European markets.

And then, Youssef, on eBay now, what this is really proving and I think it's been ahead of what I would have expected, it's proving that consumers like choice. They like to have the option of when they want something delivered to them, same day if they like that. Interestingly we've been doing it within an hour time window pretty consistently in the three cities we've been doing it. And they like that but they also would like the ability to schedule at some point in the afternoon and so we'll be driving towards that. Retailers like it because it's leveraging their stores as performance centers. And our focus to date has been building a great consumer experience. Where so that -- and I think that's one of the things that's distinguishing our pilots from other pilots right now, is if you talk about consumers that have used it, it works and they like it. Now if you think about rolling it out, and we've announced we'll be going in addition to the three cities to Chicago and to Dallas, we'll begin experimenting on two things. One is driving more scale. One of the things that we have inside the eBay marketplace is we have a fair amount of local transactions where a buyer and seller happen to be in the same city. And so now we'll be exposing those so we can begin to build more density within those cities. And we think we are probably the only people around that with the eBay marketplace volume and the retailer volume we can aggregate in a given city to have the most compelling economics on behalf of pulling multiple retailers together. And then we will experiment with other delivery approaches including taking more of a marketplace approach to delivery, where we have vetted delivery drivers and use, what I might call an uber-like approach to the delivery side. So we think this can be an effective way to offer consumers choice and allow merchants to use their stores as performance centers.

Our next question will come from Sanjay Sakhrani with KBW. Please go ahead, your line is open. Sanjay Sakhrani - KBW: I guess I had two questions. First, I was just wondering if you could talk about where the ongoing risks might be to your current guidance and perhaps where you might feel you're conservative in your outlook. And then second, I was wondering if you could talk about some of the leaked proposals in the FT last night for Europe and how that might impact PayPal. Specifically, I was just wondering whether you guys have seen any competitive pressure on your cross-border fees as a result of those rates going down for Visa and MasterCard.

Sanjay, on the first part of your question. Right now, I'd characterize our second half outlook and our outlook for the full year is fairly well balanced. I think what it incorporates is kind of the three things we know today. The U.S., we'd characterize the U.S. macroeconomic environment and our business to be performing well. Europe macroeconomic environment to be not so good but we feel like the actions we've taken are okay, and international and Korea in particular is a high risk but we think we've factored that into our second half outlook. In terms of conservative, look if the European market accelerates we will all feel great, but we're not counting on it. In currencies, I think we've in essence captured spot into our guidance both on the top and bottom line. With the bottom line fairly well hedged, top line obviously will be impacted. So it incorporates kind of our best view about what's transpired through the first six months of the year and how we see the second half playing out.

Sanjay, on your second question, I make it a general policy not to comment on leaked draft plans. That said, anytime something good comes out, we look at it. And we will, as it evolves for the long haul, we will assess it. But there is nothing -- there is nothing official as yet.

Our next question will come from Ron Josey with JMP Securities. Please go ahead, your line is open. Ron Josey - JMP Securities: So I want to ask on Cassini which I believe rolled out North America in June at some point. I wanted to see if you are seeing any benefits, I know it's relatively early but see any benefits or lessons learnt since roll out. And specifically, what you are expecting from Cassini maybe increased conversion rates, maybe in the back half of the year. Thank you?

Yeah, Ron, Cassini represents two things for us. One is the next search platform which we can continue to innovate on. So actually the current user functionality, which I'll describe in a minute, is great, but what's probably as important is it gives us the foundation for the next couple of years to continue with series of iterative search improvements. The search improvement that’s coming in its first rollout is simply indexing the entire listing instead of just the title, which does two things. One, it improves the quality of the search result and it reduces our no searches or zero result searches. So we’re seeing both of that. As with any search change, when an ecosystem as large as ours that when you initially do it, it test negative and then you work hard to get it back to positive or neutral and then you hope to get some positive benefit out of it. And we now think it's in the modestly positive category. I've said this before I'll say it again. Cassini itself is not going to create any discontinuous positive benefit any more than any other search change we've made in the last few years. It's really the combination of Cassini, of other search or user experience changes, of trust changes, of pricing changes that is the combination of those things that we think will drive the positive growth. And so while I’m very proud of it, I don't want people to overly isolate it or focus on it because that's just not -- it’s not how our ecosystems worked over the last five to six years and it's not going to be how it works in the future. I wish there were silver bullets, but there seem to be none in our business. So a lot of our work and pulling lots of levers. But I will say that I do think we have more levers than we ever had to pull going forward.

Our next question will come from Ben Schachter with Macquarie. Please go ahead. Your line is open. Benjamin Schachter - Macquarie Research: A couple of questions. One, can you talk about the key milestones that we should look for in PayPal offline? How from the outside can we track the progress there? And then the second part, loan losses seems to be going up a bit more than we would expect. What do the trends look like here? How should we think about how high that can go? What does it look like a year from now et cetera? Thanks.

Ben, on PayPal offline, here is the way we look at this, which is mobile is blurring this boundary between what used to be online and what used to be offline. And we are looking at this as a significant opportunity to increase our addressable market over the medium to long-term and our investment horizon is over the medium to long-term. So as I look at it, we continue to leverage our strength on the web and we’re the leader there and our MS TPV numbers reflect that. We're continuing to leverage our strength in mobile. And in some cases mobile is adding what you might call a digital shopping experience. In other cases mobile -- even in our current results, is something you could have said what used to be an offline experience. So take something like eBay now. When you use eBay now, you're paying with PayPal. That's in essence for our "offline transaction." It's just not happening in a store. And the same thing is happening now in Australia and in the UK, where we're out using PayPal as way to pay in over 2,000 cafes and restaurants in Australia and now in some cinemas and taxis and places that might have been characterized as offline, but now via a mobile device consumers can use PayPal to pay. The more future-oriented area which is more Greenfield is using PayPal to pay inside a classic physical retail store. And that's --- what we're doing there is doing just what we talked about in our Investor Day which is building out your (inaudible) over to the next two, three, four years and then trying to serve or develop and solve customer pain points. PayPal has never been about just replacing current payments mechanisms by trying to do same thing. It tries to solve customer pain points. And so we are standing in line as a customer pain point. So we’re trying to solve that. Waiting for a check in a restaurant is a customer pain point. We're trying to solve that. Merchants are looking to strengthen their connections with their customers by allowing easy access to loyalty programs or offering coupons or offers while they’re in the store or enabling private label cards. And so we're driving our product roadmap to enable those kinds of experiences. And we’ll begin experimenting with those in different retailers in different geographies around the world. That last category I'd characterize as more Greenfield and that's why in our three year numbers we put some of the things that are more certain in the numbers and a lot of the less certain things. We said we can't estimate exactly when we'll get consumer loss in any attraction, so we didn't put them in our three year numbers.

Ben, on your second question. First I'd say, and as you know we use Bill Me Later as a product and a vehicle to drive more engagement on our -- for merchants on and off eBay. And we do that in essence of lowering our processing cost and using our offshore cash to generate higher returns. That's how we use the product offering. In terms of how we leverage our risk management capabilities to make credit decisions, what we are trying to do is generate portfolio economics that generate a 14% to 16% return on net asset deployed. And in essence what that means -- and that's kind of where we've been for a long time. Sometimes we take a little more calculated risk which will drive up net charge-offs at the same time it usually results in higher revenue. So, net charge-offs have gone up a little bit. We are at the high end of our 14% to 16% risk-adjusted margin range and we feel pretty good about where we are. If I were to project forward I think we'll stay within the 14% to 16% range in the foreseeable future and I expect net charge-offs to levelize, stabilize a little bit in the next six to 12 months.

Our next question will come from Gil Luria with Wedbush Securities. Your questions, please. Gil Luria - Wedbush Securities: In terms of how you're rolling out the improvements to marketplace. I think when you started with the first set of improvements 3, 4, 5 years ago, you wrote some of those internationally and then brought them to the U.S. and that's when you saw the big impact. Are you doing the opposite now? Are more of the changes happening now in the U.S. to be rolled out later internationally, and if so, what's the timeline for that?

Yeah, Gill, frankly, what's really happening now, back then we were putting them in a market that we thought was most specific. And then that happened to be the UK in many cases we rolled back to the U.S. Now, frankly, we've got many in the U.S. we've got some other things internationally. So something like Cassini, we've rolled first in the U.S. and now we'll roll it out more internationally. There is some other trust and other innovations we might try in a country and roll back. The short answer to your question is, and it may be an unsatisfying one but it's the truth, is all of those things are contained in the growth rates we put into what Devin talked about it at analyst day. And I don't see anything that's discontinuous, where there is something that's significantly proven in region one and when we roll it out region two, it will do a significant bump. We do have a number of things that we will roll out in Europe and in the international markets in the second half and really into the first half of next year. And we have a few things on the trust front that are happening in other countries will roll back into the U.S. But I'd again, I would message a fair amount of steadiness as those things roll out. And we're getting better I think at the rolling out, because we don't like discontinuous things up or down and we try to avoid them. Gil Luria - Wedbush Securities: Then a quick follow up. You talked about the fact that your assumptions about Europe and Korea have you gotten worse from three months ago. Have your assumption in the U.S. gotten better from three months ago and are you assuming further improvement for the second half of the year for the U.S. consumer or the same behavior that we're seeing now.

I would say no change in the U.S. from where we were three months ago but at the same time back in -- we told you back in April that from where we were in January, that U.S. was a little bit better and Europe was a little bit weaker. And I think no real change from those dynamics from April as it relates to the U.S.

Our next question will come from Mark Mahaney with RBC Capital. Please go ahead, your line is open. Mark Mahaney - RBC Capital Markets: Two quick questions at the investor day earlier this year, you did bit of a deep dive into the Russia market. Any quick update there, and then secondly any updated thoughts on uses of cash for share buybacks and just remind us how much of your current cash is domiciled in the U.S. Thank you very much.

Mark, on Russia, I'd say nice progress in the first half of this year and that really, I guess it was December in first half this year when we got our PayPal, or in essence domestic payments license. And then second we've launched our Russian language site, I think end of the first quarter, beginning of the second quarter. And we actually ran some TV advertising in Russia, which turns out to be fairly economic during the second quarter. And we're seeing nice growth rates in our Russian business. Obviously it's all import business. We're continuing to work on how do you really make it easier to ship into Russia. But we're seeing very nice growth rates in our Russian business and we believe we continue to be the largest B2C seller in Russia.

The number one player and growing. Mark, on your second question, just about $11.7 billion in cash in total. About $3 billion of that $11.7 billion is here in the U.S. And philosophically in terms of deployment, no real change. Organic investment, number one priority, Bill Me later loan portfolio growth, the biggest consumption. We'll continue to be acquisitive as a company. And then on share repurchase we basically have for a while now the philosophy to offset dilution from our comp based programs. And we expect that to continue in the second quarter. What that meant was we bought back just about 8.5 million shares at $466 million.

Our next question will come from Ross Sandler with Deutsche Bank. Please go ahead, your line is now open. Ross Sandler - Deutsche Bank: Just two quick questions. John, you guys have talked about the clocks speed initiative for Marketplaces where you can now ship new product I think once or twice a week versus once every six months a few years ago. So I was just curious, what's the equivalent clock speed initiative looking like on the PayPal side? How quickly are you guys able to ship new innovations either on the merchant or the consumer side for PayPal? And then Bob, you guys did the small Belgian classifieds acquisition. Any revenue or expense included from that in the second half guidance? Thanks.

Ross, on clock speed, what enabled that was the hard work that Mark Carges led over the last really three to five years to re-platform the Marketplace’s core technology platform initially with the search platform and frankly continues to rev 2.0 of that. And then it was other elements of the Marketplace technology platform that then enables more iterative rapid innovation. And I'd say PayPal’s three years behind where Marketplace was. So we really just began what I’d call fundamental re-platforming effort in PayPal last year and we're a year into it. And some of the new features, we're shifting around the new stack and that new stack is more robust. It allows more iterative and faster approach. But it's going to be a three year slog to work our way through the PayPal re-platforming. I wish I could make it go faster, but we can't and more resource doesn't make it go faster. So the good news is the PayPal team is on the same path the Marketplace team was. And you’ll begin to see some benefits I think next year in PayPal's clock speed in certain areas with those features and things and they are on the new part of the stack will increase clock speed. But it's over the next three years that I think you'll see the significant acceleration in clock speed in PayPal that we're now seeing and enjoying in Marketplace.

Ross, on the Belgian acquisition, yeah we just announced and closed that a week or two ago. Rest assured every bit of the revenues reflected in our guidance and it's not material.

Operator, we have time for one last question.

Understood. Our final question will come from Stephen Ju with Credit Suisse. Please go ahead. Your line is now open. Stephen Ju - Credit Suisse: So Bob, just to build on your earlier comments around the decrease in the Marketplace’s take rate. I guess that should take on more promotional activities and this seems to be arriving in conjunction with the decrease in the overall marketing spend as a percentage of revenue. So should we view this as a more deliberate shift in your marketing mix? And has your take rate or is this a security ROI driven temporary shift fact?

I think the general theme of us continuing to pull a variety of different levers to stimulate user growth and engagement on the site is something that you've seen for a while, and I think you should continue to -- you will continue to see. I think more specifically for the quarter, what that's meant for the last couple quarters is while we've increased our sales and marketing spend overall as a percent of revenue, it's come down i.e. we've gotten more efficient in it in higher returns. But we're investing more on products, innovation R&D. We're investing more in buyer protection that flows through the eBay guarantees. And we continue to pull levers on contra-related spend and take rate related dynamics that stimulate the supply side of the ecosystem. So I think you're going to continue to see us play with the different levers in different markets to stimulate engagement and demand.

Okay, I think that's it. Thanks everyone. We'll see you next quarter.

Thank you presenters and thank you ladies and gentlemen. Again that does conclude your eBay's second quarter 2013 earnings conference call. You may now all disconnect and have a wonderful day.