Selim Freiha – Vice President of Investor Relations Devin Wenig – President and Chief Executive Officer Scott Schenkel – Chief Financial Officer

Richard Kramer – Arete Research Colin Sebastian – Robert W. Baird Heath Terry – Goldman Sachs James Cakmak – Monness, Crespi, Hardt Eric Sheridan – UBS Justin Post – Bank of America Merrill Lynch Douglas Anmuth – JPMorgan Mark May – Citi Scott Devitt – Stifel

Good day, ladies and gentlemen, and welcome to the eBay’s Fourth Quarter 2016 Earnings Conference Call. At this time, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session and instructions will be given at that time. [Operator Instructions] As a reminder, this conference call maybe recorded. I would now like to turn the conference to Selim Freiha, Vice President of Investor Relations. You may begin.

Thank you, operator. Good afternoon. Thank you for joining us and welcome to eBay’s earnings release conference call for the fourth quarter of 2016. Joining me today on the call are Devin Wenig, our President and Chief Executive Officer; and Scott Schenkel, our Chief Financial Officer. We’re providing a slide presentation to accompany Scott’s commentary during the call. We have also included a structure data update in the appendix. All revenue and GMV growth rates mentioned in Devin and Scott’s remarks represent FX neutral year-over-year comparisons unless they clarify otherwise. This conference call is also being broadcast on the Internet, and both the presentation and call are available through the Investor Relations section of the eBay website at investors.ebayinc.com. You can visit our Investor Relations website for the latest Company news and updates. 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 related to our performance. You can find the reconciliation of these measures to the nearest comparable GAAP measures in the slide presentation accompanying this conference call. In addition, management will make forward-looking statements 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 the future performance of eBay Inc. and its consolidated subsidiaries, including expected financial results for the first-quarter and full-year 2017 and the future growth in our business. Our actual results may differ materially from those discussed in this call for a variety of reasons. You can find more information about risks, uncertainties and other factors that could affect our operating results in our most recent Annual Report on Form 10-K and subsequent Quarterly Reports on Form 10-Q, copies of which may be obtained by visiting the Company’s Investor Relations website at investors.ebayinc.com or the SEC’s website at sec.gov. You should not rely on any forward-looking statements. All information in this presentation is as of January 25, 2017, and we do not intend and undertake no duty to update this information. With that, let me turn the call over to Devin.

Thanks, Selim, and good afternoon everyone. Quarter four was a record quarter for us, highlighted by solid performance in our eBay business, which benefited from a strong market over the holiday season. Overall, total GMV was up 5% year-on-year, revenue was up 6% and active buyers grew to 167 million. GMV on our Marketplace platform grew at 5% year-on-year, one point growth acceleration while revenue grew at 4%. Our StubHub platform grew volume at 5% and our Classified platform grew revenue at 13%, another quarter of double-digit growth. Finally, we repurchased $1 billion of our shares, taking advantage of share price that we do not believe reflects the long-term value of our company. On our Marketplace platform, volume growth accelerated by two points in the U.S. while international growth was stable. This holiday eBay was one of the top shopping destinations for consumers around the world and was the second most visited ecommerce site in the U.S. We enabled over $5 billion of GMV in the U.S. and over $14 billion globally in this period alone. Performance this quarter was driven by a strong external market and initiatives that enabled us to extend the holiday shopping season later than in past years. Looking at our key verticals, we saw particular strength and fashion, home and garden and collectibles and stable growth in electronics and auto parts and we continue to see benefits from some of ou key strategic priorities including mobile, C2C in our brand. Let me touch on these areas in a bit more detail and give you an update on our structured data initiative. Our mobile platform growth continues to reaccelerate driven by ongoing improvements we’re making to the customer experience. With the launch of our 55 update in October, our app reviews are the highest they’ve ever been. Customers are responding positively to these improvements leading to a three points of marketplace mobile growth acceleration in Q4. Our C2C business is recovering and Q4 was the first quarter of positive C2C growth in nearly three years. Our efforts around simplifying the experience and tailoring pricing in markets like Germany help to drive positive results. We also began expanding our early integration of marketplace inventory into our Classified’s platforms in several new markets. From a brand perspective, we advertised on TV this quarter for the first time in two years, building on the work we did earlier this year to clarify our brand messaging. While it’s very early in our mission to sharpen and amplify the eBay brand, we saw good traffic growth from new eBay users in our key markets, which is a positive early sign. Finally in our structured data initiative, we grew listings processed to 55% in Q4 up from 48% in the prior quarter. This progress has enabled us to add nearly 60 million unique products to our catalogue this quarter. Users have now generated more than 20 million product reviews in total and we have over 180 million structured data pages live on the site. Despite not aggressively pushing expansion in this holiday quarter, these pages continue to gain share of traffic, now up to 15% of SEO traffic and 4% of total eBay traffic in Q4. Our StubHub platform continues to be well positioned as a leading global ticket marketplace. Q4 was also a record quarter for StubHub with strong MLB and theater performance offset by lapping significant growth acceleration from last year and softer year-over-year NFL volume and a weaker concert landscape. Despite this quarter’s growth declaration, StubHub’s prospects in the U.S. and internationally remained strong. I believe we can continue to maintain our market leading position in the U.S. and our acquisition and ongoing integration of TicketbiS is driving significant international growth. Finally, our Classified platform continues to enjoy double-digit growth with particular strength in key verticals such as motors and real-estate and key markets like Germany, Canada and the UK. Taking a step back and putting Q4 in the context of the full year, we have made great progress against our key strategic priorities to drive the best choice, the most relevance and a powerful selling platform while clarifying the eBay brand. This strategy is the foundation that will enable us to transform the eBay experience and build a more resilient and differentiated business over the long-term. To drive the best choice for our consumers, we have adopted a retail focused mindset to more actively managing inventory and marketing around key retail moments. We have also launched key integrations with several partners including inkFrog and BigCommerce enabling a broad set of small and medium sized merchants to scale their businesses on eBay. Sellers are responding to our efforts by bringing more relevant inventory into our marketplace and we’ve seen accelerating growth in the number of business sellers on eBay throughout 2016. Delivering the most relevant shopping experience is built on our structured data re-platforming effort. On the back of broadening the coverage of structured data throughout the year, we have built and are just beginning the rollout of new consumer experiences that are modern, simple and most important differentiated. By understanding our inventory, we better understand what products to show our consumers and highlight the incredible price and selection advantages that eBay often provides across categories and our product experience is better reflecting our brand promise to enable everyone to find their version of prefect. We have made a number of platform improvements aimed at building a powerful selling platform including launching and scaling our Seller Hub product and releasing a revamp set of seller APIs. We have also made improvements to our listing flows and simplify the consumer selling experience. And finally, we sharpened our brand message, which has enabled us to start shifting our marketing spend up the funnel with new social and owned media and our first TV advertising campaign since 2014. We have delivered against our financial commitments with full year revenue and EPS above the expectations we set coming into 2016 despite FX headwinds. The strong revenue performance also enabled us to invest more significantly in our product and technology, planting seeds in the areas of AI and machine learning that will provide the foundation of our future. We have returned $3 billion to our shareholders through share repurchases at favorable prices, monetized $1.4 billion stake in Mercadolibre and made a series of acquisitions to strengthen our capabilities. Looking forward to 2017, our strategy remains unchanged. We intend to drive even more progress against our key objectives and this is reflected in our guidance, which implies meaningful growth acceleration in our marketplace platform. As we stated previously, repositioning our business is a significant undertaking and it will take time and it is not without risk, but we do believe we are on the right path. We will focus on delivering the best choice by attracting more brands and the right inventory to our platform. In 2017, we plan to deliver a series of enhancements to several of our key verticals beginning with some really exciting improvements to our auto parts buying experience. And we will focus on driving more trust for our consumers by launching a new authentication service later this year. We expect to see a large number of changers in our user experience this year, having built a strong foundation of structured data to support our product efforts. We drove broad coverage globally on branded inventory through 2016 and with the critical mass of listings covered and persistent pages now available. Our focus will shift towards improving the product and integrating our new experiences further into the core of the eBay shopping funnel. We will do this in a smart way minimizing disruption to our platform as we progress. Now, while expansion of listings coverage will continue this year, we’ve chosen to introduce the next phase of coverage for unbranded and private label inventory on a voluntary basis in mid 2017. Our technology innovation efforts are focused on emerging computing platform shifts such as AI, virtual and augmented reality, distributed commerce and the internet of everywhere. The launch of eBay ShopBot was a great example of early AI innovation leveraging our personalization, image recognition and natural language capabilities. You can expect to see more technology driven innovation in 2017. And we will continue to make eBay a powerful selling platform by delivering enhanced tools and capabilities for sellers to improve their performance and to increase velocity. In 2017 we expect to provide our sellers with data and tools to more effectively manage pricing and promotions including guidance on inventory and demand. And a simplified returns experience. And finally, we plan to be more aggressive in marketing our brand. Pushing more of our marketing dollars up funnel to drive consideration and make eBay the shopping destination of choice. In summary we made significant progress in 2016, while we have more work to do on our multi-year journey to reposition our business. We expect 2017 to be a year of accelerating progress and significant change in our business. eBay has worked to create a market place that is inclusive, fair, fostered by global trade and empowered by small business entrepreneurship. These will be the key tenants of how we approach our business going forward. And while it is not yet entirely clear how global political or regulatory changes might impact our business, none of what we see on the horizon changes our strategy to deliver the best choice, the most relevant and a powerful selling platform. Now, let me turn it over to Scott, to provide more details on our quarter and on our 2017 guidance.

Thanks Devin. Let’s begin with Q4, performance starting on Slide 4, of the earnings presentation. In Q4, we generated $2.4 billion of total revenue, $0.54 of non-GAAP EPS, $484 million in free cash flow, and we repurchased $1 billion of our stock. Let’s start with Q4 active buyers on Slide 5. In the quarter, trailing 12-month growth was 3% year-over-year resulting in 2 million more active buyers. The underlying cohort dynamics show retained buyers at consistent positive growth driven by stable churn rates. Our re-activated buyers have also grown at a rate similar to prior quarters. And new buyer growth, while still negative is starting to see more favorable trends in the last few months. On Slide 6 in Q4, we enabled $22.3 billion of GMV, up 5%. By geography, the U.S. generated $9.1 billion of GMV, up 3%, while international delivered $13.2 billion of GMV, up 7% year-over-year. Moving to revenue, we generated net revenues of $2.4 billion, up 6% decelerating 2 points sequentially driven by 1 point of lapping last quarters VAT settlement and 1 point of lapping strong growth at StubHub last year. We delivered $1.9 billion of transaction revenue, up 6% and $519 million of MS, marketing services and other revenue, up 5%. Transitioning to our Marketplaces platform on Slide 8, Q4 GMV grew 5% accelerating 1 point versus Q3. U.S. GMV accelerated 2 points quarter-over-quarter to 3% and international GMV continued growing at 7%, both benefiting from a strong finish to our holiday season. And as Devin discussed improvements in mobile, C2C, and structured data. More specifically on structured data, we have processed 55% of relevant listings to date, while the total base of listings has grown 40% over the same time period. We have created 180 million structured data enabled pages, that are being surfaced through SCO which further accelerated in Q4, and now through organic channels. Total Marketplace revenue was $1.9 billion, up 4% year-over-year, a 1 point deceleration versus prior quarter. Transaction revenue grew 5%, inline with GMV and there was minimal impact to transaction revenue from promotional spend classified as contra. Marketing services and other revenue declined 1%, decelerating 6 points versus Q3, driven by a full quarter of comps from the PayPal operating agreement revenue as well as the shift from our advertising business from off-eBay ads to on-eBay ads. As a reminder, the PayPal operating agreement contributed roughly 1 point of growth to total revenue in 2016 and this will continue to be a headwind in the first half of 2017. For the full-year the marketplace platform generated $79 billion of GMV up 5% and $7.2 billion in revenue up 4%. Moving to Slide 9, StubHub GMV grew 5% decelerating 18 points from Q3 as we lapped the full quarter of the pricing display and product changes from 2015. In addition, we face some headwinds from a weaker event landscape in December. StubHub revenue grew 20% down 12 points versus Q3 driven by volume offset by revenue from the TicketbiS acquisition. In 2016 StubHub grew GMV 21% to $4.3 billion and increased revenue 30% to $944 million. Moving to Slide 10. In Q4, Classifieds had another double-digit quarter, growing revenue 13% year-over-year. Growth in the automotive and real estate verticals in key markets, strength in engagement metrics and improvement in mobile apps continue to aid Classifieds despite lower advertising monetization from the ongoing traffic shift to mobile apps. Our Classifieds platform continues to innovate and to serve the 250 million monthly unique visitors that come to our site, across 11 brands in 15 countries. For the full-year Classifieds generated $791 million of revenue up 15%. Turning to Slide 11 and major cost drivers, in Q4 we delivered non-GAAP operating margin of 31.9%, which is down 250 basis points versus last year. A stronger U.S. dollar negatively impacted margin by 170 basis points and was felt across all spend categories. So I’ll focus my comments on the operational dynamics of our expenses. Cost of revenue increased year-over-year driven by technology infrastructure investments related to growth in product and engineering. Q4 sales and marketing expense was down slightly in total as productivity, was partially offset by reallocations across channels and platforms to help fund our marketplace brand advertising efforts. As we have previously mentioned, we will continue to be disciplined about our marketing investments and we will optimize across all our channels to get the most efficient ROI, whether those channels are accounted for as contra revenue or expense. Product development was up from continued investments in our product experiences across all of our platforms. G&A expense was up year-over-year as operating leverage was more than offset by acquisition and disposition related costs. For the year, operating margin was 31.1% down 250 basis points. Foreign exchange impacted full-year margin by 160 basis points and the remaining impact was from incremental investments in product development and stand-up costs. Before moving to Q4 EPS, I wanted to highlight two topics, taxes and hedging. We are continually evaluating our legal structure in the way we manage and operate our platforms. During Q4, we began the process of realigning our legal structure, which is expected to continue into 2018 primarily impacting our international entities. We are considering many factors and evaluating this realignment including foreign exchange exposures, long-term cash flows and needs of our platforms, capital allocation considerations and the associated tax effects. As a result, of the initial stages of this re-alignment we recorded a non-cash GAAP income tax benefit of approximately $4.6 billion in Q4 to recognize a differed tax asset. The non-cash amortization of this deferred tax asset will significantly impact our GAAP tax rate going forward. But has no impact on our free cash flow or our non-GAAP tax rate. As we have discussed in the past, post separation due to hedge accounting considerations our revenue was fully exposed to currency movements. However our hedging program allowed us to economically protect net income, helping to reduce the 160 basis points of foreign exchange impact on 2016 operating margin by 70 basis points. Therefore the impact on net profit margin was only about 90 basis points. Re-alignment of our legal structure and U.S. GAAP considerations resulted in us to having to replace our existing hedging program with a new hedging program. Implementing a new hedge strategy required us to start unwinding the existing program resulting in a Q4 gain of $16 million from the termination of certain cash flow hedges. Beginning in the second half of 2017, we will start to utilize hedge accounting to protect revenue from currency movements, which is intended to reduce the volatility of our top line from foreign exchange. We will complete the transition of our hedging programs by the end of the first half of 2017. Turning now to EPS on Slide 12, in Q4 we delivered $0.54 in non-GAAP EPS, up $0.04 versus prior year, driven by revenue growth and the net benefit of share repurchases, partially offset by the impact of a stronger US dollar. In Q4, GAAP EPS was $5.31, up $4.88 versus last year. The increase in GAAP EPS was driven by aforementioned realignment of our legal structure, as well as the sale of our stake in MercadoLibre. As always, you can find a detailed reconciliations of GAAP to non-GAAP financial measures in our press release and our earnings presentation. On Slide 13, in Q4 we generated $484 million of free cash flow, inclusive of $272 million of cash taxes paid on the sale of our stake in MercadoLibre. As a reminder the proceeds from the sale are included in the investing activities on the statement of cash flows, while the cash taxes paid are included in the operating activities. Full year free cash flow was $2.2 billion. CapEx was 6% of revenue in Q4 and we finished the full year at 7%. CapEx was at the low end of our guidance range partially driven by the timing of some investments that we now expect to happen in 2017. Turning to Slide 14, we ended the quarter with cash, cash equivalents and non-equity investments of $11 billion, with $2.8 billion in the U.S. In Q4 we’ve repurchased 34.6 million shares at an average price of $28.93 per share, amounting to $1 billion in total. This brings our repurchases for the year to $3 billion and repurchases since separation to $4.2 billion or approximately 13% of the shares outstanding. We ended the quarter with $1.3 billion of share repurchase authorization remaining. As we wrap up the year I would like to remind everyone of our capital allocation policy which we believe strides the most value for our customers, shareholders and employees our policy is several key tenets including focusing on long-term value creation while making sure we offer the resources to execute our strategy driving growth while balancing profitability supplementing organic growth plans with disciplined acquisitions and investments, and optimizing financial flexibility, access to debt and cost of capital. Heading into 2017 these principles will continue to guide our capital allocation while there are many macroeconomic uncertainties we will be disciplined in our investments and potential acquisition and we expect to return capital to shareholders and a minimum of 50% of our pre-cash flow in the former share repurchase inclusive of the dilution offset. Before turning to guidance and like to highlight some changes in disclosure. First, in order to align our internal operations and how we talk about the business we have started reporting B2C and C2C growth and we will no longer report fixed price and auction format growth however we will continue to provide the format split on our website. Second, structured data will continue to be a critical enabler of our business as Devin mentioned the focus in 2017 will shift towards exposing our new experiences to more traffic and driving data quality to improve execution – conversion. While continuing to make progress on penetration of structured data, we will no longer be disclosing the operational input metrics of listings coverage and percent process. We will be providing quantitative updates and qualitative updates on output measures such as traffic and conversion. Moving to full-year guidance on Slide 15, we’re projecting 2017 revenue between $9.3 billion and $9.5 billion growing 6% to 8%. The midpoint of our projected growth assumes roughly two points of acceleration in the marketplace platform partially offset by the tougher comps for StubHub and PayPal operating agreement revenue. We expect operating margin of 29% to 31%% for the year widget the midpoint is roughly 110 basis points lower than 2016 due to the impact of a stronger U.S. dollar as well as incremental investments in product development and marketing. The increase product development cost investments will focus on our new shopping experiences C2C and enhancements to key verticals. We will also continue to invest in marketing, particularly brand advertising to grow our active buyers and do increase consideration in GMV. We are projecting non-GAAP EPS of $1.98 to $2.03 per share, up 5% to 8% as reported versus last year. The impact of the stronger U.S. dollar will cost is roughly six points of EPS growth. Finally, we expect non-GAAP effective tax rate of 20% to 21% CapEx of 7% to 9% of revenue in free cash flow of $2.2 billion to $2.4 billion. Full-year GAAP EPS is projected to be 120 to 140 per share GAAP EPS is impacted by the same drivers as non-GAAP EPS in addition to the amortization of intangibles stock-based compensation and the amortization from our previously discussed deferred tax assets. Turning to Q1 guidance on Slide 16. For Q1 we are projecting revenue between $2.17 billion and $2.21 billion growing 4% to 6% year-over-year, which at the midpoint is a one point deceleration versus Q4, due to leap year lapping. We expect non-GAAP EPS of $0.46 to $0.48 per share, representing negative 2% to positive 2% as reported year-over-year growth. EPS is driven by the net benefit of our share repurchase program and revenue growth offset by the impact of a stronger U.S. dollar and the lapping of a Q1 2016 insurance recovery. In summary, 2016 was a year focused on our strategy to provide the best choice most relevant and powerful selling platform to our users. While replatforming the business we said we would – growth would be constrained, but the investments in marketplace platform and marketing have already started delivering some benefits. Along the way we have remained disciplined capital allocators returning 3 billion to shareholders in the former share repurchases and realigning significant – and realizing significant gains from our investments in MercadoLibre and Snapdeal. We also executed several deals to further tech and talent and geographic expansion. Within the year our revenue grew 7% versus the 2% to 5% range we expected coming into 2016 and we levered 3% EPS growth in the face of foreign exchange headwinds an incremental investments. Heading into 2017 we will stay consistent in our approach executing our strategy delivering better experiences to our customers and returning capital to shareholders. Now we’d be happy to answer your questions. Operator?

Thank you. [Operator Instructions] Our first question comes from the line of Richard Kramer of Arete Research, your line is now open.

Thanks very much guys. Two questions about sort of longer-term strategy. The first one in the context of the user experience changes you mentioned Devin but also the global buyer base that you have how aggressively might you pursue growth in your advertising business in 2017? How much of that is a part of this reacceleration in marketplace? And second we’ve seen some of the other large marketplaces shift focus away from GMV and more towards sort of marketing services trying to help sellers be more successful on the platform maybe tapping into promotion budgets given some of the initiative you just laid out for 2017, could you see eBay getting reengaged in the sort of marketing services almost GSI type business that you want divested? Is there something that is now coming back into focus? Thanks.

Yes on the second it’s likely that we well have different forms of modernization including potentially different services but not if it involves software deployment. It was my decision ultimately to dispose of GSI and that platform in large part because we are an Internet company not a B2B software company and I just don’t think that’s the business we should be running. But if you look at what other marketplaces have done they’ve offered other services and I would never say never to that is not directly in our 2017 plan however advertising as. Is a good call out. We are very excited about our plan basically to continue the shift from third-party ads to first-party ads. What that means largely is that historically we’ve taken a large amount of our ads from third parties and that drove our users off of eBay to their experience we try to do that anyway that maximized the user experience, the buyer experience but increasingly we’re seeing good results from internal ads, ads from eBay sellers promoting their inventory in our search results and in other places on our site. And for us that’s a really, really good flywheel because keeps our buyers inside our marketplace, it allows us to create a new stream of monetization and it allows our sellers to buy up for promotional activities. So there’ll be a big shift in the direction this year. It will start to show up in 2017 but it is certainly part of our future plans to accelerate our advertising growth.

[Indiscernible]

Then maybe one quick follow-up.

Yes I was going to say just one.

And may be one quick one for Scott. Can you talk at all if you’re going to spend half of your free cash flow on buybacks can you talk about the priorities for the other half since it seems that you’ll just keep piling up cash if you don’t spend a bit more than that on buybacks.

I’d read the entire to capital allocation statement we’ve made. It’s only buybacks we return capital to our shareholders when we think we have excess capital and I think we’ve done a good job buying our stock back at prices that we don’t think reflects long-term value of the company, however, there’s no doubt that acquisitions will be part of what we do in 2019. It was a relatively small part of what we did in 2016 but we did a series of acquisitions. We extended StubHub’s business, we brought in Tech and Talent [ph] as you heard Scott say. Undoubtedly there opportunities we’re running the company to the long-term we want to keep adding to our capabilities and extending our breath and we have a very strong balance sheet and free cash flow. So you can expect us to invest in the business as you heard from Scott 7% to 9% of revenue. You can expect us to do acquisitions but we’re smart acquirers and where those – where we have excess cash above those two we will be aggressive about returning capital to shareholders like we were in Q4.

Rich may be to your other question. Just to point out something on promoted listings. We’ve been talking about promoted listings for over a year closer to probably 18 months and what we been talking about is a very nascent product that we’re experiencing with. The we launched it and started to scale it. And I think this year we have a lot of confidence that not only the tools that we are providing sellers to be able to use and bulk upload to be able to manage those promoted listings, but is that scales and scales across different countries as well we feel really good about that. But I’d like to just point out that won’t show up in MS now [ph] and so while it is effectively first party advertising the way you might think about it the way you account for it because ultimately you paid on a transaction that does end up and take rate in transaction revenue.

Okay thanks.

Thank you. Our next question comes from the line of Colin Sebastian of Robert W. Baird. Your line is now open.

Thanks guys. And it’s encouraging to hear about the acceleration of volume growth that you’re expecting in the year ahead. So related to that can we assume that you are still seeing similar benefits in the higher conversion rates from the new product pages and then how quickly should we expect you to ramp up the portion of traffic seeing the new pages from the 4% level Devin that you mentioned?

Sorry Colin. Thanks. We are seeing similar benefits so we’ve added a lot of pages we’re still building and deploying a lot of these new experiences and as I said in my remarks we’re up to 4% of traffic which is pretty small so the impact in the quarter is still been really – it’s hard to see given how small the traffic is. On the Edge and SCO we are still seeing the gains that we talked about the last quarter. There’s really been no degradation. As we experimented with moving those inside as you would imagine conversion rates goes down as I said last quarter also I think it one of the questions that I got I wouldn’t – if you multiply 10% conversion gains and the compounding effect of across the whole site the numbers would be monstrous. We don’t expect to see those type of conversion rates as we move the experiences into the core shopping funnel. They’re competing with much higher converting experiences like our search results as you would imagine but we are optimistic that these are really good consumer game changing experiences and we will be aggressive subject to we don’t want to disrupt the business. We think that 4% will grow quarter-by-quarter. You will begin to see it instead of me talking about it when you go on eBay you will begin to see these new structured data pages further in the core shopping funnel, whether it’s on the homepage or in search results or even in the view item. You will start to see the benefits of that. So we are going to be aggressive will do it intelligently. We’re seeing good gains and it certainly implicit in some of what we have talked about vis-à-vis acceleration of the core business.

Okay. And then maybe one quick follow-up related to the shift towards advertising. I guess should we make any influence from that in terms of changes in the commission or take rate structure of the marketplace? Thank you.

You want to take that?

Yes, no I don’t think structurally – what I would point to in terms of our overall take rate – if you point to the Q4 take rate as maybe a proxy. What you saw in marketplaces take rate specific to marketplaces is you always have the normal mix shift in the variability between what products are selling and sellers in countries et cetera. But what you saw was about a 7.6% take rate and about 10% – 10 basis points of the decline that was year-over-year was largely driven by pricing. And I would point towards some of the consumer pricing that Devin and I spoke about in our prepared remarks where we are experimenting and changing the way we incent consumer sellers to buy and sell on our site. And that is – that’s something that I think we’ll continue to see but whether that relates back to the overall advertising and a structural take rate shift I don’t think so.

All right, great. Thank you.

Thank you. Our next question comes from the line of Heath Terry of Goldman Sachs. Your line is now open.

Great. Thanks. So with the new disclosure particularly the decision to breakout B2B or B2C versus C2C, can you give us a sense given the broad spectrum of the type of sellers that you have on the platform how you are going to draw the line between B2C and C2C where you’re going to consider consumers that are either heavy sellers versus small businesses and how the incentive structure that you planned to put into place for consumer sellers potentially impact that. And then just on the take rate point can you give us a sense of what contra revenue – what level of contra revenue items promotions were used this quarter?

Sure. So a couple – obviously several points in there – a couple of things first let me start at the macro. The reason we’re switching again is it’s really the way we always try and talk to – and the way we run the business. And so instead of point it due to fixed price and options is a proxy quarter-to-quarter we just said look but be real clear about what is. And so when we look at marketplace specific B2C growth quarter – this quarter we were at 6% and that was flat with prior quarter. And C2C it actually accelerated by five points out of the negative to up to 3%. And so back to my comment on the incentives that we are driving for consumers, we feel like that starting – as well as some of the services that we are providing that starting to make nice impact. As it relates to quantification it actually depends by country whether you are qualified as a B2C or a C2C seller. In some countries to be B2C seller you must register, generally speaking the split is that 10,000 a year, all right. When you think about our overall GMV about 80% of our GMV is through B2C sellers that do over $10,000 a and the rest is 20% that’s less that.

All right, was there I forget, was there any other question in there?

No.

Okay, next question?

Thank you. Our next question comes from the line of James Cakmak of Monness, Crespi, Hardt. Your line is now open.

Hi, thanks. Devin, you use the word accelerate several times, just trying to understand we saw good traction in the first half of this year and but then the tone kind of did change to a more longer term turnarounds in the third quarter. Can you just explain kind of what happened in the last three months that gives you that much more confidence that things going to be as fruitful as the fourth quarter was. And then secondly, just can you remind us what the international cash balances versus domestic?

Scott will take that let me take the first part. I try to keep consistent in tone throughout the year. I know our stock prices has been volatility its been up and down. And I think sometimes it gets – my tone gets interpreted ex-post facto based on what the share price does. But honestly I’ve tried to – I think that our guidance and our performance has been relatively consistent. And we’re trying to do that now but I guess [indiscernible] in your question is less tone and just why you are giving the guidance you are giving. I mean look, the biggest contributor, there are some assumptions in our guidance. We saw good market in Q4 obviously we saw a good holiday shopping season and we’re counting on a relatively healthy consumer and a relatively strong season that continue. We’re hopeful of that around the world particularly in the U.S. where we saw two points of acceleration. And second is we have a lot of initiatives which we’ll bringing to bear and the things that are getting some traction, mobile is getting some traction. C2C is getting some traction we just started our journey on the brand, which we hope over time will improve traffic and new buyers. So I don’t want to be – we certainly don’t want to be giddy this is not without risks let’s be really clear we’re not growing how we want to grow even within this guidance we should – I want us to be growing faster, however, we always said this was a journey we never said it was going to be perfectly smooth quarter to quarter. We try to keep the tone level and that’s what we’re doing again I want to be super clear about that. And not get people hot, not get people cold. We are making progress that progress will take time it is not without risks but we’re happy with where we are and we’re on the right track. Scott, you want to just address the cash balance?

Look, we have $1.2 billion in international cash at this point and $2.8 billion in the U.S.?

Great. Thank you very much.

Thank you. Our next question comes from the line of Eric Sheridan of UBS. Your line is now open.

Thanks for taking the questions. Maybe two, one you call out investments on the product side – on the development side, wanted to get a little more granularity about what are those investments are they going to be lumpy or are they going to be relatively linear as we go into 2017 versus 2016. And then also on the deceleration you’re calling out from StubHub and the Classifieds business that’s actually better than we would’ve thought given the very strong growth we saw in StubHub in 2016. Any color you can give on what informed you give on the deceleration trends and how that worked into guidance? Thanks guys.

I will do the product and then Scott, can talk about the de-accel from StubHub and ECG. The product is largely people, headcount and engineering resource. It isn’t – it shouldn’t be lumpy. Most of the operating investment as opposed to CapEx is – it will scale through the year but it’s not I don’t think they are going to be big swings and peaks, its investment in people. We grown our product and development resource both through acquisition some of the tech and talent acquisitions we’ve done and organically we hired really good people. They’re clear about what they need to get done. And to me putting aside the cost and more on the impact which is where I’m very focused my goal is that today we’ve shown slides and there are 180 million pages out there. So we built these things they are real but because they are sitting at the edge more often than not when I meet with both customers and investors I have to show them what we’re doing. It’s not entirely clear when you just go to our site or you go to our mobile apps. By the end of this year, certainly our journey is not done. I mean this is a multiyear journey but you will be able to see it. There will be meaningful changes to our homepage there will be meaningful changes to our search results page, there will be meaningful pages to our browse pages. You won’t be able to miss that eBay is changing in 2017. And that’s where the investment is going. Scott, you want to take the de-accel?

Yes, so a couple of things, maybe first let’s step back and think about the long-term of these two businesses. We feel very good about both of these businesses, specific the Classifieds. Why they commented on the deceleration quarter-to-quarter, we did not anticipate a structural change in underlying growth of that business. That business has been mid to low – double-digits in the teens for the last few years and we expect that to continue. And so my comment there was more about quarter-to-quarter. There’s always going to be quarter-to-quarter comping dynamics in you and your growth dynamics that will explain but just structural as we think about it. Really for StubHub, this next year we’re going to have three, four quarters of pretty tough comps for the StubHub business but as we look towards the long-term and the efforts that we have going, not only in the product and the deals that we are doing there. But also in the international expansion. We’re very bullish on that business and when I’ve called out – pretty much every quarter that will be facing some degree of lapping to the tune of about one point from StubHub over the next year and we will update to each quarter in terms of how things are going. The other things I’d point it too, in terms of what’s putting some pressure on I called it out in the prepared remarks is the operating agreement. So we’ve got about half a point is little bit more than a point – little bit more than half a point of year-on-year lapping in revenue. And that will be about a point each quarter in the first half and then will be fully out of the lapping with operating agreements in the second half. That’s another dynamic that we are facing into. Underlying that what we’re telling you in our guidance is that marketplace we expect to accelerate two points year-over-year, one to two points year-over-year and that’s on the basis of all the things that Devin just talked about.

Just a final note on StubHub just remember also in addition to the lapping the wall that they created last year, its an events business. And there somewhat subject to the events landscape and on quarter four, it was a light concert lineup and that is what it is. The market position, competitive position is outstanding. We think that will continue but if they are not great events in StubHub obviously has that to deal with – that’s out of their control depending on who I’m about to insult this Super Bowl may not be the most exciting Super Bowl in the world we will see, I hope it is. But its things like that its StubHub can’t control but I worry about their market position and competitiveness which hasn’t changed.

Great. Thank you.

Thank you. Our next question comes from the line of Justin Post of Bank of America Merrill Lynch. Your line is now open.

Great. Since you’ve separated from PayPal we’ve been watching the margins and you’re guiding 29% to 31%. Are there any abnormal expenses this year that you’ll lack next year that might help with that besides FX or anything unusual? How do you think about it five years from now? And the second question, there’s been thoughts about border tax out there. Obviously you are a commission business, but how do you think something like that might impact volumes for eBay? Thank you.

Yes. Let’s start with the latter question first. Look, I think it’s important obviously everyone has questions, but we don’t know what the timing or implications or substance of any tax reform or border taxation might be; it’s very much in the air. That’s not to say that we aren’t modeling scenarios and looking at the impacts that we don’t know about yet, just trying to get a sense. So I think it’s a bit too early to comment or provide much clarity. I would just go to our model that you pointed out in your question. Our model is different than a traditional retailer or e-trailer. And say you would expected to have a little bit different dynamic on our underlying financials that if anything was done. How I think about it in the data points I point to we talked about in the past that CBT is a little bit less than 20% of our overall GMV, so that’s product going between borders that might be exposed to a – but there’s no single quarter in that number that’s greater than a third, right. So if a border tax was implemented there would be some considerations like replacement or cannibalization or other alternatives that get provided. And then there would be the border tax implication. So we will work through that as we get clarity. To your first point on margins, so 29% to 31% midpoint of 30% are there unusuals or structural things this year – this coming year? I would point to each quarter we try and be transparent with what goes into our results. Last quarter there was a VAT adjustment. This quarter there was an adjustment for de-designation of hedges due to the change in our hedging strategy. Beginning of the year there were other items. Are they material in any given quarter? They can drive a point. Is it structural in nature and something that we’ve included in our guidance? Yes, it’s in their. Is that long-term and structural? No. Devin, I don’t know if you want to talk about kind of the longer – how we think about the longer term structure though.

I’ve said consistently that just given the competitive nature of the industry we operate in, given the size of the industry we operate in, and given the opportunities, we try to balance investment and ROI, but I don’t look at the long-term margin play here, I don’t look at the margin of the business going up materially. In the face – in the last 12 months we’ve had one guiding principle which is increase the competitiveness of the business and in the face of an FX deterioration of the margin we’ve invested into that rather than try to hang onto a margin at the expense of our consumer – customer experience. So we will watch the margin very carefully. We’re not at all flippant about it. But we don’t wake up in the morning managing the margin. I’ve said that before and I want to be super clear about that. I wake up in the morning not hanging onto every bit of margin. I want to invest enough that we can build a differentiated competitive business with adequate growth in the long run. What is that mean? I think it’s too soon to tell. But I don’t think you should expect the margin to go up materially over the next several years.

And just a point on that. So for 2017 our margin – as I said it was 29% to 31%. That’s 110 basis points down versus 2016 and half of that is foreign exchange and the other half is the product development and the marketing investments that we talked about. So relatively small erosion year-over-year from investments that we are going to make – to drive the growth that we are committing to. And what we’ve said is we don’t wake up like Devin said but we will remain disciplined as we think about additional investments to make sure that those returns are good. And I think we’ve proven that we can do that over the last 18 months.

Great. Thank you.

Thank you. Our next question comes from the line of Douglas Anmuth of JPMorgan. Your line is now open.

Thanks for taking the question. You mentioned that conversion rates are essentially in line with the 10% you’ve discussed in the past, the increase is from structured data. Can you just talk about some of the key learnings you’ve had as you expose more pages, then also whether there’s any difference between desktop and mobile as that rollout progresses. And then, Devin, I think you also just mentioned about actively managing inventory more around key moments. Can you elaborate on that a little bit? Thanks.

Yes, just quickly. So, as I said the 10% is that about edges in SCO. Those numbers come down quite a bit. And when you compete with well converting search pages the conversion is similar right now to the non-structured data pages. So we have some work to do when we’re competing with our best converting pages. At the edge it’s 10% all the way into the hardest comps at zero and it’s kind of a spectrum as you move out from there. So we are still seeing gains but not all of it. As I’ve said consistently is 10%. That would be remarkable. And frankly, I’m really pleased that we are getting 10% even at the edge. I mean, if we even got – if we got anything meaningful even low single digits as we move into the core that will be a great lever to reaccelerate the business. So what did we learn – what we’ve learned as we need to be careful and we need to be focused about moving these hundreds of millions of pages into our core because 167 million people are using eBay today pretty effectively. So, that’s why we are being aggressive but smart about how we do it. The second part of the question was on managing inventory. So look, one of the great benefits of understanding your inventory which is really the uber purpose of doing structured data; is that we can start to manage inventory even though we don’t own it like a retailer. What that means is getting great guidance on what is in demand; what is our price versus our competitors; where do we have gaps based on, say, our search results. And we began the journey this holiday of stepping into those gaps, going out to sellers in real-time saying we need Apple watches or we need AirPods or we need whatever because it’s in demand or you’ve got your inventory on the site, it’s at too high a price, we need you to lower it and then we will promote it. We’re starting to be able to manage peaks and troughs. It’s not that we were blind on that it’s just that if you don’t know what you are selling it becomes impossible to action those retail moments. It’s increasingly the fog is lifting on supply and demand at those moments and that allows us to step into that to maximize the efficiency of the marketplace. I think your final question was just mobile desktop, not a lot of difference right now that we’re seeing on structured data pages.

Okay. Great. Thank you.

Yes.

Thank you. And our next question comes from the line of Mark May of Citi. Your line is now open.

Thanks. I appreciate it. Just a couple here. I think you mentioned about ramping up TV advertising at the end of the year for the first time in a couple years. I noticed that the active buyer growth was a little slower than in some of the recent quarters and the 2 million ads was kind of less than – a little bit less than what you added in Q4 of 2015. Just kind of wondering if you could talk a little bit about the dynamics that were driving the active buyer number that you reported in. Is that a metric that you also anticipate kind of accelerating throughout the year? And a question on the buyback commentary; if I’m reading it correctly, it looks like you’re kind of guiding for somewhere around maybe a little over $1 billion in buybacks for the year. You purchased – repurchased nearly $3 billion last year. Can you shed a little more light into why you’re guiding for such a slowdown, you just purchased $1 billion just in the last quarter alone? Does that have something to do with the limitations up until July and you are not really factoring in the second half potential activity or what? Thanks a lot.

Hi, Mark. I’ll take both of those. First off on the second one first. Yes, so the guidance as I said is a minimum of a $1 billion. The consideration for July is out there. It’s something that we’re thinking about. And the way I would think about it is that’s our programmatic commitment and we’ll move from there depending on a lot of things, plus timing and July deadlines, before that’s clear. On the second one, it’s a great question on active buyers. Look, bear with me for a second and I will kind of dig down into active buyer growth. So our active buyer growth at $3 million – at $165 million – what $167 million up $5 million year-on-year and $2 million quarter-on-quarter, I explained I won’t rehash the cohort dynamic that I had in my script. But if you remove StubHub and you remove India, and you just talk about the core business of marketplaces in the major markets where we started to do advertising in late Q3 and early Q4, what we started to see on a trailing three-month basis is some acceleration in trailing three-month growth which is a green shoots for us and obviously I don’t like having to go, take-up StubHub, take out India to explain it. But that’s what we think, that’s where we draw some of our conclusion and confidence about moving that metric going forward because that is certainly a metric that we called out today and we called out in the past that we expect to move not only from our marketing and branding campaigns but some of the other initiatives that we talked about.

Great. That’s helpful. And just one last one. Again on advertising you talked about ramping TV at the end of the year. But I’m looking at your sales and marketing expenses were up only like 1% year-on-year and decelerated quite a bit from the recent quarters. Are you seeing leverage in other items inside of sales and marketing that you will continue to benefit from this year?

Yes, absolutely. I kind of called out in my prepared remarks. The total is exactly the dynamic that you called out. But what we’ve been doing is between platforms and within platform and within different channels we’ve been shifting. We’ve been talking about that we’re shifting to brand and so we’ve effectively done is reduced spend in other areas that we felt had lower ROI or that was less strategic, and shifted into the brand campaign in the core marketplace’s business, and that was true across platforms and into the marketplace’s platform. And on the other side we continue to expand channels like social and other aspects to try and make sure that our traffic that we are generating from structured data and the SCO channel to social is expanding and providing us the capability to not only attract new users but to drive active user growth and active buyer growth as we talked about.

Thanks.

Operator, we have time for one more question.

Thank you. Our next question comes from the line of Scott Devitt of Stifel. Your line is now open.

Hi, thanks. Devin, you mentioned earlier acquisitions in terms of capital allocations, just wondering if there’s any areas in the business that you find particularly useful from an inorganic standpoint whether that’s classified StubHub, marketplace tuck-in and or the text stack, AI. And then also as it relates to the capital allocation, any changes in view on dividend? And finally the last question is with timing of the PayPal operating agreement when that does expire and should we expect any material changes to the agreement when that happens?

That’s a doozy last question, Scott. Well done. Let’s see, taking them in turn, first of all vis-à-vis acquisitions. I think all three are in the fall StubHub, eBay and Classifieds. I just point to more tech and talent, expect us to focus on what I think of the emerging major computing platform shifts I mentioned in my remarks. AI is really important to us. VR and AR are not a toy, we want to be early. And the Internet of things, the Internet of everywhere distributed commerce also important. You can expect us to be active in all of those areas. Expanding geographically in all of our platforms we are always looking out. And it also say there may be interesting opportunities vertically for eBay, in particular we’ve seen the success of StubHub as a vertical category that benefits from the ownership of eBay, other verticals were some brand might make sense of sub experience, we’re looking at that right now. So we’ll be disciplined but you can certainly expect M&A to be part of our story in 2017. On dividend there’s no change to where we are; nothing has changed from our last position. And on PayPal, look, I will just say, obviously everyone knows that it was a five-year agreement that we signed 18 months ago. PayPal is a really good partner. We appreciate working with them. They’ve been a good payment provider for us for well before and well after we spun PayPal out as an operating entity. And as we go forward we will evaluate our options, obviously, you would expect us to look at all of our choices and options as that agreement rolls closer to its – to the date that it rolls off, but we still got a bit of time for that. So that’s where we are.

Thank you.

Thank you. That’s all the time we have for questions. Ladies and gentlemen, thank you for participating in today’s conference. This concludes today’s program. You may all disconnect. Everyone have a great day.