While eBay controlled 64.3 percent of the online auction revenue share in May 2001, uBid.com had emerged as eBay’s main competitor during this time. The next three largest competitors, Egghead.com, Yahoo!Auctions, and Amazon Auctions, represented less than 10 percent of the revenue share in the online auction market in mid-2001. Ebay considered several factors-such as the ability to attract buyers, the volume of transactions and selection of goods, customer service, and brand recognition-as being the most important competitive factors in the online auction industry. The management of eBay saw traditional competitors as inefficient beca

I believe the primary contributor to the increase in eBay’s net revenues according to the balance sheets from 1996-2001 was the increased use of the eBay site. As expected, the cost of net revenues increased as well. Cost of net revenues in the traditional auction business moved approximately in line with changes in yearly net revenues. EBay’s traditional auction subsidiaries are continuing to record its strongest revenue year, despite an offset in our sluggish economy. During the period from 1996-2001, eBay continues to make significant investments in both the people and equipment used in supporting the site. Gross margin as a percent of net revenues has increased dramatically since the end year of 1996.

The increase in operating expenses are driven primarily by sales and marketing costs. The sales and marketing expenses increased over the years are primarily due to increased online advertising costs. The increase in product development expenses over the years are driven largely by additional personnel and contractor costs, in part to support new business initiatives. General and administrative expenses increased primarily as a result of a

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