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Oct 26, 1999

eBay Inc. Announces Third Quarter 1999 Financial Results

Gross Merchandise Sales of $741 Million in the quarter -- 280% over the prior year

Added 2.1 Million new users in the quarter

SAN JOSE, Calif., Oct. 26 - eBay Inc. (Nasdaq: EBAY) (, the world's largest online personal trading community, today reported financial results for its third quarter ended September 30, 1999.

The Company generated consolidated net revenues of $58.5 million in the third quarter of 1999, a 169 percent increase over the $21.7 million reported for the same period last year. Consolidated net income for the quarter was $1.4 million, or $0.01 per share on a diluted basis. eBay's consolidated net income excluding the effects of certain non-cash charges was $3.2 million, or $0.02 per diluted share, compared with $1.8 million, or $0.02 per diluted share during the third quarter of 1998.

"In the third quarter of 1999, eBay continued to record strong increases in gross merchandise sales and registered users," said Meg Whitman, President and CEO of eBay. "The eBay community now transacts almost $3 billion per year on an annualized basis on our site. This reaffirms eBay as the world's largest personal trading community."

Key operating metrics on the eBay site:
    -- eBay's gross merchandise sales (the value of goods traded on the eBay
       site) for the third quarter of 1999 climbed to $741 million, up
       280 percent over the $195 million reported in the third quarter of 1998
    -- Registered users increased to 7.7 million by quarter end, an increase
       of 509 percent from the 1.3 million at September 30, 1998
    -- eBay hosted 36.2 million auctions during the third quarter, compared to
       9.2 million during the same period of last year. This represents year
       over year growth of 292 percent
Ms. Whitman continued, "This was a quarter of strong execution and many accomplishments in every part of the company, as eBay continued to expand into new markets and leveraged the acquisitions made in the last quarter into new online initiatives."

Execution highlights:
    -- Launched a new "Automotive" category for both general and collector
       cars (in conjunction with Kruse International -- )
    -- Launched "eBay:  Go Local!" new regional search that permits users to
       buy and sell in their local areas
      ( )
    -- Delivered a highly successful "free listing day" that generated
       tremendous community excitement with over 4 million items on the site
       -- an all-time record
    -- Launched eBay's German site and initiated final value fees. eBay
       Germany currently has well over 500,000 listings on its site (not
       included in the "stats" section of the eBay home page or key operating
       metrics -- )
    -- Rolled out eBay's strategy for the wireless Internet:  "eBay
       Everywhere" by partnering with both SkyTel and Palm Computing to enable
       users to track, view and bid on items
       ( )
    -- Launched a new AOL co-branded site across all AOL categories
       ( )
    -- Completed eBay "From our homepage to your hometown" tour of
       30 communities across the country
    -- Improved response time for customer support by more than 50% in the
       last six months
    -- Added key new members to the eBay team, including Maynard Webb, head of
       eBay Technologies, and Jeff Jordan, General Manager of End-to-End
       trading services
    -- Installed the warm back-up system, upgraded the operating and database
       systems and added system capacity
    -- Expanded eBay's co-location facilities at Exodus and opened new
       facilities at AboveNet
Financial and operating summary:

The primary contributor to the increase in eBay net revenues for the quarter was the increased usage of the eBay site. As expected, net revenues from eBay's traditional auction subsidiaries decreased seasonally. The seasonal decrease in Butterfield & Butterfield's net revenues was partially offset by Kruse's strong quarter.

In the third quarter, the Company continued to make significant investments in personnel, contractors and equipment to support the site's infrastructure. These investments, along with continued additions to customer support personnel, resulted in increased cost of net revenues both in absolute dollars and as a percentage of net revenues versus the prior quarter.

Personnel and contractor costs were the largest single contributor to the increase in operating expenses during the third quarter. Sales and marketing expenses increased over the prior quarter due to increased online advertising costs, including the recognition of advertising costs under the AOL agreement, and expenses associated with Kruse's Auburn auction and other promotional activities. Increases in product development costs were driven largely by personnel additions, including those involved with new business initiatives. General and administrative cost increases were driven by personnel additions, legal costs, and public company expenses, including SEC filing fees.

For the third quarter, eBay recorded consolidated non-cash amortization charges of $1.4 million related to stock-based compensation and $430,000 associated with acquired intangibles. The Company recorded a consolidated tax provision of $979,000 representing an effective tax rate of 42 percent of third quarter consolidated pretax income.

The Company's overall balance sheet was relatively unchanged in the third quarter compared to the second quarter. Consolidated assets as of September 30, 1999 were approximately $910 million, which included over $740 million of cash and high quality financial instruments.

About eBay

eBay (, the world's personal trading community(TM), pioneered person-to-person online trading. Founded in 1995, eBay has developed an efficient and entertaining trading site on the Web. Currently, there are more than 3.0 million items listed for sale. More than 400,000 items are added daily in more than 2,200 categories including: antiques; books, movies and music; coins and stamps; collectibles; computers; dolls and figures; jewelry and gemstones; photo and electronics; pottery and glass; sports memorabilia; and toys. eBay is also engaged in the traditional auction business through its subsidiaries, Butterfield & Butterfield and Kruse International.

Forward Looking Statements

This announcement contains forward looking statements that involve risks and uncertainties, including those relating to the Company's ability to grow its user base. Actual results could differ materially from those discussed. Factors that could cause or contribute to such differences include, but are not limited to, the Company's need to maintain site stability, to successfully manage and integrate its new acquisitions, to manage significant growth in all aspects of its business, to deal with the increasingly competitive environment for online trading and to successfully expand its model outside of the U.S. More information about potential factors which could affect the Company's business and financial results is included in the Company's Form 10-K for the period ended December 31, 1998 under the headings "Risk Factors" and "Management's Discussion and Analysis of Financial Condition and Results of Operations", its Form 10-Q for the period ending June 30, 1999, its Form 8-K/A filed on July 26, 1999, its Form 8-K filed on September 14, 1999 and its Form S-3 filed on September 30, 1999. All forward looking statements are based on information available to the Company on the date hereof, and the Company assumes no obligation to update such statements.

                                    eBAY INC.
                            (in thousands; unaudited)

                                              December 31,     September 30,
                                                 1998              1999

        Current assets:
        Cash and cash equivalents               $37,285          $246,538
        Short-term investments                   40,401           139,406
        Accounts receivable, net                 12,425            27,589
        Other current assets                      7,479            25,692
          Total current assets                   97,590           439,225
    Property and equipment, net                  44,062            82,102
    Investments                                      --           367,711
    Deferred tax asset                               --            11,277
    Intangible and other assets, net              7,884             9,327

                                               $149,536          $909,642
                                   LIABILITIES AND
                               STOCKHOLDERS' EQUITY

    Current liabilities:
        Accounts payable                         $9,997           $22,821
        Accrued expenses
        and other current liabilities             6,577            23,101
        Customer advances
        and deferred revenue                        973             1,651
        Debt and leases,
        current portion                           4,047            12,447
        Income taxes payable                      1,380            10,665
        Deferred tax liabilities                  1,682             1,682
          Total current liabilities              24,656            72,367
    Debt and leases, long-term portion           18,361             5,856
    Other liabilities                             5,981             6,114
                                                 48,998            84,337
    Total stockholders' equity                  100,538           825,305

                                               $149,536          $909,642

                                    eBAY INC.
               (in thousands, except per share amounts; unaudited)

                           3 Months Ended Sep. 30,   9 Months Ended Sept. 30,
                              1998          1999         1998          1999

    Net revenues                $21,731     $58,525       $55,199   $150,805
    Cost of net revenues          4,367      17,081        10,144     36,003
      Gross profit               17,364      41,444        45,055    114,802
    Operating expenses:
      Sales and marketing         9,414      27,230        21,317     67,104
      Product development         1,514       6,851         3,062     14,490
      General and administrative  4,249      11,779        11,049     29,481
      of acquired intangibles       327         328           477        983
      Merger related costs           --          --            --      4,359
        operating expenses       15,504      46,188        35,905    116,417
    Income (loss)
      from operations             1,860     (4,744)         9,150    (1,615)
    Interest and
      other income
      (expense), net              (161)       7,075         (593)     13,389
    Income before
      income taxes                1,699       2,331         8,557     11,774
    Provision for income taxes  (1,238)       (979)       (3,923)    (5,841)
    Net income                     $461      $1,352        $4,634     $5,933
    Net income per share:
      Basic                       $0.01       $0.01         $0.12      $0.06
      Diluted                     $0.00       $0.01         $0.04      $0.04
    Weighted average shares:
      Basic                      48,385     115,980        39,002    105,864
      Diluted                   113,619     140,082       109,625    135,358

    Supplemental (A)

    Historical net income          $461      $1,352        $4,634     $5,933
    Add back certain
      non-cash and
      merger costs:
      Amortization of
      stock-based compensation      818       1,377         2,317      3,652
      Amortization of
      acquired intangibles (B)      515         430           665      1,210
      Merger related costs (C)       --          --            --      2,528
      Charitable contribution
      of Common Stock                --          --         1,216         --
        Total add back            1,333       1,807         4,198      7,390
    Supplemental net income
      excluding certain
      non-cash and merger
      related costs              $1,794      $3,159        $8,832    $13,323
    Supplemental net
      income per share:
      Basic                       $0.04       $0.03         $0.23      $0.13
      Diluted                     $0.02       $0.02         $0.08      $0.10

        (A) The accompanying supplemental financial information is presented
    for informational purposes only and should not be considered as a
    substitute for the historical financial information presented in
    accordance with generally accepted accounting principles.
        (B) Expenses associated with the amortization of acquisition related
    charges are included within cost of net revenues as well as operating
    expenses under the heading "amortization of acquired intangibles."
        (C) Supplemental information on merger related costs reflects a
    42 percent tax benefit when compared to the operating expenses under the
    heading "merger related costs."

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