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EBay Plans to Add an Instant-Purchase Service

January 19, 2006

SAN FRANCISCO — EBay Inc. on Wednesday said it planned to offer an instant-purchase service to supplement its bid-and-wait online auctions, pitting the company directly against conventional e-commerce retailers.

Bill Cobb, president of eBay North America, said in a memo to eBay users on Wednesday that the new service — to be called eBay Express when launched this spring — aims to broaden the range of products shoppers can expect to buy on eBay.

EBay also disclosed changes to the fees it charges in the United States for listing items on ebay.com, raising by 9 percent the percentage transaction fee that it charges on the value of goods between $25 and $975 in value. It said it would cut prices on low-priced items and other seller features.

A year ago, broad changes in pricing for eBay auctions provoked a rebellion among a vocal minority of sellers. But eBay officials stressed that last year’s increases were steeper and that U.S. business growth had nonetheless accelerated.

Overall, the changes are likely to add to earnings, Chief Financial Officer Rajiv Dutta told investors on a conference call following the company’s 2005 year-end financial report.

EBay spokesman Hani Durzy said that eBay now charges 5.25 percent of the first $25 of the final sale price of an item; 2.75 percent of the next incremental $975 of value, and 1.5 percent of the incremental value above $1000 of the item. The middle tier of prices — from $25 to $975 — will now be charged transaction fees of 3 percent, up from 2.75 percent.

“It feels like we are hearing the same record again from last year,” said David Edwards, an analyst with American Technology Research in San Francisco, who rates eBay shares a “hold” in terms of their investment potential.

SHOPPING BASKET

EBay Express will feature an online shopping cart that allows buyers to select multiple items and pay for them all at once, as Amazon.com Inc. shoppers are used to doing.

EBay already offers a “Buy It Now” feature that allows bidders to short circuit the eBay auction process and pay a set price specified by a seller. But the feature is designed to attract buyers and disappears once bidders join an auction.

By contrast, Express will be a full-service shopping site that only offers goods or services at fixed prices. Sellers will be able to list items both for auction and for outright purchase, eBay said.

EBay Express is described as a “specialty site” that will be part of the broader eBay marketplace, alongside its exiting eBay Stores and “Fixed Price” listings.

EBay sellers with strong buyer ratings will qualify to sell their items on both eBay Express and traditional ebay.com sites. Initially, eBay Express will only be available to U.S. sellers, but plans are to extend the service internationally.

EBay price increases initially apply only to U.S. listings. International price changes will be announced later this quarter, eBay executives said. EBay also said it was waiving all final sale fees in its EachNet China business.

Last February, eBay compromised over the price increases by offering price decreases under certain conditions.

On the Net:

www.ebay.com




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