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OUR PHILOSOPHY

As Zappos grows and becomes more successful…

We want to share that success with our employees.

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IN THE PAST

100% medical

100% dental

100% vision

Free lunch, drinks, snacks

Celebrating our culture and milestones

Cost to the company in 2007: Over $7 Million

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Gross Sales Trend

0.0

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2000A 2001A 2002A 2003A 2004A 2005A 2006A 2007A

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($ in

Ms)

Gross Sales

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Net Sales Trend

(Financial Information Presented)

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Gross Profit Trend

(Financial Information Presented)

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Operating Profit Trend

(Financial Information Presented)

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Operating Profit / (Loss) Trend

(Financial Information Presented)

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Net Profit / (Loss) Trend

(Financial Information Presented)

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GOOD / BETTER / HOW

Building a strong company

2007 made a significant profit

Bonus plan was based on operating profit

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SIMPLY THE BEST

Because we exceeded the operating profit goal for 2007, our board of directors approved an employee

bonus pool so that excess profits above our plan would be shared.

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OUR APPRECIATION

In addition, we (Tony – CEO and Alfred – COO/CFO) decided not to take any bonuses ourselves so that

there would be more money in the pool for our employees.

EVERY single employee that worked for Zappos in 2007 (and is still with us) will receive a portion of the

money that we put into the bonus pool.

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THE BIG QUESTION

How big is my check going to be?

In 2 weeks, if you were an employee during 2007, then you will receive a bonus check equal to 10% of what

you were paid by Zappos in 2007.

If you were an employee and worked for all of 2007, this translates to about 5 ½ weeks of pay.

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EXAMPLES

If your salary was $20,000 (roughly $10/hour) in 2007 and you worked the entire year, then Zappos will pay

you a bonus check of $2,000 (before taxes)!

If you worked for 6 months, Zappos will pay you a bonus check for $1,000 (before taxes)!

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TO INFINITY AND BEYOND

For 2008, our board of directors has set a much more challenging profit goal for us. So we need everyone to

help us achieve our goals so that we can make a bonus payment next year.

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Story Worthy Experiences

Enhance Processes & Systems

Revenue and Profit Growth

Venture Into New Opportunities

Invest in the Growth & Development of our People

Culture through Core Value Education

Evolution of our Site and Core Business

2008 Company Objectives

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RAISING THE BAR

(Financial Information Presented)

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STICK TO THE CORE

Do More with Less

Be Adventurous, Creative, Open-Minded

Embrace and Drive Change

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From: Dana C.

I placed an order with your company on Saturday... Your employee ... spoke with me on the phone. I am battling breast cancer and this girl sent me the NICEST card, a bouquet of flowers which were received on Monday, card, flowers, and shoes. You couldn't have a nicer employee.

Talk about GREAT Customer Service, she is the GREATEST! I can't thank her enough for all she has done. I never expected the card or flowers. All I had asked was for the shoes to be sent overnight. She asked me what her favorite color was, and if I guessed it she would send the shoes overnight.

When I answered her that I didn't know her favorite color but mine has become PINK, due to battling breast cancer, she told me she would send them. Again I PRAISE Her and your company for SUPERIOR CUSTOMER SERVICE.

Many thanks go out to her and your company.

Email from a customer (received Friday morning)

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It's more than about numbers and making our financial goals...

It's even more than about customer service...

Together, we are improving people's lives...

And helping make the world a better place...

We are creating thousands and thousands of these stories every single day!

It is all about improving people’s lives…

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A BIG THANK YOU

Thank you everyone for 2007!

Hopefully 2008 will be bigger and better!

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ONE LAST BIT OF ADVICE…

We suggest you take half of your bonus check and put it away in a savings account. If you're the type of person that spends whatever is in your account, then open up another savings account, deposit half your money, and don't look at it.

Then take the other half and go on that trip you've always wanted to go on, or buy that car or big screen TV you've always wanted!

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P.S. You might be wondering why we need to have a legal and financial disclaimer in this presentation, but you are still reading, so our lawyers, auditors and accountants would really like to make sure we make the following clarifications.

Although an audit was underway and almost done, the financial information presented in this slide show was unaudited. We made every effort to present the best information we had at the time.

Gross merchandise sales is a non-GAAP metric. We use it to express the total demand across all of our web sites and stores. This number measures the dollar value of the orders placed in the year before accruing for certain items such as returns, and it ignores certain timing cut-offs that are required by GAAP for revenue recognition purposes. If we were a public company, we would have to reconcile gross merchandise sales to the nearest GAAP metric (net sales), but we are currently a private company so the gross merchandise sales number should be viewed just as an interesting number that we want to share with our friends.

This presentation contains forward-looking statements that involve risks and uncertainties, as well as assumptions that, if they ever materialize or prove incorrect, could cause our results to differ materially from those expressed or implied by the forward-looking statements and assumptions. These risks and uncertainties include, but are not limited to, the risk of economic slowdown, the risk of over or underbuying, the risk of consumers not shopping online or at our web site at the rate we expected, the risk of supplier shortages, the risk of new or growing competition, the risk of a natural or some other type of disaster affecting our fulfillment operations or web servers, and the risk of the world generally coming to an end. All statements other than statements of historical fact are statements that could be deemed forward-looking statements, including statements of expectation or belief; and any statement of assumptions underlying any of the foregoing. Zappos.com assumes no obligation and does not intend to update these forward-looking statements.

Congratulations on making it through all the fine print. If you enjoy fine print, look for openings on our legal and finance team at jobs.zappos.com.

Legal and Financial Disclaimer