Confidential and Proprietary

Driving Incremental Internet SalesIEA & Marketforce: The Power of Payments

London, July 3rd 2008

Confidential and Proprietary 2

Agenda

• PayPal introduction

• Addressing the three biggest problems in e-commerce payments

• The merchant benefit: incremental sales

Confidential and Proprietary 3

5 1223

40

64

96

133

175

2000 2001 2002 2003 2004 2005 2006 2007

� Founded 1998 and acquired by eBay 2002

� Facilitates online payment by card, bank, and balance

� Operates in EU under a Luxembourg bank license

� $47B total payment volume (33% growth) in 2007

� 190 markets & 44% of revenue from outside U.S.

� #1 EU and UK financial website (Nielsen)

� 120,000+ European merchant websites

� 50M+ European accounts

� ~10% of global e-commerce

PayPal overview

Millions of PayPal user accounts57M accounts active during 2007

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Agenda

• PayPal introduction

• Addressing the three biggest problems in e-commerce payments

• The merchant benefit: incremental sales

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The three biggest online payment problems

Checkoutabandonment

Concern aboutprivacy, security,

and safety

Choice of allpreferred payment

methods

50%don’t

complete

24%seek

alternatives

40%very

concerned

Sources: Shop.org/Forrester, 2007; Forrester, 2007; Jupiter/PayPal, 2008

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Problem #1: checkout abandonment

46%52% 51% 50%

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

Web-based Store-based Catalog-based Average

Checkout abandonment

Source: Shop.org/Forrester, State of Online Retailing 2007

Need for easier checkout

• 31% of shoppers prefer to shop at stores that don’t require them to retypetheir name, address, and card number.

• 48% of shoppers prefer usingalternative payments because they aremore convenient.

50%conversion

Entername andpersonalinfo

Enterbuyeraddressdata

Enterdeliveryaddress data

Entercard

securitydata

Confirmbasket

Processpayment

Entercard

number &date

Addshippingcosts

Login to PayPal

Review payment

MerchantCheckout

80%conversion

Source: JupiterResearch/PayPal, “Confidence, Convenience, Choice”, 2008

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Problem #2: concern about privacy, security, and safety

62% 61%

44% 40% 40%

17%0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

UK FR ES Average IT DE

Online shopping privacy concern

Source: Forrester, Security Concerns Impact European OnlineBehavior, July 2007; % shoppers rating themselves (very) concerned

“I like the security that PayPal offers. I don’t like giving my card

details out directly to any company.”

Payment accounts protect financial info

12% of Europeanadults (21% of

internet users) avoidshopping online due to

security concerns.Source: Eurostat,

Feb 2008

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Problem #3: choice of preferred payment methods

Payment Methods

Cards:Bank: US,CA,UK,DE (EFT,ELV,giropay) ,FR,ES,NL,CH,AUBalance: 65 countries

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Agenda

• PayPal introduction

• Addressing the three biggest problems in e-commerce payments

• The merchant benefit: incremental sales

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1-5% incremental sales for the largest merchants;5-25% incremental sales for medium-sized merchants*

% that would not have

bought without PayPal

PayPal’s % share of

merchant’s sales

Methodology: Over a two-week period, 100% of PayPal buyers from leading European websites were asked, “Would you have made your purchase from [this merchant] if PayPal had not been offered as a payment option?”

Incremental sales

x =

UK large retailers

Boots, eBuyer, Envisage, Expansys, Photobox, SVP

25%24%14%25%23%66%

10%12%22%14%15%7%

2.5%2.8%3.1%3.5%3.5%4.6%

France/Italy/Germany retailers

France – Aquarelle, BrandAlley, Cdiscount, Fnac, Meetic, Pixmania

Germany - Blume2000, Buch.de, Computer Universe

Italy - Mr. Price, 3, Yoox

21%19%30%18%30%32%22%36%57%42%27%28%

2%5%3%8%5%6%

10%7%5%8%

20%30%

0.4%1.0%1.0%1.4%1.5%1.9%2.2%2.4%2.8%3.4%5.4%8.4%

* Sources: comScore (14% US SMB), IZH4 study (7-13% Germany), PayPal consumer and merchant surveys

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4%

17%

30%

42%

7%

0% 20% 40% 60%

Other

Loyalty

Payment Methods

Convenience

Safety

Drivers of incremental sales from PayPal

All Respondents(474)

%Privacy – not sharing info 27Trust PayPal/PayPal is reliable 11PayPal Buyer Protection 4

%No need to retype details 24Just a few clicks 5Keep track of payments 1

%Wanted to use PayPal balance 7Don’t have credit card 4Couldn’t use preferred card 3Wanted to use bank account 2Cross border payment 1

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Merchants of all sizes adopting PayPal

10 of top 50

15 of top 50

15 of top 50

120,000+ activeweb merchants

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Thank you!!!

cscheible@paypal.com