PayPal Mobile PaymentsDRF Conference April 26, 2006

2CONFIDENTIAL & PROPRIETARY

105 million PayPal accounts worldwide

$27.5B payment volume in 2005 $8.8B in Q1 ‘06 10% of US e-commerce 5% of global e-commerce

55 markets & 6 core currencies

1.7M transactions daily

PayPal: A Global Standard in Online PaymentsPayPal: A Global Standard in Online Payments

PayPal user accounts

Millions

1 2 3 5 7 8 10121417192327

323540

4550

5764

7279

87

96105

1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q Q1

2000 2001 2002 2003 2004

46%YoY

growth

2005 2006

3CONFIDENTIAL & PROPRIETARY

PayPal Enables Cross-Border TradePayPal Enables Cross-Border Trade

Can be used in 55 markets

PayPal availablePayPal available + Local Bank Acct. Withdrawal

US

Pre-20032003

UK

2004

NL, DE, CH, ATFR, BE

2005

AU

ITES CN

CAIE

4CONFIDENTIAL & PROPRIETARY

Source: Nielsen/NetRatings data. Monthly unique audience

PayPal users are activePayPal users are active

PayPal users are active online shoppers Are 2 ½ times more likely to have

purchased a product online in the past week Estimate that they spend 12% more online

than do non-PayPal users

PayPal users are highly loyal Would prefer to purchase from an identical

online business that offered PayPal as a payment option over one that did not (>80%)

State that they are more likely to buy from an online business a second time if that business accepts PayPal (>80%)

Balanced gender representation:50% Male : 50% Female

Source: PayPal Brand Tracker, Ipsos-ASI, Q4 2005Past 3 month online shoppers who currently use PayPal

0 - 2 times/yr13%

3 - 10 times/yr42%

11 - 20 times/yr21%

21 - 50 times/yr15%

> 50 times/yr9%

How often do you use PayPal?

5CONFIDENTIAL & PROPRIETARY

Merchant Value PropositionMerchant Value Proposition

0.17%

1.14%

0.33% - 1.80%

1.80%

PayPal sellers First Annapolis(chargebacks

only)

Gartner (2001) CyberSourceOnline Fraud

Report

Seller online fraud losses, as a % of sales

50-90%lower loss

• Fraud models

• Card & bank verification

• Economies of scale/skill ─ 600+ fraud ops team

• Seller Protection Program

Typical incremental sales from PayPal

5-15%

1-5%

Large merchantsites

Small merchantsites

• Privacy / safety

• 105M user accounts

• “Wallet” convenience

– Bank transfers

– Balance payments

– PayPal buyer credit

6CONFIDENTIAL & PROPRIETARY

Why Alternative PaymentsWhy Alternative Payments

4+ methods

3 methods

2 methods

1 method

Note: Payment methods include general purpose bank cards, private label cards, gift certificates, electronic checks, recurring billing, instant credit (‘bill me later”) and PayPal

Source: CyberSource, May 2004

72%

71%

66%

60%

7CONFIDENTIAL & PROPRIETARY

Online Digital Content MarketOnline Digital Content Market

Digital Content is selling online For consumption on every device imaginable and propelled by music and mobile 2005 Online Music Sales topped $1.1B 2004 Online Micropayments (<$5) grew 282% One-time Micropayments grew from 7% of all on-time purchases to 18%

PayPal’s Micropayments Initiative - PP enables producers and distributors to sell DC directly to consumers through multiple solutions Announced Micropayments rate of 5% + $0.05

Enabling new business models that aren’t viable with standard “fixed fees”

Leverage “Pre Approved Payments” to extend benefits to mobile Subscriptions are an easy introduction through our standard subscription product

or through PAP

Trend: Convergence of online and mobile Mobile generated content to PC/Web

Nikon’s focus on digital and WiFi capabilities

Podcasting to mobile phones MobiTV, SLIDE and others

8CONFIDENTIAL & PROPRIETARY

PayPal’s “Pre Approved Payments” Gives Digital PayPal’s “Pre Approved Payments” Gives Digital Content Merchants the Flexibility They NeedContent Merchants the Flexibility They Need

9CONFIDENTIAL & PROPRIETARY

Mobile vs. InternetMobile vs. Internet

598

154

394

120

367

251

167

143

199

241

Total world market (in millions)

North America China Rest of world

Western Europe

Japan and Asian tigers

PC/ internet centric

Phone centric

Mobile Subscribers

Internet users

1,977Mobile Handsets

1,046Internet users

PC Installed base

798

Source:Morgan Stanley; Economist Intelligence Unit; Gartner

10CONFIDENTIAL & PROPRIETARY

Mobile Payments OpportunityMobile Payments Opportunity

2B mobile users globally (2005) 208M in US (68% nearly = internet penetration) 65M in UK (114% penetration vs. 63% internet) In 30 top countries avg. penetration rate is 80% 2T GSM text msgs sent (5.5B/day)

Convergence of internet and mobile Faster and faster networks (GPRS, 3G, 4G & WiFi) Avg screen size is almost 5x bigger

Payment opportunity is as big as Internet advertising Mobile Internet Premium Services $19B in 2005, vs $19B

in all Internet advertising• High growth rate (to ~$50B by 2009)

Sources: Portius Research, CTIA, Morgan Stanley

11CONFIDENTIAL & PROPRIETARY

Natural extension: e-commerce to m-commerceNatural extension: e-commerce to m-commerce

Launched April 6 in North America and April 25 in UK

“Mobilized” PayPal accounts, access via SMS or IVR w/ PIN

Three services: Person-to-person payments

Gifts, pay-backs, personal commerce

Text to Buy Any advertisement becomes POS

Text to Give Grassroots impulse donations

Send money anytime, anywhere – securely with your phone

12CONFIDENTIAL & PROPRIETARY

The Text to Buy buyer experience is quick and The Text to Buy buyer experience is quick and easyeasy

Sam sees an ad anddecides to buy.

Sam texts “DVD” to “BUYIT”.

Sam confirms payment via IVR and enters PIN.

Package arrivesat Sam’s specified address.

1

2

3

4

Hi Sam. You’ve askedto pay $20 for the DVD. Enter your PIN to confirm.

To: BUYITMsg:DVDMsg:

EXPERIENCE FOR PAYPAL MOBILE ACTIVATED

Sam sees an ad anddecides to buy.

Sam texts “DVD” to “BUYIT”.

Sam receives a message to activatePayPal mobile. The offer will be held open.

Sam goesonline to activatePayPal mobile, then replies or tries again.

To complete this trxn, activate at www.paypal.com/mobile. Offer will be held open for 5 days

1

2

3

4

EXPERIENCE FOR NON-PAYPAL MOBILE ACTIVATED

To: BUYITMsg:DVDMsg:

“Wow – that will be huge.” “Instantly buy with no hassle.” “This is the future.”“I’d buy things… On the ‘L’ or the bus, I’d see an ad for a new CD…  It just comes in the mail.  It’s so simple.”

(Source: Consumer reactions to Text to Buy , Qualitative User Research, August 2005, September 2005)

13CONFIDENTIAL & PROPRIETARY

Direct sales via ads & media

Benefits of Text to BuyBenefits of Text to Buy

Brand/OEM Incremental direct sales Measurability/ROI of ad spend Direct relationship with customer;

CRM data New, unique classes of purchase

occasions; customer intimacy Associate product and brand with hip,

new channel

Purchase whenever you want, wherever you are

Convenience, speed, fun Cool, new experience that fulfills the

promise of m-commerce New ways to use existing trusted

accounts Access to limited, exclusive offers

Consumer

Text to Buy

14CONFIDENTIAL & PROPRIETARY

Examples of Text to Buy ImplementationsExamples of Text to Buy Implementations

Bravo 10 & 20 second television spots with web support

Walk the Line print ad

15CONFIDENTIAL & PROPRIETARY

Go Forward. Go Mobile.Go Forward. Go Mobile.

SMS Direct Response Sales (T2B) Text to Give Electronic rebate payments Virtual merchant specific gift certificates No inventory retail events

Add another direct-to-consumer channel: Bricks n’ mortar MoTo eTailing+ Mobile

16CONFIDENTIAL & PROPRIETARY

THANK YOU!

Kevin DulskySr. Director & GM, PayPal MobileKDulsky@paypal.com