for those who may have missed it, you can retrieve the squawk box replay at the following url. transcript follows too.
mktnews.nasdaq.com\\www\nasdaq\news\msnbc\1998\10\28\NASDAQ_0910_15387.htm&usymbol=EBAY&logo=True&companyname=eBay+Inc%2E
CNBC - SQUAWK BOX
EBAY CEO MEG WHITMAN
OCTOBER 28, 1998
ABSTRACT: Whitman maintains that eBay is a safe site which provides background on its participants. Whitman says the company is cash-flow positive and has been since its inception. Whitman says eBay is the largest player in their industry.
Mark: Here to tell us what's going on with her company is Meg Whitman, CEO at eBay. Ms. Whitman, thanks for being with us.
Thank you.
Mark: I wonder if we can start out with the mechanics of how this works. It's -- eBay is an online community in which sellers can post things that are for sale and then potential buyers can bid on them? It sound like the classified ads.
Um, in many ways it has some similarities. Sellers can post an item and the hundreds of thousands of buyers actually look at that item and then the seller chooses a three, five or seven-day auction to sell or buy his or her item.
Mark: Okay. And you make your money by charging the seller a fee and taking a cut of the transaction?
There are no fees for buyers and the sellers pay two kinds of fees. A fee to list their item.
And we get a percentage of the final value of the item that's sold.
Mark: Okay. So, you're the go between. You're the arranger. How then is payment made?
You're right. We facilitate a transaction between individuals. We provide fun and exciting forum for individuals to do business with one another.
Mark: But if I bought something, how do I pay for it?
You could put your credit card on file with eBay and we'll charge it at the end of month or we'll send you an electronic invoice and you can send us a check.
Mark: So you are handling the payment.
We are handling the payment from the seller to eBay, but if you are a buyer, then the arrangement of payment between the buyer and seller is between the buyer and the seller.
Mark: Oh, okay. That's what I wanted to get at. Now, there's a significant amount of buzz on the Internet about people getting ripped off on your site; that the goods being sold aren't delivered or don't actually exist. Do you have any mechanism in place to protect people from that?
Actually eBay is an incredibly safe site. 99.9% of transactions actually go off without a hitch. And there are a number of safeguards on eBay. First of all, also all sellers and buyers can earn a feedback rating. So you should know who you're doing with and check your feedback rating before you buy or sell from them.
Mark: What if the seller is somebody new?
Then you have to be careful the you want to contact them by e-mail and make sure you know who they are. We also operate an escrow service, and that makes a certain number of people feel better as well.
Mark: Okay. I'm reading your press release. Says certain marketing expenses associated with the company's national advertising campaign were deferred into fourth quarter due to legal restrictions, et cetera. So actually your earnings would not have looked as good had you counted those marking expenses normally, right?
Well, they are marketing expenses that would not occur until the fourth quarter.
Mark: Oh.
In terms of radio and mass market print campaign, but we were not allowed to start that campaign in the third quarter, because of the quiet period restrictions.
Mark: I also see a decrease in se general administrative expenses, and the decrease in those expenses marginally a result of a one-time non-cash charge for the charitable contribution of stock. I also see recording certain non-cash charges of $818,000, 515,000 related to amortization of stock compensation, acquisition-related expenses. There are a lot of special charges in here, special line items in here is my point. Are you cash flow positive?
Yes, we are cash flow positive, and have been from inception. And in terms of the eBay contribution to the foundation, that was actually a positive in the third quarter. We made the contribution in the second quarter.
Mark: Yeah. It's a little tough to sort it out, but I understand that. Bob?
Bob Froehlich: This is Bob Froelich. Have you done any work with subscribers that you have, the 850,000? What are the demographic make-up of the people that are actually buyers on your service? Is it higher net worth people? Are there age differences? What are the categories driving your business? And what's going to drive it in the future?
Our users vary somewhere to the demographic of the Internet, which now, of course , is very mass marketed in its orientation. So, we have just the regular folks in America, who are both buying and selling on eBay. Those users trade in over a thousand different kinds of categories, everything from antiques to sports memorabilia to coins, stamps, jewelry, gem stones, toys, beanie babies and actually there's over 800,000 items for sale on the site today.
Mark: Your gross margins are phenomenal. What is to prevent -- what are the barriers to entry here? What's to prevent you from attracting an awful lot of competition?
We anticipate this will be and has been a very competitive business, but eBay is by far and away the largest person-to-person marketplace. And we created market. So we have first-mover advantage, and we also have a very well-developed user experience. It's a lot of fun. It's very safe. And we have critical mass in terms of scale. We are the largest player today.
Mark: You don't worry about the fact that George Bell at Excite and Tim Kugel at Yahoo! will come a long and say, hey, we can make more money on our site if we do that, too, and eventually this gets pretty badly fragmented.
We are very vigilant about the competition and Excite already is a player or in business, so are a number of other big portals. And we think it will be a very competitive business, but I think because we created market and we have such I fantastic product, that we will maintain our leadership position.
Mark: Is your company worth $3 billion?
No. What I focus on every day is running the company and building long-term shareholder value. And the market will go up, and the market will go down, and we really are trying to build a great long-term company.
Mark: Ms. Whitman, we wish you the best of luck.
Thank you very much.
Mark: Thank you. Meg Whitman, CEO at eBay.
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