Ufology is the study of unidentified flying objects (UFOs) and includes efforts to study reports and evidence of UFO sightings. Key terms include ufologist, which refers to a UFO investigator, and aliens, which refers to hypothetical extraterrestrial beings. Major events studied include the alleged UFO crash near Roswell, New Mexico in 1947 and theories of worldwide government cover-ups of UFO information.

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UFOs – Unidentified Flying Objects
Ufology – is a neologism coined to describe the collective
efforts of those who study reports and associated evidence of
unidentified flying objects (UFOs).
Ufologist – A ufo investigator is called a ufologist
Ufo Sightings- Some eye witnesses to the UFOs
Roswell Incident- called the Roswell UFO crash
1947
UFO Conspiracy – Worldwide UFO cover Ups and
related theories
Alien- An extra-terrestrial being is called an alien

2. “The Evolution of a New Way to Pay”
Pay”
Consult Hyperion Digital Money Forum
April 10th, 2002 London, UK
Jack R. Selby, Senior Vice President, Corporate and International Development
International
jack@paypal.com
jack@paypal.com
What is PayPal?
PayPal enables any business or consumer with email to send and receive
online payments securely, conveniently and cost-effectively
• An account-based network which integrates with traditional payment systems
• The first global real-time payment system – available in 39 countries
• Focus on the underserved small business market, including online auctions
• Revenue derived primarily from Gross Merchant Sales (GMS)
• High variable revenue and low variable expense business model
• User-driven growth creates minimum reliance on traditional sales and
marketing expenses
• Network effects which build on a large installed base – 15 million accounts
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3. PayPal is Ready to Take the Next Step
• Cash-flow and EBITDA profitable in Q4 2001
• 50% gross margins
• $40 million in revenue for Q4 2001, $105 million for YR 2001
• $3.5 billion payment volume for YR 2001
• 219% GMS growth from Q4 2000 to Q4 2001
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How Does PayPal Work?
Email Payments
! Consumer signs up and ! Consumer enters email
enters credit card or address of Merchant and You’ve got money!
bank account dollar amount of
information payment
! Merchant receives an ! Merchant may withdraw
Web Accept Payments email indicating that the cash, leave it in his
Consumer has sent money PayPal account or send it
to someone else
! Consumer, not yet a ! From a pop-up
PayPal user, visits window, Consumer
the website of opens a PayPal account
Merchant, and and makes credit-card
selects goods or funded payment on one
services to purchase easy form
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4. How Does PayPal Work?
Funding
Bank account transfer
PayPal Balance
Credit card
Average funding cost = 1.3%
Account-based payment system
Small business e-commerce Online auctions
Cross-border payments Online payments for offline services
Subscription services Person-to-person payments
Average transaction revenue = 3.3% Withdrawal
Bank account transfer
ATM/debit card
Check
Shop Anywhere
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The Payments Market Landscape
Underserved Small Business Market Results in Attractive Margins
Large merchants
Long-term relationships • Safeway
• Utilities • Amazon
• Landlords
• Doctors
Size of recipient
Small businesses / Auctions
Friend-to-friend Person-to-person
6 Risk of transaction / Need for immediacy of payment
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5. Value Proposition to Small Businesses
No other payment method matches PayPal’s level of convenience
• Ease of registration
• Online transaction capability
• International transaction functionality
• Seamless integration into multiple financial systems
• Security and fraud protection
• Account management
• Immediate access to funds
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Value Proposition to Small Businesses
PayPal is the most cost-effective payment method for small businesses
Average Cost to Process a $50 Payment
40%
35%
Cost as % of payment
30%
25%
20%
15%
10%
5%
0%
$1,750
$20,000
$1,000
$1,500
$2,000
$7,500
$10,000
$50,000
$3,000
$4,000
$5,000
$250
$500
$750
Monthly gross income
8 Merchant account PayPal Master merchant
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6. Strong Gross Merchant Sales Growth
June 10, 2000: Launch
of Premier and
Business Accounts
October 1, 2000:
User “free” limits
and CC fees
implemented
December 6, 2000:
Increased CC
receiving charges
April 19, 2001:
Increased non-CC
funding charges
July 14, 2001:
Increased low-volume
user charges
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Expanding Transaction Margins
4.0%
3.5%
3.0%
% of Payment Volume
2.5%
2.0%
1.5%
1.0%
0.5%
0.0%
Nov-00
Jun-01
Jul-01
Aug-01
Nov-01
Jan-01
Feb-01
Apr-01
May-01
Sep-01
Dec-00
Mar-01
Dec-01
Oct-01
Blended transaction revenue rate Blended transaction expense rate Blended transaction expense + loss rate
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7. Leading Payment Provider for Online Auctions
PayPal’s eBay Penetration
100%
% of eBay auction listings accepting PayPal
90%
71% as of Q4 ‘01
80%
70%
60%
50%
40%
30%
20%
10%
0%
Q1 2000 Q2 2000 Q3 2000 Q4 2000 Q1 2001 Q2 2001 Q3 2001 Q4 2001
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Growing International Presence
$100 1,000
$90 900
Total int'l funds-in/funds-out - millions
$80 800
Total int'l customers - EOQ ('000s)
$70 700
$60 600
$50 500
$40 400
$30 300
$20 200
$10 100
$0 0
Q3 2000 Q4 2000 Q1 2001 Q2 2001 Q3 2001
Total int’l funds-in Total int’l funds-out Total int’l customers
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8. Two-Tiered Marketing Strategy
PULL-DRIVEN ACCOUNT OPENINGS P
Web • Customer wishes to purchase product from Merchant
B P
Accept • Merchant only accepts PayPal
• Customer must open PayPal account to buy product P
P
PUSH-DRIVEN ACCOUNT OPENINGS
Email- • User emails money to Person or Business P B
Based
• Recipient must open PayPal account in order
to access money P
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Strong Network Effects
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12
10
Millions of users
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6
4
2
0
Aug-00
Aug-01
Feb-00
Jun-00
Feb-01
Jun-01
Dec-99
Apr-00
Dec-00
Apr-01
Oct-99
Oct-00
Oct-01
Total business/premier accounts Total personal accounts
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9. Fraud Loss as a Percentage of Payment Volume
2.0%
1.8%
1.6%
1.4%
1.2%
1.0%
0.8%
0.6%
0.4%
0.2%
0.0%
Q3 2000 Q4 2000 Q1 2001 Q2 2001 Q3 2001 Q4 2001
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Financial Information - Quarterly
Key Driver Q4 2000 Q1 2001 Q2 2001 Q3 2001 Q4 2001
Gross Merchant Sales $336 M $547 M $663 M $815 M $1071 M
Revenue $8.8 M $14.3 M $19.9 M $30.2 M $40.4 M
Net Income* ($24.4 M) ($10.7M) ($7.2M) ($1.2M) $3.2 M
Customers 5.5 M 7.2 M 8.8 M 10.6 M 12.8 M
*Excluding Cheap Stock and Goodwill Amortization
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10. Jack R. Selby
Senior Vice President, Corporate Development
PayPal, Inc.
PayPal,
1840 Embarcadero
Palo Alto, CA 94303
650.251.1289
jack@paypal.com
jack@paypal.com
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