eBay amended its marketing agreement with AOL Time Warner. eBay was locked into an additional two-year agreement with AOL, which is eBay's exclusive advertising sales representative. Under the new agreement, eBay will have the option of not renewing in 2003 and 2004 if AOL does not meet certain performance goals.
eBay was obligated to pay AOL $18.75 million per year, for two years, in exchange for online advertising services. Last month, eBay changed the agreement and will now pay AOL $18.75 million for one year; AOL will have the right to extend the term for two additional renewal years providing it achieves performance goals each year.
eBay's financial obligation for the first renewal year (ending in March 2004) will amount to a maximum commitment of $15 million, and will amount to a maximum of $10 million for the second renewal year (ending March 2005).
eBay also adjusted the commission structure with AOL to "reflect changes in the online advertising market," and it reduced the term of the arrangement by nine months from December 31, 2003, to March 31, 2003. The amended agreement also gives AOL the right to extend the term through March 31, 2004, if specified performance goals are met.
Revenues from third-party advertising during the three months ended March 31, 2002, increased compared to the same period in 2001. eBay reported in its 2001 annual report that during the year ended December 31, 1999, third-party advertising revenues were derived from approximately 10 customers. During the years ended December 31, 2000 and 2001, third-party advertising revenues were attributable to approximately 20 customers each year. The company said it expects third-party advertising revenues in future periods to decrease as a percentage of total net revenues, and possibly in absolute dollars.
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