Asian Advances, and a Retreat, For Online Auctioneer eBay

As it is swallowing the hard lessons it learned in the Japanese market, eBay Inc. is putting its effort into new ventures in the Asian market. The company, which has been eyeing expansion opportunities in the region, agreed to acquire NeoCom Technology Co. of Taiwan, for more than $9.5 million in cash, in February and gained a foothold in one of the world’s fastest-growing Internet markets with its March acquisition of a 33% interest in EachNet.com, the leading online auction site in China. The moves further increase eBay’s presence in the Asia-Pacific area, where the company has already made a name for itself in Australia, New Zealand, Singapore, South Korea, and Japan. NeoCom operates the ubid.com.tw and bid.com.tw auction sites in Taiwan, home of the third-largest e-commerce market in Asia and the ninth-largest in the world. eBay has noted that China is the fourth-largest e-commerce market in Asia and the fifth-largest in the world. “Over the next three to four years, China’s e-commerce revenue is projected to grow nearly twelvefold to more than $16 billion,” noted Meg Whitman, eBay’s president and CEO. “Together with EachNet, eBay will be well positioned to help develop this emerging market and benefit from its growth long term.” As eBay makes inroads in key Asian markets it is retreating from Japan, where its eBay Japan business lagged considerably behind the leading site, Yahoo! Japan – controlled by Yahoo! Inc. and Softbank Corp. After failing to find a buyer or partner for its Japanese operations, eBay closed the business at the end of March. eBay entered Japan in early 2000 but was never able to unseat rivals who had beaten it to that market. The company conceded that it also stumbled in executing its strategy in the market by not sufficiently adapting the eBay Japan site for the Japanese market. “I think eBay learned what it did wrong in Japan. Because of the nature of the auction model, I think it now understands that you have to be the leader in the market. I think it’s a smart move for the company to have closed its site in Japan and to wait for another time when it can go in and do what it takes to be the leader there,” says Lindsay Hoover, a vice president in the San Francisco office of Houlihan Lokey Howard & Zukin and part of the firm’s technology group. In Taiwan and China, eBay has chosen to buy into leading auction web sites rather than try to muscle into those markets with its own brand, as it did in Japan. “Two important issues for companies like eBay are novelty and loyalty. In North America, where eBay was one of the first companies to institute the Internet auction model, it is enjoying both. Its experience in Japan, however, has taught it that if you’re not the first one in a market, it is very difficult to get people to use your site. In those markets you have to buy the leaders, and the loyal customer bases attached to them,” says Sherif Mityas, a vice president in the consumer business and retail practice at A.T. Kearney Inc. Hoover expects that eBay’s future acquisitions will continue to focus on geographic diversification but will also include product diversification, such as the auctioning of services in addition to the goods that are already offered on the site. Mityas agrees, noting, “I could see eBay believing that it could be in the middle of just about any sales transaction, that it could be positioned as the pre-eminent trading block’ for transactions that occur around the world.”