eBay [EBAY] announced it has decided to no longer go after the online auction market in Taiwan alone. Instead, eBay is forming a joint venture with Taiwan
’s PChome Online, the number two internet portal and number one e-commerce platform (23% share according to Market Intelligence Centerdata) in the country. There are two possible reasons for the decided partnership, but more likely it is a combination of the two. Either eBay’s platform is struggling to gain traction in the country due to increased local competition or given that PChome Online has had a co-branded partnership with Skype since 2004 the two companies decided it also makes sense to collaborate on a co-branded online auction site. Although the new co-branded site will be managed locally by PChome Online and will replace both PChome online’s existing auction site and the eBay Taiwan site, the new joint venture does not appear to be as large in scope as the Yahoo [YHOO] and Alibaba agreement. That said, T1R does not believe this partnership would entail eBay injecting a material amount of cash into PChome Online. The release states the agreement “is subject to various closing conditions and is expected to be finalized by the end of the year.” eBay also stated the joint venture is not anticipated to have a material impact on net revenue or EPS or any other financial guidance issued to date. eBay stated they continue to see “increasing local competition, especially in Asia” during its Analyst Day, but eBay remains the number one e-commerce site in Korea. Despite the fact they are lagging local competitors in China, the country continues to aid in driving eBay’s overall growth in Asia. That said, I believe there will be success and failures within Asia Pac for all of the large internet players and believe forming joint ventures and perhaps acquisitions with the stronger local competitors is a trend we will continue to witness for the foreseeable future.
More proof business in Asia is a tough nut to crack: Yahoo was the first major internet player to decide to go after the opportunity in China by forming a joint venture with Alibaba.com. While eBay has yet to do this in China, and is a move I am not anticipating they will make, eBay is trailing the e-commerce and online auction leader in China, Alibaba’s Taoboa. eBay also made the strategic decision to pull out of Japan a few years ago due primarily to Yahoo’s dominance in the country. Government regulations and cultural differences (online interests, shopping habits, and payment/transaction trust) is much different than in the U.S. and in Europe and a challenge that all internet companies with hopes of expanding into Asia continue to face. In fact, during eBay’s Analyst Day, Matt Bannick, president of eBay International presented a slide describing Asia as a country with “unique local challenges, but strong long-term potential.” Again, it is likely the partnership stems from a variety of issues, but it is fair to say eBay must have been facing difficultly gaining traction with the local e-commerce community, which is something PChome Online has a foot hold on. The release stated “eBay and PChome Online will share best practices to develop a new shopping experience that offers enhanced features to the Taiwan Internet community.”
Strong C2C classifieds presence in Asia: During eBay’s Analyst Day, the company presented a slide showing it currently holds the #1 or #2 position in C2C classifieds (taking a page out of the U.S.
dominator Craigs List) in 21 countries. In terms of its C2C classifieds presence in Asia, they have a footprint and either the #1 or #2 presence in China, Japan, Korea and Taiwan.
PChome Online overview: PChome Online was founded in 1998 and became the first internet company to go public in Taiwan in January 2005. The company is an ISP with more than 10M subscribers and offers an internet portal, e-commerce platform and telecommunications offerings. PChome Online is reportedly the number two internet portal in Taiwan and the number one e-commerce play with approximately 23% market share according to data from Market Intelligence Center.
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