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eBay's international quest
eBay is an internet success story but despite another profitable quarter it has to make big changes to the way it does business. Kate Hanaghan reports...

By Kate Hanaghan

Published: Wednesday 16 January 2002

eBay is not only a proven dot-com darling in the financial sense, it has also managed to find its way into the hearts of enthusiastic buyers and sellers.

These users have done an outstanding job at marketing the company through word of mouth, helping it grow organically. Trouble is, its growth has predominantly been in the US, and analysts view that market as having reached saturation point.

So, despite turning in impressive financial figures and a profitable period for the thirteenth successive quarter, eBay shares were pushed down by more than five per cent, or around $4, to $60.65.

The company turned in fourth quarter results showing a nine per cent increase in profits on the back of a 64 per cent increase in revenue. Quarterly figures in 2000 saw revenue of $134m compared with $219.4m this time round with net profits of $25.9m up from $23.9m in 2000.

eBay will become increasingly dependent on cracking the international markets of Europe and Japan to drive its future growth. Otherwise, it could well end up waving good-bye to repeating record growth figures.

Dan Stevenson, analyst at Jupiter MMXI, said: "There is lots of potential for growth outside of the US in other markets. There are 42 million registered users worldwide with the vast majority in the US. But the US market is fairly saturated, although the Americans are very active traders."

International revenues account for 18 per cent of total sales up from 16 per cent in the third quarter indicating a positive move towards worldwide expansion. Even more promising, international business hit operational profitability for the first time ever.

There has been a notable increase in business in Canada, Germany and the UK. For instance, figures from Nielsen//NetRatings show eBay.de was the top European e-tail site in December, with a unique audience of 4.37 million - beating both amazon.de and amazon.com.

However, the company is struggling in France and Japan.

Jupiter MMXI's Stevenson highlighted one of eBay's most important objectives for this year as increased growth in France. He added that this is a market where fellow e-tailer Amazon has also struggled to make significant in-roads.

Hellen Omwando, associate analyst at Forrester Research, added: "The French are very tuned-in to home grown companies."

The company has also failed in Japan - quite miserably. Last year it found itself in catch-up mode to Yahoo!. The portal site has given the auction site a nasty beating with a big, heavy stick in the Far East.

eBay's critical mistakes were to turn up to the party six months after Yahoo! and then charge commission. It proved a big turn-off for Japanese consumers who were used to paying nowt at Yahoo!

eBay's response has been to announce a reevaluation of its strategy in Japan.

Come the fourth quarter of 2002, it will be interesting to see just how much its international strategies have paid off.