EBay Buys Out Australian Partner for $65M

EBay (Nasdaq: EBAY) has said it will pay US$65 million to buy out Ecorp's share of a joint venture that established eBay's online auction presence in Australia and New Zealand nearly three years ago.

The buyout, which will require the stamp of approval from Australia's Foreign Investment Review Board, will have no impact on eBay earnings projections for this year or next, the company said.

In fact, the auction giant reiterated its third-quarter guidance, saying revenue will total between $278 million and $281 million.

On the Horizon

Still, eBay's Down Under properties seem to offer long-term growth potential. The two companies said that in the 12 months ended in June, the company, which launched in October 1999, saw gross merchandise sales hit $125.8 million from 4.4 million online auctions, almost double the numbers from the previous year.

About 1.17 million people visit the site monthly, according to Media Metrix traffic figures. In comparison, eBay's U.S. site regularly ranks among the most popular and drew about 33 million unique visitors in July alone, according to comScore/Media Metrix.

The two companies worked together to build the auction site into "one of the most popular e-commerce sites in the region," said Matt Bannick, eBay's international senior vice president. "Buying the business outright will also enable us to bring it more in line with our other international businesses as part of our overall strategy to build a global online marketplace."

Slow and Steady

The company's strategy has moved forward steadily over time, with a flurry of activity coming this year. In February, eBay paid $9.5 million for Taiwan-based auctioneer Neocom Technology. A month later, eBay shelled out $30 million for a 33 percent stake in Chinese auction site EachNet.

The auction giant's main page now lists 20 international sites, including sites for Argentina and the United Kingdom. In the fourth quarter of 2001, eBay highlighted its overseas growth, saying sales at international sites had risen 27 percent from the previous year to $40 million.

The only noteworthy failure in eBay's overseas expansion has been in Japan, where it recently made what it called a temporary retreat after failing to gain ground on Yahoo! (Nasdaq: YHOO) Japan and local sites.

"When domestic growth slowed down, companies looked overseas for the next infusion of new customers and revenue," Lisa Strand, director and senior analyst at Nielsen//NetRatings (Nasdaq: NTRT), told the E-Commerce Times. "It hasn't worked in some places, but that's often for cultural reasons."

Australia Strong

Analysts have long considered Australia a strong candidate for overseas expansion, both because English is the dominant language and because the country has high levels of Internet use and relative affluence.

For its part, Ecorp said it will record a one-time profit as a result of the buyout. Ecorp also noted that eBay has agreed to an expanded, five-year marketing partnership with Ninemsn, an Australian Internet portal that is a joint venture owned by Ecorp and Microsoft (Nasdaq: MSFT).