Rough Crossing For E Bay

Starting up in Europe, the auction site runs into plenty of cultural roadblocks

Lucky for Pierre Omidyar that he was living in Silicon Valley when he got the idea for eBay. If Omidyar's family had stayed in France, his idea never would have gotten off the ground. It's not a lack of venture capital or Internet audience that would have stymied him. It's the law. Under French regulations, only a few certified auctioneers are allowed to operate. eBay hasn't even opened for business in its founder's homeland.

eBay isn't just facing a Gallic conundrum. The company that pioneered online auctions in the U.S. is late to Europe, and initial efforts so far have been hurt by technical and cultural missteps. Now, European competitors with better knowledge of the competitive landscape have a headstart--and lots of hard-to-duplicate local content.

eBay is trying to catch up. The challenges are great enough to have encouraged Omidyar to return to his homeland. The 32-year-old founder lived in France until age 6, when his parents emigrated to the U.S. But after handing over the day-to-day reins to former Hasbro Inc. executive Margaret Whitman, Omidyar has returned to Paris. He has come to rediscover his roots--and help develop eBay's European strategy.

But eBay didn't set up shop until six months ago, hiring Dutchman Michael van Swaaij away from America Online Europe. To ramp up quickly, van Swaaij acquired a German upstart called Alando and inaugurated eBay's own site in Britain. But the British online auction company QXL, started in 1997, already is a Net veteran. Other auctioneers, such as Sweden's Bidlet and Germany's, also established themselves long before eBay.

Once in Europe, eBay didn't get off to a glitch-free start. It opened shop still pricing in dollars, and the company has yet to install software to calculate European Value Added Taxes. eBay says that both problems will be fixed soon.

But the German acquisition has paid off. eBay is No. 1 in Germany, reaching 5.4% of the Net audience, compared with 4.4% for, according to MMXI Europe, a subsidiary of market researcher Media Metrix. In Britain, however, QXL has the lead, with 5% of the audience, compared with eBay's 1.2%. "eBay will end up being No. 2, but not more," insists QXL Chief Executive James Rose.

So far, European companies also have the edge when it comes to striking local deals. QXL has auctioned 100,000 British Midland airline tickets, and recently landed a contract to sell Lufthansa tickets. "eBay won't have a chance to get products from national champions," says analyst Michael Arnbjerg of International Data Corp.

The American auction giant insists that it can conquer Europe, just as it did the U.S. Lots of goods, such as electronics and computers, can be sold across European borders. And for more local items, such as soccer cards, it will set up regional sites in Spain, Italy, and--once legal uncertainties are removed--France. Finally, eBay boasts it has far more items for sale on its European sites--about 1 million in Germany, for instance. By that measure, insists Steve Westly, eBay's vice-president of marketing and business development, "It's absolutely been a huge success."

It's too early to declare a winner in Europe's online auction wars. But eBay's experience shows that it's not that easy to cross the Atlantic--French founder or not.

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