How Yahoo! Japan Beat eBay at Its Own Game

Shigeki Ohya is a Pez fanatic. The 32-year-old engineer for Nihon Texas Instruments in Tokyo can't get enough of the kitschy little candy dispensers. So in 1995, Ohya began visiting the Web site of San Jose (Calif.) auctioneer eBay Inc. (EBAY ) to buy devices that were first a hit in 1960s America. Soon after, he was buying dispensers from eBay's U.S. site and selling them in Tokyo toy shops. His sideline didn't take off, however, until September, 1999. That's when Yahoo! Japan (YHOO ) introduced online auctions to the country. Ohya started selling his Pez dispensers and now nets a tidy $400 a month on Yahoo's Japanese-language site. EBay has since expanded to Japan as well, but Ohya can't be bothered. Why? In the Japanese e-auction game, eBay has been thoroughly trounced by Yahoo Japan.

In fact, the contest isn't even close. Yahoo Japan--the country's largest portal--has 95% of the online-auction market, where last year $1.6 billion worth of goods were traded. By contrast, eBay Japan--whose only business is auctions and whose parent dominates online auctions in the U.S.--has a measly 3% of the Japanese market. Concedes eBay Chief Executive and President Meg Whitman: "We're definitely in catch-up mode." EBay will likely start the catch-up with a new chief at its Japanese operations; the current CEO, Merle Okawara, will resign at the end of May.