eBay's Whitman touts international plans

In a speech to analysts at the Pacific Crest 2000 e.conference, CEO Meg Whitman said the San Jose, Calif.-based online auction giant will likely unveil the translation software to eBay's largest 20 or 30 markets within two to three years.

Whitman spoke about what the technology could mean for consumers worldwide--predicting that eBay will help transform developing nations into virtual marketplaces with a ready audience for native handicrafts, infusing remote villages with cash that could improve locals' standard of living.

"It's fascinating," Whitman said. "There is a real frontier here that would truly make global trading a reality. eBay is creating new trade on a global basis that the world has never seen--that's what gets us up in the morning."

The company must first leap several hurdles before streamlining the translation and conversion software into a broader market than the 15.8 million people who now use eBay sites in the United States, Germany, Japan, Australia and other select markets. Many analysts agree that the online auctioneer must conquer new markets, but they're skeptical that eBay alone can help transform impoverished nations and balance the world's supply and demand of all goods.

"A total transformation may be slightly fanciful," said Pacific Crest e-commerce analyst Steven Weinstein. "But then again, look what eBay did to small business. It certainly transformed that."

eBay is not blind to the challenges of initiating a seamless global marketplace.

The most urgent problem, Whitman said, is that eBay cannot find one company that produces translation and conversion software for all of the two dozen or so markets it wants to penetrate.

Of the companies specializing in language and currency translation, none provides services across Asian, European and other languages. Typically, one software company specializes in Asian languages, providing great translation from Chinese to Japanese to Thai, while another specializes in linking all Western European languages. Some companies specialize in language translation, while others focus on currency conversion.

Whitman said she would prefer to acquire or partner with a single company to provide all of eBay's translation and conversion needs. But she said the company will likely have to settle on a combination of partners, relying on eBay technologists to help with the details--and postponing a launch until next year.

Another unwieldy problem involves government regulation of e-commerce sites.

In May, a French judge ordered Yahoo to "make it impossible" for Web surfers in France to gain access to sales of Nazi memorabilia because such items are "an offense to the collective memory of the country." Under French law, it is illegal to exhibit or sell objects with racist overtones.

Last week, the judge issued a temporary reprieve from restrictions that would bar citizens from accessing Nazi memorabilia on the world's most popular Web portal. But he stipulated that during the next two months, three experts will examine ways of blocking questionable content from Yahoo and Web sites originating in the United States.

Many countries outlaw the exportation of native fossils, historical artifacts, plants and animals. Some countries, such as Cuba, outlaw any exportation of any item not sanctioned by the government. eBay could encounter enormous legal and political hassles if sellers export native herbs or medicines, rare currencies, anthropological relics, political memorabilia, or other sensitive goods.

Whitman said eBay is taking a "let's be best friends" approach with governments in the countries where the company has operations. But she said the company is likely to run into problems as the software is introduced and catches on with local consumers.

"Frankly, we're feeling our way," Whitman said. "It's going to be 10 years before there's a seamless protocol...Until then, we're going to have to navigate the snakes. And sometimes you're going to get a toe bitten off."

Another potential pitfall: Entering new markets could prove a significant expense for eBay, which was just barely profitable in 1999 and will likely earn 20 cents per share this year. In late July, eBay reported a 97 percent increase in second-quarter revenues and per-share earnings. Profits rose to $11.6 million, or 4 cents per share, compared with $5.1 million, or 2 cents per diluted share, in the same period last year.

The cost of labor, advertising and technological support when entering a new market typically runs $2 million to $4 million per quarter for at least three to six quarters, Whitman said. Although revenue from so many new customers would likely outweigh the start-up costs, Wall Street has in the past quarter taken to dramatically devaluing companies that spend cash excessively or operate without a clear path to profitability.

"The question becomes: Do we expand into 20 countries knowing we have that kind of burn rate?" Whitman said.

Ultimately, international business experts said, the largest hurdle eBay faces in entering foreign countries is the dearth of Internet access and personal computers outside of the United States, Western Europe and a few other nations.

Although eBay has been aggressive in allowing Web-enabled cell phone users to access specific information from the central Web site, the vast majority of transactions happen via PCs. Virtually all new eBay customers come through the Web site on PCs, not by cell phones or other wireless devices.

"Guatemala is not going to dig the trenches for conventional lines so that villages can be wired to the Internet," said Rex Bird, CEO of health and fitness product retailer Body Trends. Roughly 10 percent of the Carpinteria, Calif.-based company's revenue comes from abroad, but international growth is painstaking.

"It'd be a great project for the Peace Corps to come in and set up a computer with Internet access," Bird said. "But it's going to be a very, very slow process."