Europe’s Online Auction War Rages On

While online auction giant eBay (Nasdaq: EBAY) continues to outpace competitors in the United States, QXL.com, Inc. (Nasdaq: QXLC) has edged ahead in the latest round of the European online auction version of “King of the Hill.”

This week, QXL linked up with Internet portal Lycos, Inc. (Nasdaq: LCOS) to boost QXL’s visibility across Europe. According to the company, QXL will become Lycos’ “premier auction partner,” with a high-profile presence on sites in the UK, Germany, France, Italy, Spain and the Netherlands. Other countries will be added in the future, QXL said.

eBay Targets Europe

The announcement comes as a direct challenge to eBay, which has been targeting Europe with sites in the UK, Canada and Germany. The company has announced plans to open sites in Italy and France by the end of this year, and to move into Scandinavia in early 2001.

eBay remains the world’s largest auction site, and also one of the few e-commerce companies to eke out a profit. During a second quarter in which approximately $1.3 billion (US$) in goods and services changed hands over its Web site, the company earned $11.6 million, or 4 cents per share, on revenue of $97.4 million. eBay also claimed 15.8 million registered users at the end of the quarter.

“[eBay] has indicated that they’ve made some fairly decent progress in the last 6 to 12 months, particularly in Germany and the UK,” said Derek Brown, analyst at W.R. Hambrecht.

Though Europe currently accounts for only a small portion of eBay’s business, it is “going to be a key driver” of future growth, according to Brown. “European growth rates for the Internet are comparable to where the U.S. was two, three, maybe even four years ago,” he said.

QXL on the Move

Meanwhile, QXL has been on an acquisition binge in Europe. On July 25th, it announced its 12th European Web site with the launch of a Belgian version of its service.

The company is further expanding its presence through the acquisition of Ricardo.de AG, a German online auctioneer. QXL said Thursday that it expects the acquisition to be completed by the end of this month. After the acquisition, QXL will have 1.3 million members, a market value of $1.7 billion and 16 Web sites across Europe.

“In Germany, eBay’s definitely ahead,” Goldman Sachs analyst Phil Clark said. “In the UK market, it’s a bit unclear.”

Bigger, Not Better in Europe?

Clark added that QXL has a stronger presence than eBay across Europe by virtue of being in more markets. “They’re not doing a particularly stellar performance [in all markets], but they’re there,” he said.

Clark recently lowered his rating on QXL because “the clarity of the business model is becoming a bit more cloudy” in light of eBay’s push to expand in Europe.

“In the short term, QXL is not going to be able to grow as quickly as we thought they would, because they’re sharing the growth with eBay.”

Portals Increasing E-Commerce Role

QXL Chief Executive Officer Jim Rose said the Lycos partnership gives the company “an excellent opportunity to reach the greatest number of people across Europe.” According to QXL, one in three European Internet surfers uses a Lycos brand.

Portals, once viewed as starting places for people looking for information on the Internet, are increasing their role as e-commerce facilitators. Nielsen//NetRatings’ June statistics found that portal-affiliated shopping sites are attracting more shoppers.

“Portals have capitalized on their audience traffic, turning eyeballs into dollars,” NetRatings analyst Lisa Ann Strand said in releasing the report last month.

Future Is Now

Lycos itself will soon become a European company. The portal is in the process of being acquired by Terra Networks SA in a deal to be completed by the end of this month, the companies said.

Both eBay and QXL also plan to make their services available over wireless devices in an attempt to gain more users. According to International Data Corp., there will be more people accessing the Internet through handheld computers and phones than over wired devices by the end of 2002.

Separately, QXL said Thursday that it hired controversial Internet advertising firm DoubleClick (Nasdaq: DCLK) to help boost ad revenue from QXL’s UK site. DoubleClick will post online ads and send e-mails to QXL users, the companies said.

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