You can't always believe what you hear.
During last week's conference call, eBay (Nasdaq: EBAY) CFO Bob Swan praised his company's recent success in South Korea. He singled out the company's success in growing the amount of gross merchandise value (GMV) it has generated within the Web-savvy country.
"GMV in Korea grew 33% year over year in the quarter, excluding vehicles, where we no longer capture GMV" because of a format shift, he said. "We're pleased about our performance in Korea, where we believe we've significantly narrowed the gap with our main competitor over the last three or four quarters and have gained significant share in the overall Korean e-commerce market in the process."
That statement was a direct shot at Gmarket (Nasdaq: GMKT), Korea's e-commerce platform that leads the eBay-owned auction.co.kr site.
Wednesday night's comments should have sent Gmarket's shares reeling on Thursday. Instead, Gmarket closed higher. Even on Friday, a day when the volatile stateside exchanges ultimately closed lower, Gmarket shares found a way to creep 4% higher.
Silly market! Didn't it realize that eBay was spanking Gmarket? Oh, it realized something, all right, and it was that you can't always take a company's word at face value.
He said, we said
Has eBay really "significantly narrowed the gap" with Gmarket, following a 33% improvement in the value of the merchandise it has sold in South Korea this past quarter? I don't think so. Gmarket won't report earnings until next month, but it already announced that GMV during those same three months surged 42% higher: 42% vs. 33%? Is it just me, or did you, too, have a completely different understanding of what the words "significantly" and "narrowed" were supposed to imply?
I won't contest Swan's comment that eBay has "gained significant share in the overall Korean ecommerce market," because we don't know all of the moving parts within the market. For instance, when it comes to search engines in China, both of the market leaders -- Baidu.com (Nasdaq: BIDU) and Google (Nasdaq: GOOG) -- have gained market share over the past year. They have simply grown at the expense of smaller players.
One can argue that Swan is referring to a longer time frame in Korea when he mentions "the last three or four quarters." But even if that's the case -- and it would be impressive, since Gmarket's GMV grew at a healthy 43% clip for all of 2007 -- isn't Swan obligated to point out that the trend actually reversed in the latest quarter?
Pompons down, my friend.
The world vs. eBay
The world's leading online marketplace isn't beyond singing its near-term praises. After watching domestic listings dip in each of the second and third quarters, eBay was quick to point out that the trend refreshingly reversed itself during the final quarter of 2007. Why would it thump its chest about narrowing the gap in Korea when it seems as if Gmarket is pulling further away?
Obviously, eBay has had a hard time in Asia. It has retreated in both China and Taiwan recently, and that was several years after conceding Japan to Yahoo! (Nasdaq: YHOO). In the more established European market, eBay is clawing its way back after earlier weakness in Germany. You don't hear a whole lot about eBay's success in Latin America, but you don't have to. It bet on the right horse there. The company owns a piece of MercadoLibre (Nasdaq: MELI), the rapidly growing auctioneer that is huge in the populous hotbeds of Brazil and Argentina.
Between the falling dollar and the company's commitment to lowering auction fees domestically, eBay's overseas operations will become more material contributors to the company's performance.
I'm not sure why analysts let eBay get away with its Korean comments uncontested. Maybe they were too busy trying to send off outgoing CEO Meg Whitman respectfully. Maybe they were paying more attention to her swan song than to Swan's song.
What a pity. Why have bragging rights when you're wrong about the bragging?
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