Going, Going, Gone - Online Auction Sites Catching Fire Worldwide

eBay has long been the leader in online auctions, but the venerable giant is facing rising competition in emerging economies from indigenous companies on a mission.

Mercado LibreIn Latin America, Argentina's Mercado Libre (NAS: MELI) is not only the regional e-commerce leader and a rising player in the online payments arena. It is also one of the most visible examples of an entrepreneurial business from an emerging economy rising to global leadership and making scads of money for its founders and early investors. Since the company's August, 2007 IPO at $22, the company touched a high of $70 before plummeting during the dark days of 2009. Today it's retesting its highs, trading in the mid-70s again as its markets have rebounded from recession much more quickly than the U.S. or Europe.

For investors, the ship may have sailed on Mercado Libre, but similar opportunities are popping up all around the world. South Africa's BidorBuy Group not only runs Africa's largest auction site BidorBuy.co.za, but also Jobs.co.za, TheClassifieds.co.za, Payfast.co.za and Jump.co.za (employment, classified ads, e-payment and retail e-commerce respectively). Picture Craigslist, Monster.com, PayPal and Amazon all under one roof and you get the idea of their modest ambitions.

Recently the group announced plans to spread from its base in South Africa to the fast-growing markets of Kenya, Nigeria, Seychelles, and Mauritius. In Kenya, the group's payment platform Payfast will likely encounter stiff competition from a host of local upstarts including the highly-regarded M-Pesa system from Safaricom.

Black Star LineAnother player to watch is Ghana's Black Star Line, a transaction platform for small and medium-sized African businesses to help them reach more lucrative global markets. BSL is the new project of one of Africa's most successful IT entrepreneurs, Herman Chinery-Hesse, founder of The Soft Tribe, Africa's largest commercial software developer and regarded in some quarters as the "Bill Gates of Africa."

Chinery-Hesse sees Black Star Line as more than just a trading platform. It's a vehicle to increase the prosperity of Africa's small businesses, who will then drive larger social, political and economic changes on the Continent.

"I'm using technology to connect [African small businesses] to the global marketplace, by setting up an African eBay, and African PayPal," Chinery-Hesse told me in an interview conducted last summer. "We can take local mom and pop shops and evolve them into global providers. That opportunity has never existed."

Chinery-Hesse sees the success of those small providers as critical to the fortunes of the African IT industry, whose potential promises much to the Continent. "Those merchants will expand with our economy. They are not government, and they are not influenced [by the politics of foreign aid]. They will need software. And they will behave rationally, and they will buy local. Not because of tribalism or nationalism. They will buy local because it is cheaper and better and better supported."

If the big ambitions of Africa's largest players sound too grandiose, India's Saffronart has a more focused goal of dominating a niche market: the highly-lucrative and fast-growing online art auction business. The entrepreneurial company was founded in 2000 by Dinesh and Minal Vazirani, and grew from $126,000 in online sales in its first year to over $30 million year-to-date in 2010.

The Vazirnis--art enthusiasts from an early age--started the site as a way to help young Indian artists gain access to collectors and find the right prices for their works. The company has been wildly successful in its mission and was recently the subject of a flattering profile in the New York Times.

Auction sites were one of the first killer-apps for the Internet in the 1990s and remain a huge factor in the growth of e-commerce as Web access becomes ubiquitous even in the frontier regions of Africa, Latin America and South Asia. Increasingly, big players are rising up from these emerging markets with innovative platforms and big ideas.

As the world takes notice of their success, the bidding is bound to become more intense--not just for the items on auction, but for the companies themselves.

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