Published: July 28, 2004 in Knowledge@Wharton America's online giants have been busy abroad in recent weeks. EBay has acquired Baazee.com, an online auctions firm in India. Yahoo has launched Yisou, a speedy search engine in China. Google has acquired a minority stake in Baidu, another Chinese search engine that had been viewed as China's Google. Wait a few weeks, and it's a safe bet that more international expansion plans will be rolled out amid the PR-driven sounding of trumpets and crashing of cymbals (metaphorically speaking, of course).

 

What's driving these international expansion plans? Even more importantly, what are the chances that they will succeed? Do the business models of U.S. Internet firms lend themselves to being exported and transplanted overseas? Experts at Wharton and elsewhere say that these world conquests are no sure thing. The ability to localize a global business can be a major challenge, they add, but if done right, over time such ventures can help offset slowdowns in the U.S. market.

 

Wharton management professor Raphael (Raffi) Amit points out that sometimes companies enter an international market only to retreat later. What works in the United States may not apply internationally. Although Internet-based companies, with their lack of physical assets, might in theory be expected to have an easier time overseas, success is hardly guaranteed. "When designing a business model you have to think of scale," says Amit. "The biggest issue overseas is whether a company's architecture will work in another institutional setting."

Take eBay's acquisition of Baazee, for instance. In June, the U.S. auctions behemoth announced that it would take over Baazee, which describes itself as India's biggest online marketplace, for a reported $50 million. Amit believes that the biggest hurdle eBay will face in making the deal work is dealing with the fact that most Indian consumers don't use credit cards.
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