B2B bonanza - Business-to-business Internet market in Korea and Australia - Brief Article

Business Asia, Sept, 2000

Internet-savvy Australians and Koreans are allowing their countries to take a lead in the business-to-business internet market

ASIA'S RENOWNED trade leaders Singapore, Hong Kong and Taiwan are likely to trail Australia and South Korea in adopting business-to-business (B2B) electronic commerce, according to a new study by American investment bank Goldman Sachs.

The report suggests the B2B markets in Australia and South Korea will take off in the next six to 12 months, with the other three Asian powerhouses following in 12 to 18 months.

Goldman Sachs says worldwide B2B transactions will hit a staggering US$4.5 trillion by 2005, with the Asia-Pacific region (excluding Japan) accounting for close to 10 per cent of that figure.

It attributes Australia and South Korea's lead to their large trading economies, strong infrastructure and internet-driven populations.

The survey of 70 companies across the region concludes that B2B e-commerce will boost economic growth in individual Asian countries by 0.2 per cent to 0.8 per cent a year over the next decade.

However, e-business adoption in Asia is uneven, trailing the United States by about 18 months.

China, with a less-developed infrastructure, will begin to see a boost in 2003-2004, while South East Asia will lag further behind, the report said.

Adoption of B2B practices will allow companies to cut costs and extend their market, but will also intensify competition, the report says.

The study found that 71 per cent of respondents had been planning their e-commerce strategies for at least six months, although 45 per cent had not yet settled on a plan.

Early regional leaders indentified by Goldman Sachs are Hong Kong's Hutchison Whampoa, China-based PC-maker Legend Holdings and Hong Kong trading firm Li & Fung.

In South Korea, Goldman Sachs has predicted the chaebol, or conglomerates, will dominate Korean e-business by virtue of their existing strengths.

"We believe the top four chaebol will dominate the Korean e-commerce segment -- both B2B and B2C (business-to-consumer) -- because they are early movers, have strong brand names, more capital and resources than their competitors," the report found. "Samsung, LG, SK and Hyundai have announced aggressive B2B e-commerce initiatives and are trying to independently establish mega-vertical e-market sites, and their e-commerce strategies are led mainly by their general trading arms, which also hope to coordinate the activities of their affiliates."

Goldman Sachs also believes collaboration within and between chaebol will be needed to build scale for success. "The B2B strategies announced by the chaebol trading arms are independent, or at best loosely coordinated with their affiliated companies, but sharing a common technology platform within each group would help spread the development and maintenance cost."

The company also estimated Korea's entire internet market will rise to US$20.6 billion by 2004 from US$0.8 billion in 1999, which would be equal to about 5 per cent of the US internet market.

Online... and on a roll Asia-Pacific B2B online commerce by country, 1999-2005 (US$bn)

                  1999E    2000E    2001E    2002E    2003E

Australia           3        7       14       23       36
China               1        5        9       15       36
Hong Kong           1        1        2        4        7
India              --        2        3        5       13
Indonesia           0       --        1        1        2
South Korea         3        4        8       17       30
Malaysia           --        1        1        2        4
Philippines        --       --        1        1        2
Singapore          --        1        1        2        4
Taiwan              2        3        7       14       22
Thailand           --        1        1        1        3

Asia-Pacific       11       24       47       86      160

                   2004E    2005E

Australia            56      76
China                73     125
Hong Kong            11      18
India                25      44
Indonesia             5      11
South Korea          49      77
Malaysia              6      10
Philippines           4       7
Singapore             7      11
Taiwan               35       5
Thailand              6      11

Asia-Pacific        278     444

SOURCE: GS RESEARCH ESTIMATES

COMPANY WANTS AD BREAK

24/7 MEDIA ASIA, a unit of Nasdaq-listed Chinadotcom, says it hopes to nab up to 15 per cent of the China online advertising revenues it estimates will quadruple to about US$50 million this year.

Rex Mai, managing director for China, also shrugged off critics who doubt that online advertising will be the main revenue driver for web portals, saying the model can work if China's portals rethink their pricing strategy.

"We hope to have 12 to 15 per cent market share here," Mai says.

He says growth of online ad revenues will be stronger than some analysts expect.