Yahoo acquired a 10 percent stake in Gmarket on Wednesday, paying $60 million to Oak Investment Partners, a venture firm that owns most of the popular South Korean e-commerce and auction site.

Despite Yahoo and eBay’s recent alliance to defend against Google in the United States, Yahoo has been aggressively competing with eBay in Asian countries such as China, Taiwan, and Japan (see Yahoo, eBay Ally on Ads).

Those moves have caused fierce competition between Yahoo and eBay in Asian markets. Now the rivalry will extend to South Korea, one of the most wired nations in the world.

Yahoo shares climbed $0.34 to $31.04 in recent trading, while eBay shares rose $0.86 to $32.45.

On Tuesday Seoul-based Gmarket filed documents with the U.S. Securities and Exchange Commission signaling that it soon plans to go public and trade American depository shares on the Nasdaq under the symbol GMKT. Gmarket’s IPO could raise as much as $100 million.

According to filings, Gmarket made $72.4 million in revenue and $5.24 million in net income for the year ended December 31, 2005, mostly from transaction fees as well as advertising.

According to the web site tracker Alexa, Gmarket ranks 415, making it a very well-visited site in Korea.

But that ranking also puts Gmarket behind eBay’s Korean auction site Internet Auction Co., or “auction.co.kr,” which received a better ranking of 392.

In January 2001 eBay acquired a majority stake in the publicly traded Internet Auction Co. Ltd., for $120 million.

In Gmarket’s public filings, the company cites the extremely competitive environment of the South Korean e-commerce market as a major risk factor.

The filings point not only to eBay’s Korean Internet auction company, but also Daum’s Onket.com, and the company’s own shareholder Interpark.com, which runs other competing e-commerce sites.

Wired Nation

South Korea is an important battleground for the two U.S. Internet giants, as it’s one of the most advanced countries in the world in terms of broadband penetration.

According to the South Korean government’s statistics on e-commerce, the Korean business-to-consumer Internet commerce market turned over more than $7 billion in 2004, an increase of 30 percent over the previous year.

Revenues from the entire e-commerce market, including business-to-business sales and auction sites, were even higher in 2004, at over $100 billion.

Attempting to keep the nation’s position as one of the most wired countries on the globe, the South Korean government injects billions of dollars into maintaining its broadband infrastructure and fostering its industries.

The influx of money means eBay and Yahoo are fighting for a highly lucrative market that can also be used as a test bed for advanced trial services.

Asian Auction Battle

Yahoo’s investment in Gmarket is the company’s first move into an auction site in Korea, though the company has made some minimal moves into the Korean e-commerce market.

Meanwhile, Yahoo has been battling eBay in China (see Yahoo-eBay War Rages in China) and winning.

Yahoo spent an estimated $4 billion in August to take a 40 percent stake in Alibaba, which owns the auction site Taobao (see Yahoo’s $4B Alibaba Move).

A study released earlier this month by the China Internet Network Information Center (CNNIC) confirms estimates that Taobao has reached a market share of 67.3 percent, compared with eBay’s 29.1 percent.

In Japan, the story is similar, with Yahoo successfully beating eBay at its own auction game.

Contact the writer:KFehrenbacher@RedHerring.com