eBay China Rumors
A lot of rumours about the future of eBay’s China division (eBay Eachnet) and its PayPal service are finding its way over the web.
The most cited one is that eBay Eachnet and it’s paypal service will be sold to HONG Kong-listed Tom.com, a media company that already distributes Skype (owned by eBay) in China.
Another rumor is that eBay Eachnet is in acquisition talks with Tencent, known for its instant messaging service platform “QQ”.
And yet another that Tencent is interested in buying eBay Eachnet.
eBay acquired Eachnet, the only online auction website at the time, in 2003 for US$ 180 Million and became the main player in China. Not long after that Chinese e-commerce firm Alibaba (owner of Yahoo China) started its own auction website, Taobao, that was as well free (no commissions) and more community oriented.
From a profile on Alibaba founder Jack Ma in the Economist:
In contrast with eBay’s relative anonymity, Taobao lets buyers and sellers get chummy through messaging and voice mail, and by posting photographs and personal details on the site. Turning e-commerce into a community of â€œfriendsâ€ has been critical in a country beset by a lack of trust. And with 70% of China’s web users aged under 30, Taobao’s informal, blog-like format struck a chordâ€”attracting more than 20m users. Many have now gone professional, buying goods wholesale on Alibaba and reselling them on Taobao. The story goes that, shortly after visiting Alibaba’s offices and seeing Taobao, Meg Whitman, eBay’s boss, bought Skype, an internet-telephony start-up, for its instant-messaging.
In less than 18 months Taobao became the No 1 auction site. In a survey from 2005 the China Internet Network Information Centre found out that two-thirds of consumer-to-consumer online traders in China used Taobao, compared to eBay Eachnet’s 29.1%
Alibaba also launched its own payment system, Alipay, a system that keeps cash in escrow until goods arrive. A system that works better in China as credit cards are not widely used and it gets round settlement risk. Trust is a not a commodity in China and people are used to pay only once they have the physical goods in their hands. Ebay Eachnet followed later.
Once again, Rumours
As said, these are all rumours, but as always when there are rumours something must be cooking. eBay China has performed poorly, is loosing market share and, no surprise, is grappling with how to manage its China business. Enough reasons to find a partner or maybe even leave altogether.
Techcrunch adds another possible reason for all the rumours, saying that:
“China is preparing new regulations limiting foreign ownership of companies operating online payment systems.”
If that is the case a partner, at least for Payapl, will become a necessity and maybe that would be the best outcome for eBay anyway. Leaving the big China market now wouldn’t make much sense. Understanding the Chinese would benefit eBay more. Instead of following Taobao’s foot steps it should take the lead, replacing the baseball cap with a Mao hat.
Gemme van Hasselt is an Internet Marketing Consultant, living in Shanghai, China. His musings on life can be found on China Snippets