Posted by: Bruce Einhorn on September 26, 2006
What should Meg Whitman do about eBay in China? She made headlines back in 2003 when eBay took control of Eachnet, what was then China’s leading auction site. Later, Whitman upped the ante by declaring that China was vital to the future of e-commerce and that eBay would therefore invest $100 million in the country. The company’s Chinese adventure hasn’t turned out so well. The company is now a distant No. 2 in China. The biggest C2C operator in China is now Taobao, a Hangzhou company run by Jack Ma, the fast-talking former schoolteacher who is the founder and CEO of Alibaba.com, in which Yahoo owns 40%. Ma relishes talking trash about eBay.
The rumors are now flying about eBay doing something to fix its China problem. As my colleague Rob Hof writes here on the BusinessWeek TechBeat blog, one report in the Chinese press has eBay throwing in the towel and selling to Tom.com, the Hong Kong-listed company owned by billionaire Li Ka-shing. Meanwhile, Pacific Epoch cites a rumor from the Chinese Internet that that eBay is talking with Tencent, the fabulously successful internet messaging company based in Shenzhen. Tencent operates QQ, the IM service that is ubiquitous among Chinese students. Microsoft has tried to get a foothold in the market but QQ still dominates and Tencent has been using QQ as a way to break into other businesses such as online gaming.
I think it’s unlikely that eBay walks away from China entirely. It would be just too embarrassing to Whitman, for starters. And with China on track to becoming the world’s largest Internet market, she was correct when she said that eBay needs to be strong in China in order to be globally competitive. But not many Western companies are successful when they try to go it alone in China, especially not Internet companies. Microsoft has formed a joint venture with Shanghai Alliance, an investment company backed by Jiang Mianheng, the son of former president Jiang Zemin. Yahoo tried for years to run its own operation in China, with little luck, before it teamed up with Jack Ma and Alibaba in August 2005. Given the difficulties of operating in China, a place where most consumers still aren’t familiar with ecommerce and don’t feel comfortable using credit cards, eBay shouldn’t be trying to go it alone. Teaming up with Tencent or Tom would make sense as a way for eBay to get back into the game.