eBay "Plan B's" China...

As predicted in early November here at eBay Strategies, eBay has retreated to some degree in China according to reports from Fortune, WSJ and others.  The plan is for eBay to partner with Tom Online to launch an entirely new auction site.  eBay would own 49% of the JV and TOMO the other 51%.  Reviewing the stock analyst reports on this news they are mostly positive.  The thinking goes that eBay still has a foot in China and can continue to operate there with a strong partner. This is the approach Y! has taken in Japan (that crushed eBay) and also in China (with Taobao which has crushed eBay) and Korea (with Gmarket that is hurting eBay).  So it is interesting to see eBay finally adopt what has clearly been the winning strategy pioneered by Yahoo! finally.  The big question is will it be too little too late?  With Eachnet at 30% share and falling, this transition is sure to lose some more market share.

Also, I always hear from eBay sellers that feel as if their very high eBay fees are going elsewhere (Skype+China are the usual examples).  So I thought it would be interesting to review the eBay investment in China thus far.  Here's what I come up with:

2003 Eachnet investment - $30m
2004 Eachnet acquisition - $150m
2005 Investment - $100m
2006 Investment - $50-100m
2006/07 TOMO investment for JV - $40m

Investment to date in China: $370m-$420m

That $370m-$420m sure could have made a lot of site improvements in the US and European markets that are growing, or paid for tons of new buyers, etc.

I guess the good news is that with the recent re-org and changes eBay is making, they DO seem to be focusing away from Skype+China side-bar kind of activities and instead are getting back to basics.  I just worry that the 05/06 opportunities they missed out on due to these distractions may take 2-3 yrs to turn around.

Comments

[Sushant Ajmani]

Bill, no doubt it was a bad move by EBAY but; you gotta look at the Market Conditions. I agree, they have been crushed badly in the Asian Market and couldn't position their brand as expected but; this is the time to go for Brand Repositioning and offer the consumer something to percieve and that will be possible either by paying a huge switching cost or; making a venture with a native player who understands the profitable segments and helps in building a competitive strategy.

[Billoment]

As we all know eBay has a lot of problems. They have disenfranchised many regular sellers on the site, are working with an old platform that never worked well in the first place and have wasted money on Meg's pet projects that should have been used to keep the the commerce section alive and vibrant. Is it too late to turn things around? Only time Will tell but it is going to be a tremendous job to get it accomplished. Meg and the gang have made a mess of what could have been the absolute best on line mall around. Some one is lurking in the shadows getting ready to pounce on the opportunity that is there. 2007 is going to be a very interesting year.

Bill

[Sushant Ajmani]

Market Share and Profitability are 2 different ball games and especially in ASIAN Competitive markets where, most of the players are focusing on MARKET SHARE; EBAY has to pay a good amount to buy the existing customer loyalty from TAOBAO.

EBAY has to come up with competitive FEE structure (Initial and Final), Great Promotions and on top of that build a great CUSTOMER-CENTRIC model where, they don't have to pay a huge switch cost on behalf of the customers.