eBay in China

TIME writes why eBay must win in China given the Yahoo-Alibaba deal:

The critical importance of eBay’s international growth, and of China’s piece of that growth, couldn’t be clearer. In just a decade, eBay has gone from America’s online flea market–purveyor of old 45s, Happy Days lunch boxes and Pez dispensers–to a global powerhouse, with footprints in no fewer than 32 countries. In fact, in the first quarter of 2005, the number of registered eBay users abroad exceeded that at home. According to John Yunker, president of Byte Level Research, “by 2006, and perhaps even by the last quarter of this year, non-U.S. revenue will surpass U.S. revenue.” That’s because eBay’s revenue growth is slowing in the U.S. as the market matures (last year domestic revenues grew 34% to $1.89 billion) and because its international growth has been extraordinary. eBay’s gross-merchandise volume (GMV)–the total dollar value of the deals done on a given website–in Britain, France and Italy all increased 100% or more last year. Consider that in 2000, eBay’s international revenue totaled $29 million. By 2004, that figure was $1 billion.

For some time, it was simply a given that eBay would take China by storm as the online marketplace exploded, that it would be, as Bear Stearns analyst Robert Peck puts it, a “layup.” In 1999, Shao Yibo, a Harvard Business School graduate, started EachNet, an e-commerce company, in China. Shao’s site openly aped eBay in style and content, effectively screaming “buy me” at the San Jose, Calif., giant. In 2002 eBay complied, paying $30 million for a third of the company and taking the rest for an additional $150 million the following year. This, arguably, was a hefty price for a start-up in a market in its infancy, but that was hardly the point. China is on its way to having 200 million Internet users. E-commerce is surging, and dotcom companies in general are back in favor. Wildly so.

But eBay’s dominance of the next great e-commerce market has turned out to be anything but a layup.

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Rajesh Jain

An Entrepreneur based in Mumbai, India.