EBay lauds China's e-commerce potential

EBay has big plans in China, where it will invest $100 million this year to grow its business.

EBay executives this week called China the "largest e-commerce opportunity today" and reaffirmed the online auction company's plans to invest US$100 million in the country during 2005.

"We are doubling down in China because the potential for Internet commerce in that country is simply extraordinary," Meg Whitman, eBay's chief executive officer, said at the company's analyst conference in San Jose, California, on Thursday. China's current online population already exceeds that of Germany and the U.K., two of eBay's most important markets, and by 2009 is expected to surpass that of the U.S., she said in remarks that were webcast.

"Behind that growth will be 170 million middle-class households by 2010," Whitman said. "In short, five to 10 years from now, (a company's) share of e-commerce in China is likely to be the defining measure of business success on the Net."

EBay entered China in 2002 when it bought one third of EachNet.com for US$30 million. It acquired the remaining two thirds a year later for an additional $150 million and finished integrating the site with eBay's international network in September last year. That integration means that products listed for sale at the eBay EachNet can appear on eBay sites in other countries, and vice-versa. EBay also added a number of new features to the service.

The integration process caused growth to slow at eBay EachNet but, with the work now complete, eBay has earmarked US$100 million in spending this year to promote the new service, Whitman said in January when eBay announced its financial results.

"As you think about 2005, (investment) goes into more product development, it goes into customer support, trust and safety," she said in January, according to a transcript of the earnings conference call. "It goes into online advertising, offline advertising, and we are accelerating that spending because the market is growing so rapidly."

The goal of the investment goes beyond China's Internet auction sector, she said.

"What we are focused on there is not only our leadership position in the marketplace business, but securing the leadership position in e-commerce overall in China," Whitman said in January.

She added this week: "We are on a tear to be the undisputed winner in China and the additional US$100 million investment we announced last month should be a sign of an unmistakable commitment and an unstoppable determination to win that market."

Whitman dismissed eBay's rivals in China as "a bunch of small competitors ... nipping at our heels," but in fact they include names such as Yahoo, which has a joint venture in China with Sina, and Hong Kong-based Alibaba.com, which is well known in the region. The latter operates a major business-to-business portal under its own name as well as the Taobao.com consumer-to-consumer site. In July last year Alibaba.com said it would invest 350 million renminbi (US$42 million) into Taobao.com.

Elsewhere in Asia, eBay reported good business at its South Korean unit, Internet Auction, of which it owns 99.7 percent.

"Internet Auction achieved US$1 billion in gross merchandise volume faster than any Korean retailer has ever done," Whitman said at the analyst conference this week. "One out of every two Koreans between the ages of 20 and 40 are registered Internet Auction company users."

EBay also operates Asian services in Australia, Hong Kong, India, Malaysia, New Zealand, the Philippines, Singapore and Taiwan. It counted 27 million users and 100 million listings in the region in 2004, and its revenue from business in the region last year was US$157 million.

EBay's excursions in Asia haven't all gone well, however. Its Japanese service was launched in early 2000 and then closed in March 2002, after it failed establish a significant business in the face of competition from Yahoo, which arrived earlier in the country, and some local companies.

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