eBay admits FAILURE in China, eBay Eachnet to close, Tom Online to run new China JV auction site

[mandy]

The latest:

eBay Eachnet, the Mainland unit of the world’s largest online auction company eBay Inc., has denied reports that it has signed an agreement with Tom Group Ltd. to sell its business to the Chinese company that is controlled by Hong Kong’s richest man Li Ka-shing...

However, a report today by the South China Morning Post quoted a source as saying that the two companies are still in the first stages of negotiation and that nothing concrete has been agreed upon.

“The negotiations are at an initial stage and if everything goes smoothly an agreement may be reached in two to three months,” a source was quoted as saying...

Taobao currently holds 67.3% of the Mainland market while eBay holds 29.1%...

full article: http://www.chinaknowledge.com/news/news-...px?id=4460

[mandy]

The rumors continue:

Now the Internet magazine is reporting (citing Chinese media sources) that Tom Online has signed an agreement with eBay Eachnet to acquire it with a formal announcement coming soon...

eBay is denying the rumor.

Well, this doesn't sit well with me at all:

    * First of all, Meg Whitman, eBay's CEO just recently said in the Q3 earnings call that eBay is committed to China.
    * Second, after leaving Japan and having increasingly strong competition from Gmarket in Korea, selling eBay Eachnet would mean eBay is not only leaving China, but the whole of Asia pretty much (well, not India).
    * Third, I also mentioned here the possible difficulties for Skype in China and PayPal already has a problem there with regulations as it cannot be fully owned by foreigners. What does that leave then?...

full article: http://www.bloggingstocks.com/2006/11/03...agreement/

[mandy]

The latest rumor:

eBay is expected to sell a proportion of its ownership of the Chinese division of Paypal, its online payment system, to Tom Group for cooperation, but the proportion of shares is under discussion...

eBay Eachnet will still be run by eBay directly, and Kijiji, an online platform for people to post free advertisements for job postings, housing services and a host of other services, will run independently...

eBay China and Tom Group refused to comment on the news...

full article: http://www.shanghaidaily.com/art/2006/12..._units.htm

[regic]

WSJ article:

Rumors are that eBay will announce it is closing eBay Eachnet (eBay China), and will open up a new joint venture Chinese site with Tom Online.  The new site would be 49% owned by eBay, 51% by Tom.

(subscription required) http://online.wsj.com/article/SB116647579560853680.html

EDIT: eBay recently made a similar move in Taiwan when it closed its Taiwan site and opened a new join venture site with PCHome (eBay has a 35% minority interest in the new Taiwan site).

[mandy]

more info:

EBay Inc. will roll its China site into a joint venture run by a Chinese partner, a source said, in the latest example of a Western media firm ceding control of its China operation in the face of a tough market.

Under the plan, eBay, the world's biggest online auctioneer, will put its China eBay business, which it purchased for $180 million, into a venture with Beijing-based Tom Online...

Tom Online , an Internet and wireless media specialist, would hold a controlling 51 percent of the venture, with eBay holding the remaining 49 percent...

and eBay rumored to give up majority control of PayPal China:

PAYPAL DEAL

In a separate deal, eBay's PayPal online payment unit, which set up shop in China last year, will announce its own deal to form a joint venture with a locally based electronic payment specialist, according to local media reports.

Under that deal, PayPal will give $105 million for a 33 percent stake in the venture with UMPay, which is itself a joint venture between China Mobile , China's top mobile carrier, and China UnionPay, operator of an electronic financial system linking most major Chinese banks.

http://news.moneycentral.msn.com/provide...x?feed=OBR&Date=20061219&ID=6286895

EBay Inc. is expected to announce plans Tuesday to open a new Chinese Web site as part of a joint-venture with a Beijing-based Internet company, signaling a strategic shift in the online auction company's Chinese operations.

The new site -- operated by online portal and wireless operator Tom Online Inc. -- will focus on the domestic Chinese market, according to a person familiar with the deal who requested anonymity because it hadn't been formally announced.

EBay's current Chinese portal, http://www.ebay.com.cn, will become a platform for Chinese merchants to sell to international buyers...

EBay will initially contribute $40 million to the venture, and Tom will contribute $20 million...

full article: http://biz.yahoo.com/ap/061218/ebay_china.html?.v=1

[regic]

9 months after the rumors (and this thread) began, its official: eBay makes a face saving move (a la Taiwan) and admits defeat in China.

The press release from eBay:

[quote]eBay Inc. and TOM Online Announce Joint Venture Agreement To Enable
Next Phase Of E-Commerce Growth in China

SAN JOSE, Calif.,/SHANGHAI and BEIJING December 19, 2006 – eBay Inc. (Nasdaq:
EBAY) and online portal and wireless Internet company TOM Online (Nasdaq: TOMO;
Hong Kong GEM: 8282) today announced a joint venture agreement that will set the
foundation for the next phase of growth of e-commerce and m-commerce in the rapidly
growing Chinese market.

eBay EachNet, eBay Inc.’s China-based subsidiary, and TOM Online will combine expertise
to build a new China marketplace in 2007. The new marketplace will bring together the
strengths of both companies – eBay EachNet’s global e-commerce knowledge and large and
active trading community in China, and TOM Online’s local market knowledge and active
wireless user base of more than 75 million.

The new marketplace will bring enhanced online and mobile opportunities to buyers and
sellers in China, evolving eBay’s participation in China and extending TOM Online’s
wireless service portfolio into m-commerce. Upon the launch of the new marketplace, eBay
EachNet users will be invited to transition to the new site, and TOM Online will work to
deliver its user traffic to the site as well.

"eBay has helped pioneer e-commerce in China, and by combining our expertise with that of
a strong local partner like TOM Online, we are even better positioned to participate in this
growing market,” said Meg Whitman, President and CEO of eBay Inc. “This agreement is a
sign of our continued commitment to delivering the best online buying and selling
experiences in China.”

“eBay is one of the world’s most recognized e-commerce brands and TOM Online has a
proven track record of delivering outstanding services to Chinese consumers,” said Wang Lei
Lei, CEO of TOM Online. “The new online marketplace to be built by the joint venture will
provide an enhanced user experience, tailored for the China market, and will capitalize on our
companies’ strengths in the emerging m-commerce sector.”

eBay will have a 49% stake in the joint venture, and TOM Online will have a 51% stake.
Both companies will make financial contributions to the venture, including a US$40 million
cash contribution from eBay and US$20 million in financing from TOM Online. If mutually
agreed, the two companies can equally share in an investment of up to an additional US$10
million. In addition, eBay will also contribute its EachNet subsidiary, while TOM Online will
contribute local management expertise, technology, and brand. The formation of a joint
venture will foster synergy among user communities and distribution channels, enhance rapid
product innovation capabilities on a local platform, and promote mobile integration.

China has an Internet population of 123 million Web users as of June 2006, which grew by
19% over the last year, and the country has more than 400 million mobile users. The China
eCommerce market is experiencing explosive growth, and could rise to 46 billion yuan in
value next year, from 5.6 billion yuan last year, according to IResearch. By working
together, eBay and TOM Online will improve their ability to tap into the potential of new
online commerce trends in China. This new venture builds on the existing relationship
between TOM Online and Skype, eBay Inc.’s online communications business.

Wang Lei Lei will be chief executive officer of the JV, and drive the vision for the new local,
China marketplace. eBay EachNet CEO Jeff Liao will provide management support from
eBay to the JV. Liao will also continue to lead eBay’s separate operations in China, including
the expansion of eBay’s business efforts in China to promote global trade by PRC-based
sellers, as they ramp up their trading practices with people around the world.
eBay will also continue to grow the China Development Center for worldwide product
development under the local leadership of recently appointed General Manager Daniel Lee, a
former Yahoo! Asia CTO. eBay Inc. expects to continue to increase headcount in China into
2007 as it evolves its presence in the market.

eBay does not expect this partnership to have a material impact on eBay’s financial guidance
as issued in connection with its third quarter earnings release on October 18, 2006.


About eBay EachNet
eBay and EachNet, a leading e-commerce company in China founded in 1999, have been
working together since March 2002, when the two companies formed a strategic relationship.
In June 2003, eBay increased its investment in China by acquiring EachNet. With eBay’s
global resources and continued best practice sharing, eBay EachNet has become one of the
major online marketplaces in China.

About TOM Online
TOM Online Inc. (Nasdaq: TOMO; HK GEM stock code: 8282) is a leading wireless Internet
company in China providing value-added multimedia products and services. A premier online
brand in China targeting the young and trendy demographic, the company’s primary business
activities include wireless internet services and online advertising. The company offers an
array of products such as SMS, MMS, WAP, wireless interactive voice response services,
content channels, search and classified information, free and fee-based advanced email and
online games. As of September 30, 2006, TOM Online is the only portal in China that
enjoyed a top three ranking in every wireless internet service segment.

TOM Online is a subsidiary of TOM Group Limited (“TOM Group”), one of the leading
Chinese language media groups in the Greater China region. TOM Group’s diverse
operations span five media sectors: the Internet (through TOM Online Inc.), outdoor (through
TOM Outdoor Media Group), publishing, sports and TV & entertainment.


Forward-Looking Statements
eBay Inc.
This announcement contains forward-looking statements regarding eBay (including without
limitation as described in the quotations from management in this announcement) and their
strategic and operational plans related to, and the expected financial impact of, the announced
strategic agreement. Those statements involve risks and uncertainties, and actual results could
differ materially from those discussed. Factors that could cause or contribute to such
differences include, but are not limited to, regulatory uncertainties relating to doing business
in the People’s Republic of China, the rate of development of the mobile and internet-based
marketplace business sector in the People’s Republic of China, the reaction of users of each
company's services to the strategic agreement and associated product changes, the reaction of
each company's competitors to the strategic agreement, potential product development issues,
and the possibility that the expected benefits of the strategic agreement may not materialize to
the extent expected or at all.

[FineThings4U]

Why does this not surprise me?  eBay is about to show store owners the express line out of the door.

:blinkie:

[mandy]

Press coverage:

If only EBay Inc. had listened to Chinese Internet users like Gong Yunzhe.

The 25-year-old Shanghai woman is one of 30 million Chinese who have bought goods online. She tried EBay but found it costly and hard to use. Worst of all, none of its online stores had phone numbers or e-mail addresses on them.

By contrast, Taobao, EBay's rival in China, allowed Gong to chat instantly with sellers through messaging and voice mail.

"You can ask any question about the product, tell the seller when you want to get it and bargain to beat down the price," she said. "This is the Chinese way of buying products, not waiting for e-mail from the seller you are unfamiliar with."

The cultural gap is one big reason EBay's chief executive, Meg Whitman, is shifting strategy in China.  She announced today in Shanghai plans to shut down the company's main website in China...

full article: http://www.latimes.com/technology/la-fi-...technology

Ebay's decision to close its main online auction website in China and replace it with a minority-invested joint venture is a stark illustration of the difficulties facing foreign internet companies in the country.

The decision to give control of its main China operation to Beijing-based portal and telecom service operator Tom Online marks a stunning strategic shift for Ebay, which has struggled to fend off competition from Chinese auction rivals led by Alibaba.com.

The disclosure late on Monday of a retreat follows months of rumours, recently fuelled by apparent leaks to technology websites from disaffected employees of Eachnet, the Shanghai-based auction company it acquired for $180m in a deal completed in 2003...

full article: http://news.moneycentral.msn.com/provide...px?feed=FT&Date=20061220&ID=6289826

EBay Inc. will close its unprofitable China Web auction unit and form a venture with billionaire Li Ka- shing's Tom Online Inc. to run the business in the world's second- biggest Internet market.

EBay, based in San Jose, California, will pay $40 million for a 49 percent stake in the venture, both companies said in a statement today. Li's Hutchison Whampoa Ltd. controls the parent of Beijing-based Tom Online, an Internet company that sells services such as ring tones for mobile phones.

The China closure comes after EBay shut a Web site in Taiwan in June and one in Japan in March 2002 as it battled to adapt to local conditions. The U.S. company says it will work with Tom Online to boost its business in China, where EBay's market share has declined by half since it entered the Asian nation five years ago, according to data from research companies...

full article: http://www.bloomberg.com/apps/news?pid=20601080&sid=aCMgkAe7EAsc&refer=asia

[dimucci]

[quote author=dimucci link=topic=3089.msg24785#msg24785 date=1159283186]
eBay Japan
eBay Taiwan
eBay China

:popcorneaters:

[/quote]

eBay Japan
eBay Taiwan
eBay China

South Korea next? 

[sneakymagenta]

Ebay is hoping its members don't notice this colossal failure and waste of its $370-$420 million investment .  Nada on the announcement board.

http://ebaystrategies.blogs.com/ebay_str...bs_ch.html

lso, 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.