Alibaba group’s Taobao is well known as the number one C2C site with Alipay being the first choice online payment mechanism in China. However, Baidu entered the C2C competition by launching Youa with Baifubao as the payment mechanism.

Taobao started by blocking Baidu’s spider from indexing its millions of web pages. Take a look at the content of Taobao.com’s Robots.txt file:

User-agent: Baiduspider
Disallow: /

User-agent: baiduspider
Disallow: /

or access the file via your browser:

http://www.taobao.com/robots.txt

Run a site search on Baidu for Taobao.com and it returns only 2 results:

• Taobao’s member sign-in page
• Taobao’s B2C site: Taobao Mall Beta

Besides disappearing from Baidu’s natural search results, both Taobao and Alibaba stopped all advertising on Baidu PPC. Once both companies were on the list of biggest spenders of Baidu.

Earlier, Taobao merged with Alimama, and Koubei.com also merged with Yahoo China.

By launching Youa, Baidu lost the big PPC advertising revenue used to be generated from the Alibaba group. Baidu is also fighting an uphill battle to catch up with Taobao in China’s C2C market. The success may really depend on how well Baidu leverages from its large existing user base. Besides, Baidu also provides Chinese C2C users easy ways to import their products directly from Taobao to Youa.

For the Alibaba group, both Alibaba and Taobao are missing large search traffic volume that was used to be generated from Baidu. To make up the lost of traffic, the Alibaba group really has to work on improving Yahoo China in hoping this search engine will start gaining search market share in China.

The merge with Koubei.com is believed to enhance Yahoo’s localization in China as a search engine, and to add to Yahoo’s strength in building better services on life search.

The Alibaba group already owns Taobao.com (the largest B2C site in China) and Alibaba.com (the largest B2B site in China). With the group’s successful eCommerce experience, it is only a matter of time to see eCommerce being integrated into the existing Koubei community.

The leading Chinese search engine, Baidu:

Google China:

Yahoo China Search 360:

Yahoo China Portal:

Sina.com China:

Sohu:

Tencent’s QQ.com:

Taobao.com:

The earthquake happened in Sichuan province on 12 May has been the worst to hit China since 1976. Up till today the death toll of the quake has gone over 34,000 and some 245,000 people were believed injured in the disaster.

• Google will power Sina’s natural search results, which will allow Google to gain search market share in China. According to iResearch, Google’s web search market share in China was 18.1% which was behind baidu’s 66.3% in December 2006.
• In return, Sina will become paid search and contextual advertising partner of Google, in which the two companies will share the search and contextual advertising revenues.

I believe Sina chose Google ahead of Baidu due to the three reasons below:

• Many advertisers and publishers believe that Google Adsense’s contextual ads are more relevant than that of Baidu’s.
• Baidu has become a major threat to Sina. The obvious reason is that Baidu has been expanding its online empire with the additions of popular services like Baidu Space, Baidu Zhidao, Baidu Baike, Baidu Post, Baidu Life and so on.
• Search market share of Sina in China was less than 1% in December 2006. Obviously it does not make much sense for Sina to spend considerable budgets in maintaining its search engine algorithm. However, Sina’s own search engine algorithm iAsk will still be used to power other search verticals such as blog search, news search, image search and answers search across Sina’s web properties.

Ever since Google launched Google.cn and rebranded to Guge in early 2006, it has not yet made any significant progress in gaining search market share and advertising revenues in China. On the other hand, search competitor Baidu has doubled its advertising revenue in Q1 2007 and finished off by leading China’s search market share in December 2006 in 5 verticals. Other factors contributing to Google China’s limited progress include its failure to offer its Gmail service on Google.cn and to provide online music. Google China CEO Kai-fu Lee did not mention whether Google will launch Gmail nor music search in China. However, Sina will definitely become the next major traffic partner to Google, besides portals Soso.com and 163.com.

BBS is very popular in China, as a social community platform. Before the launch of Yahoo! Club, Sohu has already been running a similar service called Sohu Club which is the number one online community in China. To be honest, Yahoo! Club may be trying to follow the success of Sohu Club.

Some of the most popular forum topics in Sohu Club include stock markets, movies, cooking, and in-law relationships.

Update:

However, after Yahoo China’s merge with Koubei, you won’t be able to access Yahoo Club. Instead you will have to use the Koubei Community which is Yahoo-Koubei’s BBS.

At the first glance, SkypeFind is an online local yellow page service that will help users to easily find contact numbers and addresses of local businesses, such as hotels in Shanghai, and restaurants in Beijing.

Interestingly, Skype seems to be only promoting the Skype Find service on the two Chinese language web pages (simplified and traditional). Perhaps it is an attempt of Skype to tap into the Chinese Internet market. Though I believe whoever downloads and installs this version of Skype will have SkypeFind on it as well.

For example, if a seller is proved by Taobao to send the buyer a counterfeit item, this seller is forced to refund in full. The money will be deducted from the initial deposit of the seller.

In a country like China in which the laws of online purchase and eCommerce are not yet mature, there are official statements from one of Chinese consumer associations warning buyers. To avoid fraudulent sellers or merchants online, consumers should:

• Ensure the trading site is legitimate by looking at the company name, address and contact numbers.
• The prices of the items are not considerably or unreasonably lower than they should be.
• Ensure they attain the proof of payments (or invoices).
• Make the payments are made only after they have received what they purchased, otherwise use the escrow systems provided by the trading site.

In December 2006, the daily spend of Chinese consumers on Taobao has skyrocketed past 90 million yuan. During the 3 days of the New Year public holidays, this figure went past 100 million yuan per day.

This is a serious alarming signal to Taobao’s closest competitor eBay China (Eachnet), which has been struggled for years in China and have recently joined forces with both Baidu and TOM Online.

eBay China’s employees, however, are showing strong resistance against the move and are complaining about the scheme. Under this new scheme, eBay employees are first to have their current labor contracts ceased before they are to sign new contracts with the new joint venture with TOM Online.

Employees are mostly concerned with having to sign new contracts, they will not be able to keep their current benefits and salaries. On top of that, there is a good possibility that they may lose their stock options with eBay. Many employees are worrying that they will not be employed by the new venture for at least 1 year, as nothing related is clearly stated in their new contracts.

About 100 eBay China employees have signed a petition reflecting that they will not sign the new agreement. However, a spokesman from eBay China insisted that the company has no intentions to cut staff.

Failure in localization has been one of eBay’s biggest obstacles in growing its business in China. eBay’s competitor Taobao has been partnering local banks and logistics, and offers free services. eBay with a management team of expatriates, on the other hand, charges for service fees and focuses only on online advertisement to acquire new users.

eBay’s venture in China started with acquiring the Shanghai-based Eachnet.com for US$180 million in 2002. It has since spent over US$100 million to expand its business. Even with all the financial investment, it was easily beaten by the Chinese local C2C site, Taobao.com, which was only founded in 2003 and is currently in possession of over 50% of the online auction sector.

Tom Online has its problems as well and is desperate in finding new revenue models other than the wireless Internet services. Perhaps it has been feeling the brunt of regulatory pressure from the Chinese government and mobile operators.

Last month, eBay also announced its new partnership in China with Baidu, and I have analyzed the reasons why eBay needs Baidu.

• Baidu is to promote Paypal Beibao, PayPal’s service in China, as the preferred online payment mechanism on the Baidu Points platform.
• Baidu is to become the exclusive provider of text-based search advertising on eBay Eachnet. The testing of this text-based search advertising feature is expected to start in Q1 2007 with the full implementation in place by Q2 2007.
• Baidu and eBay Eachnet are to develop a co-branded toobar. The toolbar will let users to click on an eBay EachNet icon directly from the Baidu toolbar menu and be redirected to eBay EachNet’s online auction.

I believe joining forces with Baidu is the right move for eBay’s survival in China. eBay’s market share in China has dropped from 90% to just below 30% in less than 3 years in which eBay’s biggest Chinese rival Taobao.com is currently in possession of over 50% of the Chinese auction sector since its launch in 2003. Here are the five reasons that eBay China desperately needs to partner with Baidu:

Reason #1: eBay needs exposure on Baidu

With this partnership I expect eBay.com.cn to rank better across the board on Baidu’s search engine result pages, at least due to a higher publicity effect that Baidu will give eBay Eachnet. Whether Baidu will technically help eBay Eachnet in optimise its web pages will be another interesting expectation.

Ranking well on Baidu is more important than ranking well on Google China, as Baidu currently has a larger search market share than Google in China. Also see Baidu Gaining 2006 China Search Market Share.

Besides search, eBay will surely be benefited from Baidu’s many other verticals, in which I expect to see more at later stages.

Reason #2: eBay needs Chinese localized strategies

As a foreigner company in China, eBay absolutely needs a local power player like Baidu who understands the Chinese market. All these years, eBay’s many strategies in China are criticized as copycat versions of rivals Taobao and Alibaba and are often one step too slow.

Reason #3: eBay needs Baidu’s relationship network

Also with Baidu’s good relationships to other local Chinese companies and government, eBay will be able to easily avoid the hurdles that are very commonly encountered by foreigner companies in China.

while Google China (Guge) has dumped the Chinese Guge characters and replaced with this moon cake logo for Chinese’s Mid-Autumn Festival.

Alibaba insisted that both professional purchasers and entrepreneurs can benefit greatly from using its online B2B service, and currently has over 160 million registered users in over 200 countries.

According to Alexa Ranking, Alibaba’s international site has over 5 million daily visits.

Chinese bloggers can now sign up on Bokee Bank and choose from which company’s ads they want to place on their own blogs. Bloggers will be paid out their advertising revenues generated from their blogs via Alipay.