eBay Joining Forces With TOM Online
eBay, the world’s largest online auction site, is to close its Chinese operations after almost 5 years of participartion and announced that it is starting a 49 -51 joint venture with Tom Online Inc of Li Ka-Shing, the richest man in Asia. eBay will invest $40 million for the 49% stake, while Tom Online, with core business in selling cell phone ring tone, will invest $20 million. A joint site will also be launched in 2007.
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.
[...] A problem has arisen recently with eBay, which has signed an agreement with TOM Online on 20 December 2006 for a joint venture agreement in China. According to the agreement, the 2 companies will combine expertise and a joint investment to build a new China marketplace mainly for mobile operations and electronic commerce. The new venture will include the take-over of the eBay’s operation in China (known as Eachnet), in which the eBay’s China ecommerce operation will shift to focus on international business. [...]