Monday, June 27, 2005

The Taobao Offensive

From Red Herring: Taobao Plots eBay Offensive

"Meg Whitman is coming to China, and Jack Ma, founder of eBay’s largest mainland rival, can’t contain his elation. “When my team heard she was spending much of the summer in China, we were all dancing,” beams Mr. Ma, who launched auction site Taobao—the name means “digging for treasure” in Mandarin—in May 2003. The former English teacher calls Ms. Whitman’s trip to China, which was confirmed by eBay’s China team on June 2, “an admission of defeat.”"

"If the numbers that Taobao trumpets are true, Mr. Ma has reason to believe that he will win. On the sidelines of the Fortune Global Forum in May, he predicted that Taobao’s GMV (gross merchandise value) will easily outstrip the $400 million that Ms. Whitman forecast for eBay EachNet, the San Jose, California-based company’s China operation, in 2005. “We had 1.13 billion renminbi in GMV [about $137 million] just in the first quarter,” says Mr. Ma. He rattles off more metrics: $82 million in GMV in May alone, 75 million page views a day to eBay’s 15 million, 8 million new product listings a day, and 20 times the total product listings of its competitor."

"None of this, however, is actually paid for by Taobao’s users: since its launch on July 10, 2003, the site has offered all listings for free and, unlike eBay EachNet, charges no final value fee for completed transactions. To Taobao skeptics, this sounds all too familiar. “It’s a bit like the early days of the Internet,” says Paul Waide, an editor at Shanghai-based analyst firm Pacific Epoch. “They’re using metrics that don’t really mean anything. What everyone wants to know is how they’re going to turn those into revenues.”"

"Competition between the two sites has become somewhat personal, it seems. Mr. Ma alleges that eBay has spent money on outdoor advertising in Hangzhou, a city of 2 million, completely out of proportion to the city’s market importance. “In front of my office there’s a huge building with an eBay ad,” says Mr. Ma. “They’re just trying to make me unhappy. That’s just an emotional response.” Mr. Zheng (eBay EachNet’s chief operating officer) points out that his Shanghai offices are similarly surrounded in Taobao ads. “They bought ads right at the entry to the subway station in front of the eBay office,” he says."


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