By Tyler Holt

At Glance Ebay China Taobao Major Issues Case Questions Quiz Outline

At a Glance CEO- Jack Ma May 2003 launched Taobao Ebay held 70% of market share 2008 eBay bowed out of market Taobao held 80% of market share

The Birth of China’s Online C2C Market Slow start due to low Internet penetration rate Lack of norms and laws supporting online exchange Technological and financial infrastructures needed for online auctions not in place

The Birth of China’s Online C2C Market Fraud was rampant Lacked comprehensive online payment system Mainly debit cards specific to each city Lack of credit system Banks hesitant about issuing credit cards

In 2001 Bank of America and China Construction Bank issued credit cards through online application China UnionPay- single card processing system million bank cards billion bank cards

The Rise of Eachnet.com 1999 many internet B2C shopping sites started: Yabuy.com Netease.com Sina.com Eachnet.com

The Rise of Eachnet.com Founded in 1999 by Bo Shao and Haiyin Tan MBAs inspired by Ebay Major difficulty= customers trading in person

The Rise of Eachnet.com Problem- payment processing Cash-on-delivery system Partnerships with major banks to encourage credit card use Escrow and “paypal” used but abandoned early on

The Rise of Eachnet.com Attempted to earn profits- Switch from free service to pay for listing Auctions dropped dramatically Ebay approached in 2001 A new approach to Asian expansion Used eBay market principles eBay paid $180 million in 2003 for Eachnet.com

eBay China 1995 as experiment by Pierre Omidyar 1998 went public, worth billions By 2001 expanded to Europe, Latin America, Australia, New Zealand, Singapore, Korea, Japan Lost Japan in 2001 Announced entry into China

Leveraging eBay’s Global Strategy and Organization Use world-wide capabilities to compete High-ranking executives to lead eBay China Servers moved from China to Silicon Valley Long-term sustainability Regional layer- eBay Asia

Taobao Rivals eBay China Jack Ma- founder of Alibaba.com, B2B College english teacher-China’s earliest Internet pioneer No Knowledge of computers Found out about internet during visit to US 1999 founded Alibaba.com 2002 leading B2B Chinese website

Taobao Rivals eBay China Saw eBay as serious threat early Lots of government support Launched Taobao as a way of cutting off eBay Secretly started Taobao “searching for treasure” $12 million investment from Alibaba to Taobao

Taobao Rivals eBay China Worker ant mascot- unite and fight to the end 2004 eBay still saw Taobao as a fledgling company “….shark in the ocean, but we are a crocodile in the Yangtze” Help from Masayoshi Son of Softbank from Japan

Competing for Customers eBay bought exclusive ad rights to major websites Taobao used grassroots computer bulletin board services (BBS) “They have deep pockets, but we will cut a hole in their pockets”

Competing for Customers Fee-free service Used typical Chinese department store structure Sense of community Instant messaging service, full contact information

Competing in Payment Services “An Fu Tong”- Secure Pay, built on Eachnet payment and escrow services. Similar to Paypal eBay bought Paypal in 2003 Paypal scrutinized by government- no international transactions or flexible credit An Fu Tong and Paypal led to confusion

Competing in Payment Services “Alipay”- provided escrow and help with transportation % of listings for Taobao accepted Alipay 21% of listings for eBay accepted online payment

Competing for Partnerships Taobao partnered with Sohu (leading portal website) MSN China chose Taobao rather than eBay for shopping channel eBay partnered with Global resources (international trade information provider)

The Problem of Counterfeit Merchandise Market flooded with counterfeit products- clothing and accessories Government defended Taobao from seller fraud eBay vulnerable to sellers committing fraud

The Endgame Taobao flexible and fast to respond to users eBay bogged down by global platform complexity eBay replaced CEO several times Tried several partnerships

The Endgame Paid $40 million to Tom online to take control of eBay China Renamed Eachnet and entirely cut off in 2007 eBay.com.cn designated to international trade Eachnet.com domestic C2C

Becoming a Profitable Company 2006 Fee-based service New product PR disaster Asked for vote from customers 2008 “Mall of Brands” B2C Entirely fee-based

Where they are now Taobao advertising revenues $220 million advertising revenues >$765 million eBay- Partnered with three Chinese manufacturing giants Breo- professional healthcare products Kwong Pontus Telecom and Techno Company- communication electronics products Aigo- digital and electronic equipment

Major Issues Fraud Lack of integrated banking system Competition for customers Competition for payment services Competition for partnerships Counterfeit merchandise

Would you have started Taobao as non-fee based? What factors should eBay have paid more attention to? What were the critical errors that eBay made?

Quiz What profession was Jack Ma when he started Alibaba.com?