eBay China to Roll Into Joint Venture

eBay is repositioning itself in China, roll its Chinese operations into a minority position in a partnership with Tom Online.

Online auction juggernaut eBay has announced (PDF) it is repositioning itself in the Chinese market, rolling its operations into a minority stake with a new partnership with Tom Online, an Internet and wireless company controlled by Hong Kong entrepreneur Li Ka-shing. The move marks a major repositioning for the company, which has previously heavily invested in creating a Chinese version of its auction business, only to see its grand hopes fail to fully materialize.

Under the terms of the partnership, eBay will hold a 49 percent stake to Tom Online’s 51 percent, and reports say eBay plans no job reductions in China.

Way back in 2002, eBay actually pulled out of the Japanese market, ceding victory to Yahoo Japan Corp. However, the Tom Online partnership is seen as more of a strategic shift for the company rather than an admission of defeat. In 2003, eBay bought a one-third stake in EachNet, a person-to-person trading business operated in Shanghai, and has managed to secure nearly one-third of the Chinese online auction market. But the dominant player is Taobao, an online auction site run by Alibaba, a Chinese-based Internet company. eBay’s partnership with Tom Online is seen as a way to make its business more responsive to the rapidly shifting—and rapidly growing—Chinese market, rather than simply trying to apply strategies and techniques which were successful in Western marketplaces. Plus, Tom has more than 75 million wireless customers.

To create the new partnership, eBay plans to chip in $40 million, while Tom Online will pony up $20 million; Tom CEO Wang Lei Lei will be chief executive officer of the new joint venture.