China Payments News - Yahoo-eBay War Rages in China

Peace may have broken out between eBay and Yahoo in the United States, but one of the bloodiest battles on the web - the contest over China’s online auction space - rages on between their Chinese allies. Yahoo and eBay announced last week they’ll cooperate on their U.S. search, advertising, and online payment efforts. But that teamwork won’t extend to their affiliates in China, according to officials at the Asian operations.

Yahoo’s interests are tied with Alibaba.com, China’s leading online business-to-business platform, which owns auction site Taobao.com. Last August, Yahoo paid $1 billion in cash for a 40 percent stake in Alibaba as part of a $4-billion deal that gave Alibaba control over Yahoo’s operations in China. And since Taobao’s launch in July 2003, it has wrestled with eBay EachNet, the San Jose, California-based auction giant’s Chinese subsidiary.

A study released earlier this month by the China Internet Network Information Center (CNNIC) confirms Taobao’s claims to market dominance in China. The study, based on telephone and online surveys of buyers and sellers in Beijing, Shanghai, and Guangzhou, estimates Taobao’s market share at 67.3 percent compared with eBay’s 29.1 percent. The remaining 3.6 percent goes to PaiPai, a relatively new entrant, which is operated by China’s leading instant messaging provider, Tencent. Market share was calculated based on total reported purchases across China’s three leading auction sites, but didn’t take transaction value into account.

Taobao’s market share is attributable, at least in part, to the fact that the site does not charge either listing or transaction fees. While this approach once prompted EachNet founder Bo Shao to comment, "Free is not a business model," eBay EachNet announced earlier this year that it would waive sellers’ fees as well as commissions on transactions paid for through PayPal, the company’s online payment facility. ( Red Herring )

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