Note to Google: eBay admits defeat in China
It's official. eBay is shutting its China site. The Browser feels a little humiliated on Meg Whitman's behalf. Her famous summer sojourn to Shanghai in 2005 attracted some mockery from rival Jack Ma. eBay had been rebuffed in Japan a few years ago, so in China it was plying Chinese consumers with free hours of karaoke in exchange for joining eBay. So much for an Asian invasion.

So what went wrong? For one thing, eBay's rival in China,, was free from the start. eBay eventually dropped its transaction fees too, this past January, but that was a case of too little too late. At the root, though, was eBay's failure to grasp the Chinese consumer's buying habits. From an article last May in the San Francisco Chronicle:

Dai said she switched to Taobao after eBay acquired EachNet and redesigned the Web site to conform to its global format.

"At first, EachNet was really convenient, but after it changed its layout, it was a mess. I didn't know how to use it anymore," she said. She has remained on Taobao ever since, mainly because of its free service.

But Dai also prefers Taobao because it allows her to call, e-mail or chat with other users before a product is purchased.

EBay permits users to leave messages for each other on its site, but conceals personal contact information until a buyer wins the bid. This ensures that users carry out transactions on the site, rather than directly between buyer and seller, explained Liu Wei, public relations manager at eBay EachNet.

Global formats? Preventing users from building the kind of community they want? Google should be watching eBay's slip-up very closely as it takes on the Chinese homegrown search site Baidu. When Baidu's CFO Shawn Wang was at Fortune's offices earlier this year, he explained that the most popular feature on the site [aside from searching for mp3's] was the user message boards.

Google doesn't have an equivalent draw in China, and that's probably giving users one big reason not to use it. Perhaps that explains these numbers from a Bloomberg article: "Beijing-based Inc. may raise its share of the Chinese search market to 56 percent next year, more than double Google's 19 percent, according to a Sept. 28 Credit Suisse Group report."
Posted by Jia Lynn Yang 9:24 AM 2 Comments comment | Add a Comment

eBay's defeat shows that China is not a mature Capitalism market. It should be a warning to all business which want to develop into China.
How can suvive with free transaction fees? Is it a state run company that can borrow money from a state run bank endlessly? Think about it.
Posted By Bob, Atlant, GA : 12:53 PM  

Ebay's problems in China had more to do with a lack of understanding their customers than in not having political connections or having something inherently wrong with China's business landscape. The Eachnet team did quite well before Ebay screwed it up. If Meg Whitman et. al. had actually taken the time to understand their consumers (and listened to their employees from Eachnet on the ground in China for that matter), then China would have been a success for them as Jack Ma��s Taobao (YHOO) has been.

I have written about Ebay's problems in China on Yahoo Finance/ Seeking Alpha.

Shaun Rein
Managing Director
China Market Research Group (CMR)

"Ebay Faces a Tough Road in China."

"TOM Online Must Focus on Products: Connections Don't Ensure Success"
Posted By Shaun Rein, Shanghai, China : 1:01 AM  

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