eBay's China Challenge

Rob Hof

Why can't U.S. Web companies make it in China on their own? Assuming the reports are true, it looks like eBay will soon be joining a number of U.S. firms that have offloaded their China Internet investments to local partners. As had been rumored for some time, the new reports have eBay teaming with Tom Online. It would be quite a switch, given that CEO Meg Whitman spent some $100 million last year on the site, only to lose ground to Alibaba, Yahoo's partner in China. (Not that Alibaba is without its troubles, either.) (Update: Corrected story link.)

What happened? There are some interesting (if unconfirmed) little hints at this Chinese blog. The gist clearly is that eBay didn't understand the market in China, despite buying a Chinese company and trying a number of strategies. Whatever the reason, this can't be a great development for eBay. Given CEO Meg Whitman's evident determination that last couple of years to make a go of it in China--coupled with eBay's exit from Japan years ago and its challenges in Korea--this has to be a bitter pill to swallow. And with China's Internet population set to exceed the United States' before long, it's a setback for eBay's long-term growth potential.

Update: Done deal.

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