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Tom Online: eBay's Last China Card

The auction giant's hookup with the well-connected, Hong Kong-based, Internet outfit signals a retreat on the mainland from eBay's core biz

Ebay's (EBAY) long-expected retreat from the online auction business in China is now a reality. On Dec. 20, the U.S.company released the details. It will shut down its existing site in China, then buy 49% of a joint venture with a local partner, which will run the renovated auction business with eBay's help. The local partner is Tom Online (TOMO).

Tom who? That's probably the reaction of U.S. investors who know plenty about eBay, but little about the ins and outs of China dot-coms. So here's the skinny on Whitman's new partner. Tom Online and its parent Tom.com are controlled by Hong Kong billionaire Li Ka-shing, who has superb guanxi (connections) on the mainland and an uncanny sense of timing for deals. For its part, Tom Online is keen to diversify away from wireless value-added services, which currently account for about 90% of its earnings.