eBay: Robust Monetization Path in China "Unclear"; Follow the Yahoo! Strategy?

eBay (EBAY) has been the subject of rumors lately that it's looking to sell or merge its Chinese online auction business following market share losses to Alibaba's Taobao.com. eBay President and CEO Meg Whitman addressed the competitive environment in China during management's earnings conference call with analysts earlier today:

Imran Khan - Analyst, JP Morgan

Meg, moving on to Asia, recently you announced a partnership with PC Home, and there are a lot of press discussions on a potential joint venture in the Chinese market. I was trying to get a sense what is your thought process in terms of thinking in China? Do you feel comfortable as a standalone company, or what do you think about doing a potential joint venture?

Meg Whitman - President and CEO, eBay

Sure. In China we continue to see healthy growth in GMV and listings. This quarter, particularly healthy growth in the local market. As I mentioned in the script, we actually tightened seller restrictions on sellers selling out of China on eBay.com, Germany, France and Italy because of the fraudulent seller issue that we began to see emerge. So our local market growth is quite healthy. We believe we're actually maintaining share in what is becoming an even more competitive market. There are many new entrants in the business, but we feel pretty good about where we are.

That said, the robust monetization path there is unclear. We do charge, as you know, for eBay China, but at a much lower rate than any other market in the world. So we're constantly evaluating how to strengthen our long-term position. What are the alternatives that we can look at there? One thing we most recently did is we realized that PayPal and eBay in China are much more closely linked, and need to be much more closely linked, than they are in any other market. It is a bit more like Korea, where escrow is actually part of the flow on an Internet auction company in Korea. So we combined the entity under one leader. Those are the kind of things we're looking at and we're committed to China for the long term.

Christa Quarles - Analyst, Thomas Weisel Partners

Hi, the first question is on China. I was wondering if you could discuss the pros and cons of going through the Yahoo! strategy, deconsolidating your China businesses and partnering up with some local player, or even more broadly partnering with maybe a local portal or search player to help your penetration of those markets?

Meg Whitman - President and CEO, eBay

With regard to China, the only thing I can say is I just want to reiterate that we are seeing healthy growth in our local GMV and listings. We are maintaining share in what I perceive to be a very, very competitive market, with low rates of monetization. I just actually don't think it is the right thing to do to comment and speculate on portal versus a Yahoo! strategy in China. We're committed to the Chinese market for the long term. We think it holds great potential. I think that is probably the right way to characterize our view at this point.

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