eBay #1 in China? No. But CEO Whitman says "yes".

by: Ezra Marbach

eBay (ticker: EBAY) CEO Meg Whitman discussed the company's Chinese subsidiary eBay Eachnet, and the competitive environment in China, at Analyst Day in February. Here are key quotes from Whitman followed by a discussion of hard charging online auction competitor Taobao.

On eBay Eachnet and its Chinese competition:

Today, eBay Eachnet is by far the number one e-commerce site in China. We're helping China to define it's e-commerce future and it gives me tremendous satisfaction to see eBay Eachnet helping so many young Chinese taste entrepreneurship for the first time.

Now like in the early days of the net in the United States and other countries, there are a bunch of small competitors in China nipping at our heels and I don't blame them. They see the opportunity too, but guess what? We love competition. Absolutely love it. We have from the earliest days. It motivates us. It makes us hungry. It makes us stronger and it makes us very, very determined. We are on a tear to be the undisputed winner in China and the additional $100 million investment we announced last month should be a sign of an unmistakable commitment and an unstoppable determination to win that market.

On eBay's latest results:

Now the good news is we're already seeing the results of that determined effort in China. Data that shows that we had a fantastic start to 2005. Just as we pulled ahead of able competitors in the U.S. and Germany in 1999 and 2000, we're pulling farther ahead in China today.

(Quotes are from the CCBN StreetEvents transcript.)

Quick thought: Ebay the #1 e-commerce site in China? Let's ask Alibaba, whose online auction subsidiary Taobao.com is competing with Ebay in the China market. How can we ask them? Fellow China blogger Bill Bishop was kind enough to provide an Alibaba presentation that is currently circulating in China.

First, some background. The Chinese online auction market consists of 3 players - eBay Eachnet, Taobao (operated by Alibaba), and 1pai (a joint venture between Yahoo! (ticker: YHOO) and Sina.com (ticker: SINA)).

According to a combination of statistics from market research firm, iReaseach.com, and Taobao, the online auction market shifted dramatically in 2004. In Q1, eBay had 90% of the gross merchandise volume (GMV) in the online auction marketplace, to Taobao's 9%. By Q4, eBay had 53% to Taobao's 41%.

The Alibaba presentation claims that Taobao received the #1 e-commerce traffic ranking in China from Alexa.com at the end of 2004. Alexa.com also cited Taobao as the 23rd most visited site in the world, ahead of all other e-commerce sites in China.

For the first time, Taobao exceeded eBay for the most new quarterly users in Q4 2004. As of the end of Q4, Taobao had 4.7 million listings to eBay's 229,000! Taobao also cites an iResearch report showing that users not only prefer Taobao by a sizeable margin, but enjoy Alipay, Alibaba's online payment system as well. (eBay CEO Whitman hastily dismissed a question when asked about Alipay at Analyst Day).

So while Meg Whitman says that eBay is "by far the #1 e-commerce site in China", she is talking about gross merchandise volume and number of registered users. eBay said it reached 10 million users in January, to Taobao's 4.0 million at the end of 2004. Taobao is more straightforward. It claims to be the "#1 consumer e-commerce marketplace" as defined by "product listings and traffic ranking". And though eBay just earmarked another $100 million toward its Chinese operation, the statistics above show that Taobao is definitely still in the game and quickly gaining ground.