eBay after the bell 9-25-06: What's happening in China?

Talk about big trouble in little China.

This is a clear sign that Ebay are hitting the panic button. It has been quite obvious that the raise in sellers fees have been used to subsidise Ebay's attempt to tap the Far East market. By doing this Ebay have alienated their customers in their 'core' consumer nations. Sellers are angry at the raise in fees; buyers are angry with having to wade through 1000s of ipods from China.

What next? I don't think Ebay know either. It is certain that its either going to take a marketing masterstroke (at what expense?) or a strong merger/takeover bid (at even further expense?) in order to recoup some respectable balance.

Whitman was quoted last year as saying: "Whoever wins China, will win the world." We now have our answer. Not to worry though Meg, the world seems a very futile place to venture when the backyard still needs tidying.

It seems eBay is happy to squander money in an attempt to ingratiate itself in China, but does not seem to have a clear strategy. A $100 million spent to swamp Ebay.com with a load of free lsitings http://www.businessweek.com/globalbiz/content/sep2006/gb20060922_888836.htm doesn't seem to be working. US buyers and I expect much of the Western world are fed up with having to trawl through these interminable listings. At least the store owners know where their increased fees are being spent. A pity it can't be spent sorting out other far more pressing matters like frauds and scams. If eBay pursued those matters with the same enthusiasm it's future would look more secure than it does at the moment. Still a SELL NOW while you can still get at least something for your stock!

As someone "close to" the situation I'd like to reassure the author not fear Jeff Liao becoming the new CEO of Ebay China. True, if Jeff was meant to serve in this position long-term, it would have been a mistake to replace Martin (with his marketing savvy) for Jeff (a numbers guy from Taiwan). However, Jeff is intended to serve only for the short term and manage the integration/transition of Ebay China to its new ownership, which will either be Tencent or Tom.com, pending the widely rumored negotiations. Most likely it should be Tom.com, but you can expect some media "buzz" for the next couple weeks as Ebay plays the two companies off each other to maximize their negotiating position. Good news is that Jeff wont be running Ebay China for long. Bad news is that Ebay China under new ownership will be a de facto withdrawal from the China market for Meg Whitman and Ebay. In the end, Alibaba.com's Taobao is the likely beneficiary of all of this - it is unlikely Tom.com or Tencent will be able to extend their services into a non-core business like consumer auctions. But in the mean time, expect some fireworks before the deal is announced - and expect Jeff Liao to wrap up his position by the end of the year, when the deal is expected to close.