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by Mike Zazaian September 26, 2006 - 4:55pm, 18 Comments

Taobao has taken over eBay in the Chinese C2C market

Due to a boom in popularity of Chinese eBay facsimile Taobao, eBay may sell off its once-prosperous Chinese divisions and leave the country altogether.

Tom.com, a Hong Kong-based firm and the distributor of eBay’s Skype service in China, will allegedly assume controlling interest in all of eBay’s Chinese operations, according to a story in the Shanghai Daily. Ebay entered the chinese market when it bought 30 percent of Chinese consumer-to-consumer site Eachnet.com in March of 2003, eventually buying out the rest of the stock by the end of the year. At the time, the eBay/Eachnet entity controlled 90 percent of the Chinese C2C market.

eBay didn’t anticipate, however, the establishment of Taobao.com, a completely free online consumer-to-consumer platform. Started by Jack Ma, founder of alibaba.com, in April of 2003, Taobao quickly became the dominant C2C platform in China, controlling as much as 67 percent of the market in 2005, compared to a paltry 29 percent by eBay/Eachnet, who charged a comission of 8 yuan (about $1 US) on each item sold.

The announcement comes on the heels of news that eBay China CEO Martin Wu has been fired. Liao Guangyu, current GM of PayPal China, will take over Wu’s duties and carry out the rest of the takeover process.

It goes to show how dominant an ad-supported network could potentially be in the United States. By offering a no-pay solution, Taobao complete ate away at eBay’s C2C control. If a viable, costless eBay alternative showed up on US soil one couldn’t help but think that it might put eBay out all the misery it’s caused with it’s tremendous price hikes over the past year.