Summary
Taobao.com, the Alibaba auction site, has announced it will be free for three more years, and challenged eBay to do the same. Ebay's response was that paying something keeps the marketplace free of clutter.
Original source:
http://today.reuters.com/news/newsArticle.aspx?type=internetNews&storyID=2005-10-20T035044Z_01_FOR013752_RTRUKOC_0_US-CHINA-AUCTIONS.xml&archived=False
Details
The two leading Chinese Internet auction sites escalated a bitter war of words on Wednesday by arguing the superiority of their respective strategies for conducting online auctions.
Taobao.com, the Alibaba auction site backed by Softbank Corp. of Japan, and in which Yahoo Inc. recently purchased a 40 percent stake, sparked the battle by saying its site would be free of charge for three more years.
"We call on eBay to do what's right for this phase of China's e-commerce development and make your services free for buyers and sellers in China," Jack Ma, chief executive of Alibaba.com, said in a statement.
It was a clear shot across the bow of rival eBay, which acquired China's largest online auction site, EachNet, in 2003.
"'Free' is not a business model," eBay fired back in its own statement.
"It speaks volumes about the strength of eBay's business in China that Taobao today announced that it is unable to charge for its products for the next three years."
EBay, the decade-old online auction giant that now counts 168 million users worldwide, has the philosophy that completely free is unhealthy.
Paying something ensures that a marketplace won't become a dumping ground for unwanted goods, it argues.
"It is not good for a buyer or a seller because it clutters the marketplace," eBay spokesman Hani Durzy said, noting that sellers may list 20 of the same, unpopular item when price is no object.
"Some amount of pricing ensures a higher quality supply," he said.
Alibaba.com said its Taobao Chinese-language consumer auction site will remain
free for buyers and sellers for three more years, until at least October 2008.
It also plans to invest $120 million to expand Taobao's marketplace and declared that its ambition was to create 1 million jobs in China for entrepreneurs selling goods on the Taobao site.
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Friday, November 18, 2005
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