eBay, apparently is looking to get out of China, long after the so called “giant opportunity” became a thorn in auction company’s side. There was that pesky user rebellion. Just wondering how much did the China plan cost the company?
They had acquired EachNet for around $180 million over a period of time. In June 2003 Ebay paid $150 million to buy 67% of EachNet. Add to this operational and capital expenditures, and the time CEO Meg Whitman spent in China, my guess is that China cost eBay over $500 million. What do you think? As a footnote, I think this could be a good lesson for US-based start-ups trying to go to China and capture that market.
I’ve seen a lot of companies trip themselves up trying to move operations to, or selling products to China. It sounds good on paper, but it is a very tough place to do business because of the competitive and nationalistic business culture there. It is obviously also a very different culture, so lots of opportunities for US companies to screw up.
I’ve been looking at the Spanish speaking market as a greater opportunity. Apart from the language barrier, the cultural differences are not so great, and there is less resistance from Latin consumers and companies in using American products. We set up an office in Argentina recently, and apart from some minor snags, it was pretty easy.
First Skype (- few $Bs), and now China (only $500M? :-))
When travelling to a foreign country, isn’t it common sense to find a good local tour guide? If you look at the history of acquisitions of China internet companies by US companies, they have all produced poor results. e.g. Yahoo/3721/Alibaba, Amazon/Joyo, eBay/Eachnet, IACI/eLong. It simply is a different market that requires different strategies and tactic. Tactics that US HQ might not agree with.
One of our consultants used to work for a early VoIP company (to remain untold, at least here) and he told me they had worked with the 3rd largest telecom company in China to set up their network. Everything was going fine for about 6 months and then customers called them up saying their service stopped working. They called up their Chinese partners but reached no one. Finally he flew over there again to see what was going on. When he got to their offices, it was empty. Everything (including all of his equipment, computers, papers, files) was gone. He couldn’t track them down. He got a call from the 2nd largest telecom company there, saying that he had been working with people that didn’t have as much pull with the govt. that they did. They ended up setting up a new network in China.
Thats how things in China work. Thats almost a better story than another one of our guys told me about working for Lucent and trying to sell equipment to China. That one was really funny (well, come to think about it, its not that funny, as I still own LU at $37 a share.
The China thing gets even more complex. I had this below sent to me this morning. You may want to read the article and see if there is any validity to it; or if you knew/heard about this coming up.
http://rexdixon.wordpress.com/2006/09/28/ebay-to-acquire-tencent-holdings-rebtel/ – permalink to my blog with link to the article.
Rex
I was kind of surprised about hearing this because ebay put a lot of effort in to make ebay china work. Apparently their efforts was not better than the competition.
Just last week I watched the series “china rises” and when Ma mentioned that ebay might find trouble in china, I was skeptical. About 15 minutes into the 2nd part, (http://www.nytimes.com/specials/chinarises/gettingrich/index.html) Jack Ma(taobao’s ceo) disdainfully says why do people say that nobody should compete with ebay, From the video, here’s what he said.
“A year and half ago, I went to wall street and said ‘I just launched an auction site called taobao to compete with ebay, the people were shocked’, they said “Jack you’re crazy, you can find anybody to compete with but don’t compete with ebay because they’re too strong.” I was very angry at that time, ‘why did they think I would lose’, I told them that if ebay was strong, it was a shark in the ocean but we are a crocodile in the yangzte river. When a crocodile fights with a shark in the ocean, it will lose, but if the shark swims into the yangtze river, it will have big trouble. So I think to have ebay as our rival is good for us but it might be a disaster for ebay.
Jack Ma talks too much. Great to be a rebel with a cause and as Steve Jobs would say ‘Think Different’ but talk is cheap, especially in China.