Ebay Quitting China

Well, it looks like Yahoo! and Google aren't the only company having trouble in China.  Ebay announced today that it is turning over its Chinese branch to a Beijing-based company in a new joint venture, capping a 3-year financial slide.

According to CNN:

EBay said it would fold its China subsidiary, eBay Eachnet, into the venture with Tom Online, a popular Chinese provider of games and other value-added online services. EBay will contribute $40 million and own 49 percent of the venture, while Tom Online contributes $20 million, owns 51 percent and has management control.

Apparently, the trouble began in January of 2005, where Ebay reported that its financial performance was falling short of high expectations.

And China is not the only country where Ebay has encountered difficulties.  The company took a similar strategy in June of this year, when it merged its Taiwanese auction site with a local partner, PC Home.   

Meg Whitman, Ebay CEO, maintained that this joint venture shouldn't be considered a failure, but rather a re-adjustment of Ebay's strategy:  "We have determined that every country in Asia is quite unique, and we have to make a decision about every country in Asia, how we want to do business." 

Whitman also noted that "I think you have to be willing to evolve your strategy on a local market basis to make sure you are doing the right thing for your buyers and sellers and the right thing for your company."  It seems strange that essentially pulling out of the world's largest Internet market would be the best decision for the company.  Apparently, operating in China required too much time and energy, occupied too many valuable resources, and took away from Ebay's business ventures elsewhere.  

David Wolf, chief executive officer of Beijing-based technology consultancy Wolf Group Asia, commented:

Few American companies come here prepared to devote the executive time and corporate focus that China demands, and those that don’t give this place the time and attention it deserves are, sadly, doomed to be sent packing.

So who's next??

TechCrunch has an interesting post on this subject from September, 2006.  Check it out here .