Yesterday I posted about the recent purchase of eBay auction management company, Vendio, by Chinese company Alibaba. At the end of that post I promised to tell you the backstory about eBay and Alibaba. So here goes:
This goes back about 5 years. Those of you who attended eBay Live in San Jose or Las Vegas will probably remember it, but for those of you new to eBay it makes an interesting story.
If you don’t know anything about Alibaba, they are wholesale sourcing website that lists thousands of companies outside the US who are looking for eBay and online sellers to buy merchandise from exporters in dozens of foreign countries –mostly in the Far East, but actually from many countries. Also, Alibaba owns TaoBao, the largest online auction company in China. Alibaba also owns Ali Express which is a wholesale sourcing solution for those who want to purchase goods from China in small quantities –even quantities as low as one, so you can sample the goods before you buy them.
Problems started a few years ago when eBay wanted to expand into China, but Alibaba’s parent company was already the big auction site in China and they went head to head. I don’t have space here for all the details and background (which is very interesting if you Google “eBay + Alibaba” but suffice to say there is no love lost between eBay and Alibaba.
Well, Alibaba was set to exhibit at eBay Live in San Jose in 2005. They had paid for a giant booth on the trade show floor and were even scheduled to participate in some of the sourcing seminars. But, the day before the show, eBay kicked Alibaba out in favor of their competitor, www.globalsources.com. And at the show eBay announced a lash-up with Global Sources to help eBay sellers find merchandise.
So Alibaba –thinking fast, conceived one of the greatest Guerrilla Marketing tactics of all time: When you got off the airplane at the San Jose Airport, there were dozens of well-dressed nice people saying “Welcome to eBay Live. Here is your free tote bag,” and they handed you a really nice bright orange tote bag. They were also standing on every corner leading to the convention center and at all of the bus and metro stops.
The result was that thousands of eBay Live attendees were walking around eBay Live toting the Alibaba signature bright orange tote bags. eBay execs were furious. At one point they tried to block people coming in with the bags, but realized that would have started a riot.
Besides handing out the bags, Alibaba took over the Presidential Suite in the hotel across the street from the convention center where they held a free lunch and gave PowerPoint presentations to hundreds of eBay sellers about importing and the Alibaba services each day. I was invited to speak at one of these seminars and it was packed with about 40 people in a small room and more listening from out in the hallway.
At the receptions, Alibaba.com set up free Internet workstations so users could check their email and ebay sales and they conducted daily presentations to introduce Alibaba.com’s online marketplace to visitors. 1,670 eBay sellers and PowerSellers, visited the receptions during this 3-day event to learn how Alibaba could help eBay sellers source products directly from reliable manufacturers in China.
So now Alibaba owns Vendio which is an eBay certified developer. They get to peek inside eBay’s kimono to see the inside track on all new development at eBay and access to the eBay API.
Vendio has about 80,000 sellers registered with their system, so there probably isn’t much eBay can do about this. In any event it’s about time eBay buried the hatchet and made nice with Alibaba. If they were smart they would be talking to Alibaba about working together in China on the old theory that half a loaf is better than none. Yahoo did this. In 2005 while eBay was acting childish, Yahoo invested $1 Billion in Alibaba and handed off their struggling auction business to TaoBao, Alibaba’s Chinese auction company. Over time, this has paid off big for Yahoo. their stake is now worth about 4 times that amount.
Taobao.com is the “eBay of China” and has become that nation’s largest online auction site, garnering 75% market share, according to domestic research firm iResearch.
Jonathan Lu, president of Taobao.com, said the company’s online transaction volume is expected to double to 200 billion yuan (about 3 Billion dollars) this year from the 99.96-billion yuan it reported last year. Meanwhile eBay’s sales are essentially flat and experiencing slow growth.
So as Paul Harvey used to say: “Now you know the rest of the story.”