The business ‘war’ on the Internet

The ‘war’ between eBay and Taobao from 2003 to 2005 was a classic case on the Internet.

In several commercial cases, the ‘war’ between Taobao and eBay in China is the most surprising one: eBay as one of the world’s largest Internet company controlled 90% of the market share in the China in 2003, while Taobao was a newcomer. But two years later, Taobao rose to 79 percent, followed by eBay withdrew from the Chinese market.

I think the reason Taobao be able to beat eBay could be argued as three things:

1. Free policy, no charge to the seller. eBay charges fee to the seller to make money, it is profitable from the outset, but also lucrative. However, Taobao announced it is totally free, Once this is released, cause sellers’s attention immediately. Many sellers joined Taobao, including someone has become eBay sellers already.

Here is a link:

It generally describes how much does it cost to be a seller.

2. Releasing Alipay and ensuring transactions. The third party payment platform solved the issue of trust while ebay provided online payment system and PayPal (Different countries have different legal regulation of third party payments, but eBay can not provide an escrow service like Alipay, which means consumers confirm if they are satisfied with goods they have bought on Taobao before money be released to its seller.

3. In the book by eBay founder (Meg, 2010), she said the main reason is due to the loss of talent. Personally, I think other reasons were also important.

If you need further reading about this, I recommend the book: The Power of Many: Values and Success in Business and in Life (Meg, 2010). This book describes in detail the development of eBay history and unique philosophy, of course, the war between Taobao and eBay is included as well.

1 Comment

  1. I think this is a really interesting subject to talk about. The fact that on company can control the whole online market in a country is astonishing on its own. I personally feel as if there should be more diversity in all markets, not just on the internet, but that fact that it seems to be Ebay OR Taobao and not both seems to show that this isn’t possible. Perhaps if Ebay had stayed in the Chinese market, as opposed to withdrawing at the first sign of trouble, perhaps there could have been more of a friendly rivalry between the two companies, offering better deals than each other, or lower prices than each other, creating a better market for the customers.
    Its brilliant that a newcomer can rise up and stand next to an already huge opponent like Ebay, but it is a shame Ebay didn’t stick around to play for a bit.


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