Ebay been oversold recently.
Ebay been oversold recently.
eBay's current Price Target is $77 (+41% from the 2004 Target of $55 and +144% from the 04/22/05 price of $31.51). This dramatic rise in the Target is the result of a +35% increase in the equity base and a +4% increase in the price/equity multiple.
http://cnnfn.investor.reuters.com/ReportDetails.aspx?docid=20561334&sId=1
Ebay oversold recently
Although it has a little bit problem by increasing commision fee, it is growing company and with small competitors (overstock.com is small relative to ebay).
Standing Up To a Giant
Ebay aims to conquer China. Jack Ma has his "ants" doing handstands to repel the American invasion.
Ebay has conquered online auctioning, racking up $778 million in profit last year on a transaction volume of $34 billion. But Ebay won't stay on top unless it also conquers what eventually will be the world's largest market for online goods:China. Ebay bought its way into China in 2002, holds half of a $1 billion market and will spend $100 million this year to bolster its presence there. China is a "must win" and "is likely to be the defining measure of business success on the Net," Ebay Chief Meg Whitman told Wall Street analysts in early February. "A bunch of small competitors are nipping at our heels."
Jack Ma is more than a mere ankle-biter. Ma runs the Taobao consumer site, the biggest homegrown rival to Ebay in China. Though it didn't start up until a year after Ebay arrived, Taobao has quickly gobbled up 41% of China's online auction sales, compared with Ebay's 53%; it has 4 million registered users, gaining on Ebay's claim of 10 million customers in the country. To take on the decidedly American presence of Ebay, Taobao--Mandarin for "searching for treasure"--plays up its local staff and an all-China focus; its online moderators use screen names from characters in famous Chinese kung fu novels. Most important, Taobao doesn't charge sellers a cut, as Ebay does.
Ma's core business is Alibaba, the business-to-business Web auction site he's been building since the Internet craze of the late 1990s.Now at $68 million in annual sales, Alibaba competes locally with the longer-established Global Sources. Like Taobao, Alibaba offers basic service free of charge but gets revenue from 85,000 members who pay $250 to $10,000 a year for extra services such as personalized Web pages and accreditation.
Alibaba's main site is devoted to in-China trade, and a second site handles trade with companies in the rest of the world. So naturally Ma must keep his eye on the Ebay juggernaut, which is aimed at both consumer and business users.
The Taobao site is "a firewall on the consumer side against Ebay coming after Alibaba," says Jason Brueschke, a sell-side analyst with Pacific Growth Equities in San Francisco. Setting up Taobao "was defensive at first," Ma concedes. "But now we are going after them."
In the combined office for the two businesses in Hangzhou, two hours' drive south of Shanghai, he is brash: "We want to be the world's largest consumer site."
Toppling Ebay is a bold (if not suicidal) ambition, and Ma tells his staff it requires a different perspective. Ebay looks less fearsome when you're upside down, he argues, so new employees are encouraged to learn how to do a handstand. It's going to take more than that. Ebay, with $3.3 billion a year in revenue, expects overseas sales to eclipse its U.S. business in two years. It now is the dominant auction site in Germany, France and Australia, crushing local rivals or buying them; it leads in Korea and Singapore; and it just launched in Malaysia, the Philippines and India. It is considering Vietnam, Thailand and Indonesia.
But Ebay's Whitman says China is top priority. China's population of Net users, likely to surpass 100 million this year, is second only to that of the U.S. and may double in two years. Taobao and Ebay "are fighting tooth and nail," says Victor Koo, who runs China portal Sohu. "If Ebay wants to be a global consumer site, it needs China."
And China is a special case, Ma argues."Ebay may be a shark in the ocean, but I am a crocodile in the Yangtze River. If we fight in the ocean, we lose--but if we fight in the river, we win."
At 40, Ma is known respectfully around Alibaba as "Grandfather," having formed China's first Internet company in 1995, about the time Jeff Bezos was starting Amazon.com in the U.S. That year Ma, who'd learned English as a youth hanging out at a tourist hotel and offering free guided tours to foreign guests, got to the U.S. as an interpreter for a trade delegation. He visited friends in Seattle and learned about the Internet.
After some early ups and downs with Web startups back home, he was able to raise $25 million in 1999 from Goldman Sachs, Softbank of Japan and others to form Alibaba. Today that business clears $5 billion a year in transactions (Ebay's size,as a pay site,in 2000).
Ebay entered China in 2002 by paying $30 million for a one-third stake in Eachnet, an auction site set up three years earlier by Harvard graduate Yibo Shao and a partner. A year later Ebay bought the rest of Eachnet for $150 million, keeping on its chief, Shao. He vows that Ebay Eachnet, as the site is known, will win: "There can be only one big [consumer auction] site in China."
Ma countered by teaming up with Masayoshi Son's Softbank to launch the Taobao consumer site for $56 million. He picked the ideal partner:Son had beaten back Ebay in Japan by taking an early lead in auctions with his Yahoo Japan joint venture. Ebay closed its Japan site in early 2002.
"We were both thinking the same thing:Son kicked Ebay out of Japan. I have the same chance in China," Ma says. "Ebay doesn't think we are a threat. China will be a worse defeat than Japan." His swagger rankles some observers. Last year Ma gave a presentation on his grand scheme to half a dozen Wall Street types, and one of them stalked out midway through the pitch, with a parting shot:"Ebay will win!"
But so far not a single Western Web site has succeeded in China. AOL in 1999 launched a $200 million joint venture with China's biggest PCmaker, Legend Computer (now called Lenovo). Three years later AOLsold out, and Legend switched to a local telecom partner. All the top sites in China are homegrown: Sina for portals, Shanda for games and, for search, Baidu, which is about to go public. Yahoo is an also-ran in the market; its auction site, 1pai.com, runs a distant third to Ebay and Taobao.
In addition to the $100 million spending spree that Ebay plots this year, it spent an undisclosed sum to sign exclusive deals with China's three largest portals (Sina, Sohu and Netease) to block Taobao ads from those sites. (Sohu and Sina have since dropped the exclusives). "They are doing everything they can to block us," says Ma. Ebay is also plastering ads all over China, on subway platforms and buses. "They have deep pockets, but we will cut a hole in their pocket," Ma jokes.
Ebay has stumbled since scaling the Great Wall. Last year it overhauled the Eachnet site to comply with Ebay's worldwide format. The design change confused some customers, and product listings plunged--down to 250,000 from 780,000 before the switch. Ebay lost some fans last May, when it changed the rules about how sellers can limit their buying audience. "Many power sellers left Ebay to go to Taobao," says Ebay power seller Wang Yun, who remains loyal to the site. Ebay denies it.
Chen Zhuoyuan started selling clothes from Wuxi, China over Ebay's site a year ago but quit after a week because of technical problems, switching to Taobao. "The trades are bigger," she says. Ebay also lags behind in offering its PayPal payment system in China, while Ma launched his own version, Alipay, in January. And the online giant has been shuffling local management, keeping Shao as chairman but assigning a new chief executive officer. "Taobao didn't win the first battle, but Ebay lost it," Ma maintains.
Ebay's onslaught can be expected to continue, but Ma has a fallback: Dozens or hundreds of Ebay sellers in China are cheaply sourcing goods from Ma's Alibaba site, then reselling the items at a profit, says analyst Brueschke.
In addition to its free-pricing practice, Taobao uses guerrilla marketing to keep up with Ebay's might. The China site advertises on the cheap on hundreds of small Web outlets ignored by Ebay. Taobao is the eighth most popular site in China, ahead of Ebay at number 13, according to Alexa, an Internet traffic monitor. An Ebay spokesman argues Taobao's guerrilla tactics artificially inflate its ranking because pop-up ads for Taobao on other sites count as "visitors" to Taobao itself. "It's like saying a person seeing your billboard has visited your store," says Shao. Ma says he is phasing out that ploy--with no visible drop-off in Taobao's Alexa ranking.
In contrast to the Ebay machine, Taobao and Alibaba are vintage dot-com. Young Chinese hipsters in blue jeans sit at open desks beneath posters that say: "Pay any price, do anything, to WIN!" Last year Ma staged a fifth-anniversary bash, in an arena, for all 2,000 employees, with Taobaoists waving flags of worker ants, their mascot--the conceit being that tiny but united they can defeat an elephant. The four-hour event ended with everyone holding hands and singing the lyrics "You have to go through a thunderstorm to see a rainbow"--a reference to the dot-com bust and the dark days of the SARS virus scare as Taobao launched in mid-2003. Then they went disco dancing late into the night, climbing on the bar--Ma among them.
Hijinks can goose morale, but the business model of gaining footing with free traffic and snaring revenue from ancillary services is what concerns those Wall Street skeptics Ma encountered last year. Blessed with his seemingly patient backers and "enough gas in the tank," his Alibaba Holdings has not joined the dot-com rush to the public markets that led to turbulence in the West and later in China.
"Alibaba plans for the long term, and our focus is on our customers and building a great business," maintains Ma. "Plus, our competitors are public, so we know all of their war plans. Why would we want to give up that advantage?"
Additional reporting by Maggie Chen.
