EBay Takes $30M Stake in Chinese Auction House

For the second time in three weeks, EBay (Nasdaq: EBAY) has moved to solidify its foothold in Asia, buying a stake in Chinese auction site EachNet for US$30 million.

The investment gives EBay a 33 percent stake in EachNet, a three-year-old trading community formed by two Chinese entrepreneurs. EachNet is based in Shanghai on the Chinese mainland.

The investment in EachNet comes on the heels of EBay’s purchase of NeoCom Technology, a Taiwan-based auction site. EBay picked up that site for $9.5 million in cash, plus future considerations depending on how well the site performs.

Two for One

Together, the moves put EBay on the cutting edge of e-commerce investment in the Chinese marketplace, where the San Jose, California-based auction giant has said overall e-commerce revenue will grow by 12 times to $16 billion per year over the next four years.

EBay, which between its Chinese forays quietly announced plans to exit the Japan market, where it never gained traction against deeply entrenched Yahoo!, said it sees enormous potential in the Chinese market.

“Our relationship with EachNet is an important step forward in EBay’s strategy to build a truly global marketplace,” company CEO Meg Whitman said.

According to research firm IDC, China has 27 million Internet consumers, making it the fifth largest online economy. With a population of 1 billion, the potential for long-term future growth is alluring as well, according to analysts.

Have a Seat

EachNet said it has 3.5 million members who trade everything from apparel to real estate on a person-to-person platform similar to EBay’s.

EachNet was founded in 1999 by Bo Shao and Haiyin Tan.

Shao called Ebay’s investment an endorsement of “the enormous potential of e-commerce in China. We believe online trading will revolutionize how people buy and sell goods and services in China.”

In return for its cash investment, EBay will receive two seats on EachNet’s board of directors, which will be taken by Whitman and EBay’s senior vice president of international, Matt Bannick. The auction giant also will have the right to expand its stake in the future.

EBay said this investment will have no material impact on its 2002 earnings.

Piling On

Other e-commerce companies also have targeted the Asia-Pacific market in recent weeks.

Both Priceline.com (Nasdaq: PCLN) and Travelocity (Nasdaq: TVLY), for example, have announced plans to launch Asia ventures in the next month.