New Competition for eBay in China

A deal has been struck between Yahoo and Chinese Internet portal Alibaba.com which analysts expect will create major competition for eBay – the world’s largest internet auction site.

Standard & Poor's Equity Research issued a "hold" rating on eBay and said that the business relationship between Yahoo and Alibaba.com will have a negative influence on the online auction company.

eBay has a strategic plan for it’s future growth in China, with CEO Meg Whitman saying earlier this year that China is a major priority for the company. But according to S&P Equity Research, Alibaba's consumer auction business - Taobao - is currently doing well on it’s own in competition with eBay in China.

The research firm is quoted as saying, "……and we think that adding Yahoo's resources and assets, including its portal and stake in e-commerce venture 1pai, would only enhance its prospects."

The deal between Yahoo and Alibaba is expected to be completed towards the end of this year and will result in the bringing together of the Number 2 and Number 3 operators in the Chinese Internet auctions domain.

On past performance, it seems unlikely that eBay will take this competitive threat lying down. So we can probably expect eBay to make some strategic moves to maintain it’s overall global dominance in the online auction business.