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TaoBao, eBay expect strong Q4 growth in China
Updated: 2006-01-20 15:50

China online auctioneer TaoBao added 3.9 million users to its service in the fourth quarter from the third while its chief rival, eBay Inc., added 2.8 million, as the pair fought over the fast-growing market.

TaoBao's additions brought its total registered users to 13.9 million, up 38 percent from last year's third quarter, according to data released on Friday by the firm, whose top shareholders include Yahoo Inc. and Japan's Softbank Corp.

It said its gross merchandise value had grown 29 percent in the fourth quarter from the third to $375 million, bringing its total for the year to $982 million.

Online giant eBay's fourth-quarter additions in China brought its total to 17.9 million registered users, representing a 19 percent gain from the previous quarter, the company said in announcing its global results on Thursday in the United States.

The U.S. firm did not provide a gross merchandise value for its Chinese operations for the quarter.

"Listings and bids also grew sequentially ... driving accelerating year-on-year gross merchandise value growth," the company said in a transcript of a conference call that occurred after the report came out.

TaoBao offers its basic services for free, versus an eBay model in China that charges users various fees for many functions such as listing and selling products, helping Taobao to gain recent momentum despite its later entry to the market.

TaoBao says its model will help it to grow quickly. EBay has countered that "free is not a business model" and has said that charging fees helps to improve the quality of its listings by stopping less serious buyers and sellers from using its site.

"With superior trust and safety systems, we are uniquely positioned to capture China's evolving e-commerce users," eBay said in the transcript. "Over the past six months, we have been experimenting with product and pricing changes to attract these users."

In the latest of those moves, eBay said on Thursday that its Chinese service would eliminate fees it charges when a sale is complete -- essentially commissions -- but that other items such as listing fees would remain.

China is one of the world's fastest growing e-commerce markets, drawing on an Internet user base that reached 111 million at the end of the last year -- the world's second largest, according to official data.

Transaction volume in the consumer-to-consumer trading market reached about 3.4 billion yuan in 2004 ($422 million), representing an average growth rate of 84 percent over three years, according to Shanghai-based market research firm iResearch.

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