Alibaba's new acquisition unit has targeted classifieds as its first area of investment, causing new competitive concerns for eBay. Alibaba.com has entered into an agreement for a strategic investment in Koubei.com, one of China's largest classified listing and community websites with over two million registered users. Alibaba's C2C online-auction site TaoBao has posed a major competitive threat to eBay Eachnet since its launch in 2003. Alibaba is extending the competitive playing field with its Koubei investment, as eBay operates its Kijiji.com classifieds sites in thirty-two cities in China (http://www.kijiji.com).

The investment in Koubei.com comes out of Alibaba's newly formed investment and acquisition group headed by Tian Jian. The group was formed to "leverage the company's industry know-how and financial resources towards developing promising young companies that bring strategic synergies with Alibaba's core businesses," according to a press release.

"Community-based classified listings are an essential part of ecommerce," Jian said. "Besides buying and selling products online, people want a marketplace to trade services and share information about service providers. With our investment in Koubei, we're partnering with the team that pioneered the online classified marketplace in China and opening up another channel to grow our existing ecommerce community of more than 40 million consumers and businesses in China."

Alibaba consists of Alibaba International (alibaba.com), a B2B marketplace for global trade; Alibaba China (alibaba.com.cn), the largest online small- and medium-sized enterprise community in China; Taobao (taobao.com); AliPay, China's leading online payment service; and Yahoo China (yahoo.com.cn), a leading search engine and portal, acquired from Yahoo Inc. in October 2005.

Rumors surfaced in September that eBay was looking for a buyer for its eBay and PayPal China divisions. eBay Eachnet CEO Martin Wu resigned last month and was replaced by Paypal China general manager Jeff Liao (http://auctionbytes.com/cab/abn/y06/m09/i26/s00).

It was last year that eBay CEO Meg Whitman invested $100 million in China, saying the country was its biggest long-term opportunity in terms of local markets. "If we are good and we execute, ultimately China could be eBay's largest local market in a five to 10 year period," Whitman said.