eBay confirmed it is entering into a joint venture with online portal and wireless Internet company TOM Online in China a day after the Wall Street Journal predicted the partnership. In a conference call, eBay CEO Meg Whitman called the folding of eBay Eachnet and opening of a new marketplace an evolution of eBay's strategy, not a failure.

As for eBay's online payment service, Whitman said PayPal may partner with a local Chinese entity "should it be required by local regulations," according to Forbes (http://www.forbes.com/home/feeds/afx/2006/12/20/afx3270398.html).

Whitman told The Wall Street Journal, "Nothing has changed in terms of our belief in the Chinese market," citing the need for local expertise. The Journal said eBay's decision to migrate the China site to the eBay platform and centralize engineering decision-making in the U.S. had hurt eBay Eachnet's ability to compete with nimbler competitor TaoBao.

eBay's press release said its joint venture with TOM Online will set the foundation for the next phase of growth of ecommerce and m-commerce in the rapidly growing Chinese market. The result of the joint venture will be a new China marketplace in 2007 that will "bring together the strengths of both companies - eBay EachNet's global e-commerce knowledge and large and active trading community in China, and TOM Online's local market knowledge and active wireless user base of more than 75 million. Upon the launch of the new marketplace, eBay EachNet users will be invited to transition to the new site, and TOM Online will work to deliver its user traffic to the site as well.

eBay will have a 49% stake in the joint venture, and TOM Online will have a 51% stake. Both companies will make financial contributions to the venture, including a $40 million cash contribution from eBay and $20 million in financing from TOM Online. If mutually agreed, the two companies can equally share in an investment of up to an additional $10 million. In addition, eBay will also contribute its EachNet subsidiary, while TOM Online will contribute local management expertise, technology, and brand.

Wang Lei Lei will be chief executive officer and eBay EachNet CEO Jeff Liao will provide management support from eBay to the joint venture. Liao will also continue to lead eBay's separate operations in China, including the expansion of eBay's business efforts in China to promote global trade by PRC-based sellers, "as they ramp up their trading practices with people around the world."

eBay will also continue to grow the China Development Center for worldwide product development under the local leadership of recently appointed General Manager Daniel Lee, a former Yahoo Asia CTO. eBay stated in its press release that it expects to continue to increase headcount in China into 2007 as it evolves its presence in the market.