eBay unable to trump
Alibaba in China

Even after investing $100 million in China in 2005, ebay is finding that replicating its business model there just doesn't work.

According to the Financial Times, the auction site decided on Monday to give control of its main China operation, Eachnet, to Beijing-based portal and telecom service operator Tom Online, in response to its inability to fend off Chinese auction rivals led by Alibaba.com, illustrating the problems facing foreign internet companies trying to move into the country.

Edward Yu, chief executive of consultancy Analysys International, said eBay’s move reflected wider failures among foreign internet companies to adjust quickly enough to consumer demand and challenges from local rivals, like Alibaba's fee-less business model.

eBay’s decision to work through a locally controlled joint venture echoes that of U.S. portal Yahoo, which transferred its struggling China business to Alibaba last year. Alibaba accounted for 60 percent of all consumer-to-consumer online transactions in China during the third quarter of 2006.