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The Untold Story of the War between Alibaba and eBay

In the mid-2000s, a schoolteacher turned entrepreneur in China by the name of Jack Ma went head-to-head with what was then the King of Ecommerce, eBay. Porter Erisman was an insider at Alibaba, and in a new book, Alibaba’s World, he tells the David-and-Goliath tale of Alibaba vs. eBay, providing not just a history lesson, but a fascinating story of corporate warfare that had a direct impact on the lives of online sellers.

The Denver native was working for Ogilvy & Mather in Beijing when in March 2000, he took a job at Alibaba – a young startup at the time – running public relations.

Some incidents Erisman describes will be familiar to EcommerceBytes readers, such as the 2005 battle in eBay’s home town of San Jose. Alibaba was approved to set up a booth at eBay’s annual eBay Live conference. It was a good fit – many sellers were looking to source product from China, and Alibaba provided a marketplace to bring eBay sellers together with Chinese manufacturers and wholesalers. But in a “cut off your nose to spite your face” decision, eBay decided to exclude Alibaba at the last minute.

Erisman describes how Alibaba turned the incident into a marketing coup, much to the chagrin of eBay. As EcommerceBytes reported in our coverage of the 2005 event, “the award for best guerrilla marketing goes to Alibaba.com, who had strategically placed people around downtown San Jose to give out bright orange Alibaba bags, which were carried everywhere by eBay Live convention-goers throughout their 3 days.” And, we noted, thousands of people went to Alibaba’s Hilton hotel suite to listen to a presentation and pick up a free MP3 player.

Other stories may be more of a surprise, such as the revelation that eBay had made several offers to buy Alibaba, beginning in 2004. The story is reminiscent of eBay’s handling of PayPal, another company that eBay tried to defeat in spite of the fact it provided a very necessary service to eBay sellers. eBay also made numerous offers to buy PayPal, and in that case, ended up spending much more to acquire the business than if it had grabbed the opportunity sooner.

In Alibaba’s case, eBay was shut out when Yahoo moved in and did a deal with Alibaba. “eBay had likely assumed it was Alibaba’s only suiter and its executives could take their time,” Erisman writes. Upon hearing rumors of the Alibaba-Yahoo deal, Meg Whitman desperately tried to reach the CEO of Alibaba’s backer, Softbank’s Masayoshi Son, he reveals. But she was too late.

Jack Ma is a very big celebrity in China – and should be here in the States as well. Those who are interested in his story may also want to investigate another book called “Alibaba” published in 2009 that provides more background about the charismatic founder. Interestingly that book reveals that eBay had signed exclusive advertising agreements with the three main portals in China – locking out Alibaba’s TaoBao marketplace. But because the move forced Alibaba to use more guerrilla tactics, it was able to get word out about TaoBao without spending a fortune in advertising, likely doing it a favor.

Both books talk about the incident in 2003 in which one of the Alibaba employees attending a tradeshow in Canton contracted SARS. Erisman was working side-by-side with the employee at the show and was quarantined when he returned to Hangzhou.

In addition to describing the concern for his coworker and fear for his own health, Erisman reveals in his book that the quarantine gave him a week to test Google AdWords.

“Locked in my apartment, I had little to do during the day besides distract myself from health concerns by tinkering with the advertising campaign we were testing on Google’s search advertising platform,…

“The initial results were amazing. Our biggest headache had always been that we had no cost-effective way of reaching our niche business customers in 180 countries. But advertising on Google allowed us to generate targeted traffic from such obscure key terms as “China ball-bearing supplier.”

“From the Google ads we were suddenly generating targeted traffic from every corner of the Earth at five cents a click. My list of keyword ads quickly grew from six to 500. Could this be the breakthrough that we needed?”

Alibaba went on to become one of Google’s largest advertisers in China, later prompting a visit from Google cofounders Larry Page and Sergey Brin.

Erisman’s co-worker survived, and so did Alibaba through all of the challenges the company faced. In 2005, after investing $100 million in China, eBay CEO Meg Whitman was quoted saying, “Whoever wins China, will win the world.” It was a longshot that Alibaba would survive in the face of competition from eBay, but not only did it survive, it was clear just one year later that Alibaba was winning.

It’s difficult to find executives willing to speak candidly about their employers, competitors, and people in the industry. Erisman is a refreshing change from that typical self-censorship. He talks candidly of his dealings with Meg Whitman’s right-hand man Henry Gomez, and is surprisingly frank about his impressions of people like Google founder Larry Page. He’s also candid about Ma, and while clearly a big fan, he’s not afraid to point out mistakes Alibaba’s founder and CEO made along the way.

For story-telling, Erisman’s “Alibaba’s World” is hard to beat, and he tells a compelling tale of his time at Alibaba during an exciting period for online sellers and the startups that tried to market to them.

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Ina Steiner
Ina Steiner
Ina Steiner is co-founder and Editor of EcommerceBytes and has been reporting on ecommerce since 1999. She's a widely cited authority on marketplace selling and is author of "Turn eBay Data Into Dollars" (McGraw-Hill 2006). Her blog was featured in the book, "Blogging Heroes" (Wiley 2008). Follow her on Twitter at @ecommercebytes and send news tips to ina@ecommercebytes.com.