PayPal was almost one of eBay's biggest missed opportunities before eBay finally acquired it in 2002 - a new book reveals that it was China's Alibaba that won that distinction.
eBay began courting Alibaba in 2004, according to Porter Erisman, who was a Vice President at Alibaba from 2000 to 2008. In his new book, "Alibaba's World," he reveals that eBay CEO Meg Whitman was stunned to learn a year later that Alibaba chose to enter into a deal with Yahoo.
"eBay had likely assumed it was Alibaba's only suitor and its executives could take their time," Erisman wrote in his book. Meg Whitman made a desperate but futile attempt to reach Masayoshi Son, the CEO of Alibaba investor Softbank, when she heard the news.
To understand just what a missed opportunity that was, the tables are now turned: Alibaba is considered by many to be a candidate to buy eBay.
At the time, however, Alibaba was a wholesale marketplace that brought together retailers and manufacturers (B2C). In 2003 when its charismatic CEO Jack Ma saw eBay beginning to enter China, he decided to go to war with eBay. He did so by launching a person-to-person marketplace in China called TaoBao that was similar to eBay.
Alibaba was a good fit with eBay, whose merchants used the Chinese platform for product-sourcing. Why battle eBay in China? Ma believed that while eBay would start with consumers in China through its acquisition of Eachnet, over time they would start going after Alibaba's wholesalers.
He succeeded - TaoBao was a thorn in eBay's side in China. Yet eBay was confident it could win there. "Whoever wins in China wins the world," Whitman famously said.
Erisman told EcommerceBytes that there were multiple discussions and offers by eBay over more than a year's time, beginning in 2004. "Each time, the offer got higher," he said. And had eBay given a generous enough offer early on, there's a good chance that Alibaba would have accepted it, Erisman revealed.
But would Chinese government regulators have approved the deal? Erisman said the deal would have received smoother acceptance by the Chinese government than Alibaba's ultimate deal with Yahoo, since eBay was a pure ecommerce company and involved in less sensitive areas of the Internet than Yahoo.
"In hindsight, it would have been the smartest move that eBay ever made as Alibaba (just like PayPal) would have gone on to outgrow eBay," he said. "It would have been great for eBay sellers because it would have brought them closer together with Alibaba's wholesale sellers."
But ultimately, Erisman said, such a deal would probably have been worse for Alibaba and entrepreneurs. "Yahoo proved so different than Alibaba that Alibaba was able to make a clean break and grow independently. But Alibaba and eBay are so similar that I have a feeling eBay's management would have stifled Alibaba's growth, putting their own management in place, in the same way they did with Eachnet."
Alibaba Group Holdings went public in the fall of 2014, with the Wall Street Journal calling it one of the most valuable technology enterprises in the world.
What would eBay be like now if it had acquired Alibaba in 2004 or 2005? Would Carl Icahn have been able to pressure it to break up the company?