Alibaba.com, one of China's biggest business-to-business e-commerce firms, said on Tuesday that it would invest 100 million yuan (US$12 million) into the consumer-targeted e-commerce web company Taobao.com, which was launched two months ago.
Jack Ma, chairman and chief executive officer of Alibaba.com, said: "China is well posed to become the world's biggest e-commerce market with a forecast 200 million Internet users, so we must invest now.
"If (we waited until) the market is mature, there would be no room for us by then."
Ma said the money will be spent on equipment, employee recruitment and an online credit system for users.
He said he hoped that Taobao.com, a wholly owned subsidiary of Alibaba, would eventually overtake its parent in terms of both revenue and staff size. He added that the 100 million yuan (US$12 million) investment would be enough for Taobao.com to operate for three years.
Alibaba currently has more than 900 employees. The firm has predicted that its profits will be 100 million yuan (US$12 million) this year, compared to just 1 yuan (12 US cents) last year.
Ma said Taobao.com will build an online trading platform integrating the business-to-consumer (B2C) and consumer-to-consumer (C2C) models.
Alibaba is not the only firm keen on the e-commerce market.
Industry sources said other firms aiming to buy an e-commerce business in China are Sina Corp, one of the biggest Internet businesses in China and a NASDAQ-listed firm; the Hong Kong-listed Tom.com, backed by Hong Kong's richest man Li Ka-shing; and the US Internet giant Yahoo.
A source from Tom.com said it is targeting one of the biggest B2B firms in China.
These developments have come shortly after the US online auction giant eBay acquired the US parent of China's biggest C2C website, Eachnet.com.
The US behemoth paid US$150 million to buy a two-thirds stake in the Delaware-based Eachnet Inc.
Last year, eBay paid US$30 million for one-third of Eachnet's shares.
Meg Whitman, eBay president and chief executive, said in a statement after the acquisition: "Eachnet has built a great business and is in a fantastic position to take advantage of the long-term growth prospects of e-commerce in China."
Fang Xingdong, chairman of the Chinese Internet industry researcher Chinalabs.com Ltd, said the prospects of the e-commerce market are a major reason for recent active investment.
"E-commerce will be one of the top three applications on the web together with news and e-mail, but there are no dominant providers at present in the way that the portal sector has the NASDAQ-listed Sina Corp, Netease.com and Sohu.com, so there is plenty of room for investment and acquisitions," said Fang.
He said Chinese Internet companies must expand into new areas. With their expanding profits, they can afford to spend more time and money on mergers and acquisitions, he added.
(China Daily July 10, 2003)