[photopress:tencent_toys_viewed_by_schoolgirl.jpg,full,alignright]In China, Taobao and eBay are rivals yet they are to team up to fight against a perfectly acceptable perception. That is that they both have a lot of improper trading in ‘virtual currencies’ from popular Internet games. In truth, they do. It is not the main part of the business but it is certainly there.
At the end of last year, Tencent, an online game operator, sued Taobao (which is operated by Alibaba and 40% owned by Yahoo) for allowing the unauthorized auctioning of Tencent’s virtual currency and user accounts. Now the case is to be heard.
Bit worrying so Taobao and eBay — normally bitter commercial enemies — got together and swore they would remove any virtual-currency listings from their sites. And no doubt they will try although whether they can be successful is another matter.
At the same time investors will be watching to see if this odd new partnership leads to more significant cooperation between the two companies. Possible if not probable.
Taobao sees itself as a job creator and has a goal to create a million jobs in China by bringing new sources of income to individual Taobao sellers. The company considers anyone who earns more than RMB2,000 a month to be ’employed’ as a Taobao seller. So far it claims it has done this for more than 100,000 people across China. Which is probably true.
Meanwhile, in a parallel development Tencent is moving more to online advertising to diversify its portfolio and compete with Sina.com and Baidu.com.
The first step will be to upgrade its brand image which is typically seen as being suited to teenage Internet game players. Tencent wants to lure higher-end users to its portal and e-commerce site to entice more spending from advertisers.
Tencent, whose business ranges from instant messenger QQ, a portal QQ.com to online auction service and search engine, makes money mostly from Internet value-added services like selling virtual image icons and games to its users, whose numbers are estimated at more than two-thirds of the 140 million Internet population in China. Which is why it does not like other Internet companies flogging off important bits of its games.
Fu Xinghua, an analyst with Analysys International, said, ‘Tencent should improve content quality for its news, finance and auto channels to attract higher-end users and more advertisers.’ But what, if the process of doing that, it loses some of its fanatical players and their revenue stream?
So it is suing Taobao and eBay and, at the same time, trying to move more and more into their Internet space. A move that has many possible outcomes.
Source: Market Watch
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