eBay's rival Alibaba to begin charging fees

I know this is old news, but it came out during the holidays so I thought it's worth a mention in case others, like me, have missed it before. It is also -- I think -- good news for eBay Inc.'s (NASDAQ:EBAY) operations in China. Well, it seems that Alibaba.com, China's largest e-commerce company and eBay's main rival there, will soon also start charging certain fees. (Apparently, giving away services for free isn't a good revenue source).

Specifically, starting February 2007, Alibaba.com (owned 40% by Yahoo! Inc. (NASDAQ:YHOO) will charge users of its (now) free Alipay online payments service. It will only charge, however, those users who don't do business on Alibaba's auction site, Taobao. The fee Alipay will begin to charge was not disclosed but sources say it will be 1.5% of the total value of each purchase. While Alipay and Taobao contribute less than 20% to Alibaba's revenue, Jack Ma, Alibaba's founder and chairman, hopes this figure would be 30% by 2010.

eBay's online payment system, PayPal, started operating in China last year and it was rumored, especially after eBay's recently announced joint venture with Tom Online Inc. (NASDAQ:TOMO), that PayPal would work on a similar venture. Whitman, eBay's CEO, dismissed the rumor.

Why do I think Alibaba charging fees is good for eBay? Well, right now eBay's main problem in China is fees. eBay competes against free services while it charges its users fees. As more companies come to the realization that they need to charge fees, eBay's position in this potentially growth market could only improve. Of course, this step by Alibaba is small and a far cry from charging full scale fees, or from Taobao charging fees, but it might indicate the beginning of a trend.