Chinese eBay rival branches out with branded mobile phone

China's biggest online auction and retail Web site plans to stamp its brand on a new mobile phone, the first time it's name will be put on a device, according to a source with knowledge of the situation.

Taobao.com plans this week to announce the phone, which will be co-branded by Lenovo Mobile and come with a pre-installed Taobao application, the source said Wednesday. The handset is part of ongoing efforts by the company to "develop the wireless market," including by drawing more mobile users to Taobao, the source said.

Taobao, where users can buy items from each other or in online stores, is owned by Alibaba Group, which also operates Yahoo China and other top e-commerce Web sites in China, including business-to-business sale platform Alibaba.com. Use of Taobao has soared as more Chinese turn to the Internet to buy everything from phones and laptops to makeup and toasters.

By putting its name on the handset, Taobao is following Amazon.com, which this year started selling electronics accessories like cables and blank DVDs under the AmazonBasics brand name. But the Taobao move would make it one of China's first major e-commerce companies to brand a mobile phone.

Taobao hopes to expand abroad and has said it may do so first in areas with cultural similarities to China. Its parent company has said it wants 1 billion people using the site globally in 10 years. Transaction volume on Taobao in the first half of this year nearly doubled the figure from a year earlier, reaching the equivalent of US$11.8 billion.

The Taobao phone is a smart move but not a surprise, said Duncan Clark, chairman at technology consultancy BDA. Taobao has hinted in recent months that it has a growing ability to predict consumer demand by analyzing buyer trends on its site, said Clark. It could potentially use that ability to launch other self-branded products such as clothing, which along with mobile phones is one of the most popular item categories on Taobao, he said. Rising mobile traffic to Taobao could also help boost the site's advertising revenue.

But if it keeps launching physical products then Taobao will need to be wary of competing with the small and medium-sized companies that are its main clients, said Clark. A Taobao phone could also spur rival Internet companies like Tencent, which offers a hit instant messaging program called QQ, to consider placing their brands on handsets or other products as well, he said.

China officially had 730 million mobile phone accounts at the end of October, making it the largest mobile phone market in the world.

The IDG News Service is a Network World affiliate.