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Shells out $50m for Baazee.com

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eBay is buying India's biggest auction site, Baazee.com, for $50m and some post-acquisition costs. Based in Mumbai, Baazee.com has one million registered users, who flog stuff just like they do on eBay.

India lags far behind China in Internet numbers - just 17 million people are online, according to IDC. But it is a growth market - Internet subscribers are expected to reach 30 million in 2006.

In such an immature market, eBay could have been tempted to build its own ops. But it is probably wise to buy a thriving local player.

Experience shows that there is room for only one auction player in each country (sorry, QXL.com). This is why Yahoo! withdrew from the auction business in Europe in 2003, and this is why eBay fled Japan after failing to make inroads against Yahoo!, the dominant player in this country. Right now, China is the big battleground between the two companies. Last year, eBay bought EachNet, China's biggest auction site, for $180m. Yahoo! meanwhile is setting up an auction site in China in tandem with the portal Sina.com. There are a couple of local rivals too - Taobao.com and Alibaba.com, Reuters reports.

The battle for China will play out over the next 18 months, According to Rajiv Dutta, eBay's CFO. In a webcast this month, he said: "I'm very confident that the EachNet business has a tremendous head start."

In new economy thinking - remember that? - Winner Takes All is a desirable form of monopoly, as it promotes market liquidity, or as former Wired editor Kevin Kelly wrote: "a single large pool is superior to many small pools". He forecast the network economy, would breed "mono-sellers with great fertility". The prediction holds water for auction sites and, with Amazon, books. But for anything else? ®

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