Chinese online auction website Taobao has extended its free service commitment for another three years in a bid to attract more users and attack its giant global competitor eBay.

Taobao, owned by Chinese e-commerce website Alibaba, of which Yahoo! holds a 30 per cent stake, said yesterday that it planned to invest US$120 million in the next three years and would continue with its free online bidding services to Chinese users.

"This is not targeted at any of our competitors," said Sun Tongyu, general manager of Taobao, in Beijing yesterday.

But Taobao has been fighting fiercely with eBay, with both claiming to be the top online bidding company in China.

In an attempt to break into the online bidding market, the Hangzhou-based firm decided to provide free services for three years when it opened for business in May 2003.

Since then Alibaba has invested 450 million yuan (US$55 million), while eBay charges users for listings and transactions.

The strategy has been one of Taobao's strongest weapons in a bid to attract 10 million users and challenge eBay's position.

In response, the US giant dropped its listing fees to almost nothing, with a lowest charge of 0.05 yuan (half a US cent), in May.

Yesterday, Alibaba Chairman and CEO Jack Ma again called on eBay to cancel all fees.

He said: "No charges is the right business model for China's current conditions."

EBay made a quick response, saying that this is not a good business model, and Taobao's free services are just a strategy brought about by the strength of eBay's trade in China.

The US firm, which released its third quarter results on Wednesday, said it added almost 2 million new users in the quarter, taking the total number to 15.1 million.

Taobao's Sun said the money, purely from Alibaba and not related to Yahoo!'s new investment, will be used to build brands, improve creditability of transactions and develop technology.

"We have 100 million page views a day. If we have 500 million a day in the future we will need to spend a lot of money," said Sun.

He revealed part of the new investment will also be used to acquire a stake in the top Chinese Internet portal Sina Corp.

Alibaba bought Yahoo!'s Chinese operations in August, but the US giant paid US$1 billion to get a 30 per cent stake in the Chinese firm.

It is believed that Taobao's 10 million users and its prospects are why Yahoo! paid such a huge sum for a stake in a company that only had a revenue of US$68 million last year.

Source: China Daily