Thursday, August 11, 2005

Yahoo Is Paying $1 Billion for 40% Stake in Alibaba

From Reuters: Yahoo takes 40 pct stake in China's Alibaba

"Yahoo Inc. will pay $1 billion in cash for 40 percent of China Internet auctioneer Alibaba.com, taking on eBay and Web search firm Baidu.com as it extends its reach in the world's second-largest Internet market.
Under the much-anticipated deal, the largest to date for an online asset in China, Yahoo would fold its entire Chinese search and other operations into Alibaba, China's second-largest Internet auctioneer, which runs business-to-business and consumer auction sites."

Press Release: Yahoo! and Alibaba.com Form Strategic Partnership in China

Yahoo's online assets in China:
Yahoo China: Yahoo China's main site; Portal
Yisou.com: Search engine
3721.com: Search technology provider
Share of China's search market (all three combined): 22.7 percent
Source: Shanghai iResearch

Alibaba's operations:
Alibaba.com: Business-to-business e-commerce site; handled $4.5B in transactions in 2004
Taobao.com: Online auction site; eBay's main competitor in China
Alipay: Online payment system; more than 2 million users; competes against eBay's PayPal

Comments and opinions on the deal:
"Yahoo!'s investment underscores our long-term commitment to the Chinese market. We believe the combination of Yahoo! and Alibaba is the best approach for Yahoo! to win in this region. Together, we will create one of the largest Internet companies in China, and our combined assets will make us the only company that has a leading position in all the key sectors that are driving explosive Internet growth in China such as search, commerce and communications." Terry Semel, chairman and chief executive officer of Yahoo!

"Teaming up with Yahoo! will allow us to deliver an unmatched range of e-commerce services to businesses and consumers in China. With the addition of Yahoo! China to Alibaba.com's business, we're expanding our services to provide a leading search offering to China's Internet users. In China, Alibaba.com is winning in B2B, winning in C2C, winning in online payments and now we're going to win in search." Jack Ma, chairman and chief executive officer of Alibaba.com

"I think it's too low, that's why we're not selling (our entire stake)... That's a signal of our confidence that this company will grow much more." Masayoshi Son, CEO Softbank, disagreeing with some comments that the $4 billion valuation of the new company was too high

"No question this creates a monster in the China Internet. It will have a powerful combination of search, communications, commerce and auctions. All they need is a game component and they could have a shot at becoming number one. This also may be the only real choice Yahoo had, even though they end up with a minority share in China, as they did in Japan, something they have said publicly and privately they regret."
Bill Bishop, CEO, Red Mushroom; Co-founder CBS MarketWatch

"If you look at what happened to (eBay) in Japan, it was Yahoo that beat them in Japan, look at what happened to them in Taiwan, Yahoo beat them in Taiwan, and now it's Taobao and Yahoo (who are) going to beat them in China."
Porter Erisman, Spokesman Alibaba.com, on the competition with eBay

5 Comments:

At 9:24 AM, Anonymous BESchlepy said...

Yahoo had no choice but to do this deal. They were losing in everything. Alibaba wanted this deal because the yahoo/sina auction relationship (1pai.com) has about 900,000 items listed compared to taobao's 8.5 mil items listed. That is a 10 percent increase. According to alexa ebay was catching up to taobao in traffic.

 
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