The Ways in Which Alibaba.Com's Reputation Could Help Yahoo! Compete More Effectively as a Search Engine and Web Portal in China

Introduction

On 24 October 2005, Yahoo! Inc and Alibaba.com, the largest Chinese e-commerce company created a partnership in one of the largest and most attractive internet market in the world, Chi-na. China ranks second to the United States in the overall number of Internet users with 103 mil-lion people online compared to 203 million in the United States. But with an overall Internet penetration rate of just 8 percent of China's 1.3 billion compared to 69 percent of the United States' 296 million citizens, make it easy to understand why China is an important market for Yahoo! or any internet company.

Yahoo! Inc in China

Yahoo! Inc. is a leading global Internet brand and one of the most trafficked Internet destinations worldwide. Yahoo! seeks to provide online products and services essential to users' lives, and offers a full range of tools and marketing solutions for businesses to connect with Internet users around the world. Yahoo! is headquartered in Sunnyvale, California.

Yahoo! Inc first set up operations in China in 1999 with day-to-day business being overseen by executives in Hong Kong and Taiwan. Its focus then was on online advertising. However, its advertising revenue was meager at best and ranked way below the top three Chinese internet portals Sina, Sohu and Netease. At the end of 2003, the US giant acquired a local keyword search company named 3721 Network Software for USD120 million and shifted its focus to internet search engines. This venture proved successful as it was helmed by the founder of 3721, Zhou Hongyi. During Zhou's tenure Yahoo! China became a strong player in the Chinese search market but this was short-lived as Zhou did not extend his employment contract.

In the six years of Yahoo! China's independent operations in China its business was punctuated with frequent personnel changes, twists in company strategies and slow reaction to localization and challenges in the Chinese internet market. The Chinese market, with its unique culture and complex regulations on Internet content, posed some stiff challenges for Yahoo! China.

Alibaba.com

Alibaba.com is China's leading e-commerce company, operating the world's largest online mar-ketplaces for both international and domestic China trade, as well as China's most popular online payment system, AliPay. The Alibaba websites have more than 15 million registered users in 200 countries and territories. In 2004, over US$4 billion in trade is estimated to have come from buyers and sellers connecting at Alibaba sites.

Founded in Hangzhou by Jack Ma in 1999, Alibaba.com first served as a bulletin board service for businesses to post and sell trade leads. Since then, it has transformed to become a global marketplace for SMEs, with offices in over 50 cities across