With more than 100 million people already online, China's Internet market is seen as a gold mine by all those hoping to make it big in e-commerce. Foreign players are clamoring for access but China is already well served by local operators such as Alibaba. The company runs a thriving business-to-business marketplace, created Taobao, China's most popular consumer marketplace, and introduced AliPay, the leading online payment system. Last year, Yahoo purchased a 40% stake in Alibaba for US$1 billion plus all Yahoo China's assets, allowing the Chinese company to diversify its business into search. Jack Ma, founder and CEO of Alibaba, told CHINA ECONOMIC REVIEW how he plans to overcome the likes of Google, Baidu and eBay.
Q: You have said that Yahoo China will focus on search services – how do you expect this market to develop in the coming years?
A: We chose to enter this market because we realized that search and search advertising are a critical part of e-commerce. The same advertisers that advertise on Alibaba and Taobao, also advertise with search advertising. We wanted to have several channels to offer our customers, so we now have both marketplaces and search advertising to help our customers market themselves online. Search is still in the early stages in China, so today's market leaders may not be the leaders of tomorrow. It's really just the first mile of a long marathon.
Q: How can Yahoo and Alibaba offset the global strength of Google? What can you offer that Google can't?
A: Actually, we think Baidu is the real competition in China. Google is a great company, but they are just getting started here. Yahoo and Alibaba already have the advantage of six years' experience in China. During that time mistakes have been made, but we've learned from them and now know the market better than any international player. So we don't see Google posing the most significant challenge for us.
Q: What are you doing to close the gap with market leader Baidu?
A: First, we're focused on hiring the right people. At the end of last year we did a nationwide road show to attract search engineers in China's major cities and even inland cities like Chengdu and Xi'an. So the most important thing is to have the best local team, and we are building that right now. Our greatest advantage over Baidu is our international partner – Yahoo. While Google has been receiving a lot of media coverage, people don't always realize that Yahoo's Silicon Valley team has been building a world-class search technology team. So when we combine Yahoo's Silicon Valley technology with our local search engineer capabilities, we'll bring the best of both worlds to our customers.
Q: To what extent does Yahoo China configure its search results to meet government requirements? Do you see this as just a necessary part of your business?
A: As is the case with our international website and other websites, we make sure that our website content and operations do not violate the laws in any country in which we operate. Since we are focused on e-commerce, entertainment and finance, our services don't run into any sensitive or inappropriate areas.
Q: What did Yahoo think Alibaba could offer that Yahoo couldn't achieve on its own? And what was the most attractive part of the deal for you?
A: I think they saw that Alibaba was more than just a business plan. We have a company and a team that have survived the toughest years of the Internet winter and are now highly profitable. So I think Yahoo felt that joining hands with a winning team locally, and putting the operations in our control, was the best model for winning in China. For us, the most attractive part is the ability to add search into our portfolio of businesses.
Q: You've pledged to fight off eBay's challenge to Taobao in China. What is the key to achieving this goal?
A: We actually believe that this game is already over. It is too late for eBay to make a comeback in China. The key has been focusing on local market needs and forgetting about e-commerce models in the West. Taobao is much more suited to China's consumers and market conditions, and so long as eBay is directing eBay China from its Silicon Valley headquarters, it will be impossible for their local team to move fast enough to win.
Q: How will the growth in credit card usage in China affect services like Taobao?
A: It will help facilitate e-commerce, but e-commerce does not depend on credit card usage. Our AliPay payment system is already China's largest online payment system, and we did it without credit cards playing a major role. It's another example of making the right product for China, and not worrying about emulating the western payment systems.
Q: What implications will the development of mobile Internet services have for your business?
A: Mobile Internet will be important. But I think in many years, people won't think about it in terms of "mobile Internet" or even "e-commerce". The Internet will be everywhere and "e-commerce" will become so normal it will just become "commerce."
Q: You defended Yahoo's decision to pass information to the authorities that contributed to the imprisonment of journalist Shi Tao as "business is business." Could you elaborate on this?
A: No further comment.
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