[photopress:Yahoo_1.jpg,full,alignright]Jerry Yang co-founded Yahoo and now he is solely in charge with a load of problems to fix. Yahoo might soon get a bit of good news from China, one battleground that has up till now been almost as much trouble as Google.
Background is that in 2005, Yahoo took a 40% stake in Alibaba.com. It is going to have an IPO. Very possibly the IPO won’t be for the whole company but just the most successful pieces, first of which is Alibaba’s business-to-business marketplace (also called Alibaba).
This IPO could rival that of Baidu.com, the Chinese search engine that went public on Nasdaq in August, 2005, and has enjoyed a 34% increase in its stock price since then.
An Alibaba IPO would provide a welcome Chinese break for Jerry Yang, who, so far, has been less than lucky. The company has not only suffered from a lackluster Chinese portal and an also-ran Chinese language search engine but has lost a high-profile lawsuit brought by international record companies for providing links to Web sites carrying unauthorized versions of songs.
Yahoo China has also gone through many top managers, with an embarrassing departure last year of its president after barely a month on the job.
On the other hand Alibaba.com has helped Alibaba become the dominant business-to-business company in China.
Alibaba.com’s revenue comes largely from service fees that it charges customers. These Alibaba users pay anywhere from $300 for a no-frills package to $10,000 for top-of-the-line service. Customers paying that top price get priority status on Alibaba search results as well as training from Alibaba staff on how to do online marketing.
The business-to-business operation has many fans among people who follow the industry. It is a profitable business and, indeed, could be seen to be subsidizing many of Alibaba’s other ventures.
For instance, the company operates the most popular consumer-to-consumer site in China, Taobao.com, which commands about 65% of the market for such transactions. The success of Taobao forced eBay to retreat from the Chinese market.
Although eBay’s Meg Whitman had pledged to invest tens of millions of dollars in China to develop the company’s business there, eBay was a distant No. 2 in the market by the time last year it announced it was changing strategies and forming a joint venture with Tom Online, controlled by Hong Kong billionaire Li Ka-shing.
Alibaba has yet to figure out a way to translate Taobao’s popularity into revenues. The site is free and likely to stay so. Now Alibaba, China’s largest online business-to-business (B2B) marketplace for global and domestic trade, plans what could be a US$1 billion share sale in Hong Kong to help fuel growth. Investment banks Goldman Sachs and Morgan Stanley are arranging the impending public offering.
Yahoo, owning 40% would probably say, for which relief, much thanks.
Source: Business Week and China.org.cn
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