Alibaba's World: How a remarkable Chinese company is changing the face of global business by Porter Erisman

Author:Porter Erisman [Erisman, Porter]
Language: eng
Format: epub
ISBN: 9781447290650
Publisher: Pan Macmillan
Published: 2015-05-06T18:30:00+00:00

YAHOO!

“PORTER, THERE’S AN urgent meeting downstairs that Jack needs you to attend,” Jack’s assistant told me as we entered the summer of 2005.

“What’s it about?” I asked.

“He’ll tell you at the meeting. But all of the senior managers need to be there. You should go downstairs right away.”

At the meeting room I found the entire senior management team sitting around a table. A sudden meeting such as this could mean only one of two things—very good news or very bad news.

Jack walked in, put his hands on the table, and got straight to the point.

“I’ve got a big announcement everyone—we’re buying Yahoo! China.”

The team was surprised. Shocked, even. We hadn’t seen that coming. And if we hadn’t seen it, one thing was for sure—neither would eBay.

Jack explained how the deal had come about. “A few weeks ago I was at a conference in Pebble Beach, and I started chatting with Jerry Yang. We started talking about what we could do together in China. I told him that if he really wanted Yahoo! to win in China, he should let us run it. After talking with them for a few weeks, we agreed in principle to a deal, and now we’re finalizing it. Yahoo!’s going to invest $1 billion in Alibaba and we’re going to take over Yahoo! China.”

Yahoo! wasn’t the most obvious choice for a partner, but the more Jack explained the rationale for the deal, the more sense it made. Since becoming the first US Internet company to enter the China market in 1999, Yahoo! had struggled through a series of partnerships, none of which had worked out. But its early entrance into China had given Yahoo! an advantage—its executives had learned from their six years of mistakes. Chief among these lessons was that they could not simply apply their US model to the China market. They quickly found that translating international content for the China market didn’t satisfy the needs of local consumers, and Yahoo!’s growth had failed to keep pace with that of local rivals who had developed features and content that better fit the China market.

In 2003 Yahoo! attempted to rectify the problem by acquiring local search engine leader 3721, led by the feisty entrepreneur Zhou Hongyi. The main driver of 3721’s growth was controversial antivirus software Zhou had created that, once downloaded, also installed a search toolbar on the computers of Internet users that defaulted to the 3721 search engine. Within the industry the 3721 software was widely regarded as a “hooligan application,” since it of ten installed without the user’s being fully aware and was quite difficult to uninstall. Nevertheless Zhou’s aggressive tactics worked; 3721 quickly became the second-largest search engine in China, and in 2003 Yahoo! bought it, keeping Zhou on to head Yahoo! China’s business. Over time, however, a rift grew between Zhou Hongyi and Yahoo’s US management, and Yahoo! began to look for alternatives for doing business in China.

In the process Yahoo! looked to the example of Yahoo! Japan, where the company had partnered with Alibaba’s main investor, Softbank.

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