Yahoo buys 40% stake in Chinese auction site Alibaba.com

Yahoo buys 40% stake in Chinese auction site Alibaba.com

	Published : Thu, 11 Aug 2005 16:05 By : Richard Owen Print this Story

BEIJING: US-based Internet firm Yahoo Inc. today agreed to invest $1billion (£556m) for a 40 percent stake in Alibaba.com in a move designed to increase its presence in China.

Yahoo has also agreed to hand over its Chinese search engine operations as part of the deal thus ending its independent operations in the region. Alibaba.com is the country’s biggest ecommerce site in direct competition with eBay - the global leader in online auction.

China is a key market for online trading with over 100 million people using the Internet. The firm runs Alibaba.com a business-to-business trading site and Taobao.com - the country’s second largest consumer auction site.

Besides a 40 percent economic interest Yahoo will also hold 35 percent voting rights in the Chinese firm. The deal is said to be the country’s biggest in this sector to date and values the newly merged Chinese firm at $4 billion.

It would also bring Yahoo in direct competition with eBay in this rapidly growing market.

Alibaba is based in Hangzhou a city in east China and employs around 2000 people. Alibaba.com caters to small and medium sized businesses helping them find customers in China and from abroad. It also runs Alipay, an online payment business – an area where eBay has put in a huge investment with US payment broker Paypal.

Alibaba’s new partner Yahoo is already ahead of eBay in the Japanese market. In Japan Yahoo had joined hands with Softbank – a pioneering start-up. It is believed that the Yahoo-Alibaba deal was brokered by Softbank who is also a stakeholder in the Chinese firm.

China is today second only to the US in the number of Internet users. By the end of this year, it is expected to have close to 120 million people using the Internet. Many overseas firms are finally seeing huge potential in the growing online market in China.