Partner or new competitor? Alibaba worries about Yahoo

PUBLISHED : Saturday, 11 September, 2010, 12:00am
UPDATED : Saturday, 11 September, 2010, 12:00am's chief executive says it may have to re-evaluate its relationship with Yahoo after its United States partner announced plans to expand on the mainland.

Yahoo, which holds a 40 per cent stake in parent firm Alibaba Group, said on Monday that it planned to broaden its online advertising coverage to include mainland small and medium-sized enterprises (SMEs).

Yahoo's Hong Kong subsidiary aims to sign up online advertisers among SMEs in Guangdong and other coastal provinces to help them reach buyers in the US and other international markets.

That plan could put Yahoo in competition with, the world's biggest business-to-business e-commerce services provider.

'If they [Yahoo] want to do anything in China, they have to respect the agreement they signed in 2005,' chief executive David Wei Zhe said.

In October 2005, Alibaba Group and Yahoo formed a long-term strategic partnership in which the mainland firm acquired and assumed management control of Yahoo's mainland operations. In turn, Yahoo invested US$1 billion to become a strategic shareholder in Alibaba Group. Wei said had not received any official notice from Yahoo, but read about the potential expanded online search marketing business on the mainland.

'We should re-evaluate the relationship [with Yahoo] if that [initiative] comes through,' Wei said. had 53.44 million registered users as of June and operates in more than 240 markets. It already connects SMEs that have little or no marketing budgets with domestic and international buyers through giant online trading websites. These include an English-language portal for global traders and a Chinese-language site for mainland suppliers and buyers.

'We're not exactly going to compete with because it is a business-to-business platform used by registered members,' Yahoo Hong Kong managing director Alfred Tsoi Po-tak said.

'What we're offering is simply another online advertising and marketing platform, through Yahoo in America, for mainland SMEs to reach their target audience.'

Tsoi gave no specific timetable for the US initiative. Last month, relationships between Yahoo and Alibaba Group may have further soured. A group of investors led by Alibaba Group and Yunfeng Fund - enterprises in which chairman Jack Ma Yun has significant stake - took a minority stake in's search business.

According to a JP Morgan report, that move reflected 'a seemingly worsening relationship between Alibaba Group and Yahoo' since the mainland firm would rather invest in a domestic search engine than in Yahoo's mainland operations.

While it scrutinises Yahoo's intentions, Alibaba Group is pushing forward with a potentially more rewarding relationship.

Ma and eBay chief executive John Donahoe said yesterday they were both keen to find more ways to work closely together after PayPal, the electronic payment system run by eBay, was adopted by for its AliExpress wholesale transaction service in April this year.

'Our sellers need great products at low prices,' Donahoe said. 'And we want to help your suppliers [at] sell to the rest of the world.'

'Our challenge is how to keep innovating and to grow the market,' Donahoe said.

Taobao, the mainland's leading online retail platform provider and a subsidiary of Alibaba Group, competes against the Tom Group and eBay-backed EachNet service. PayPal is also a rival to leading domestic e-payment system AliPay.

Wei said's two recent US acquisitions, e-commerce software providers Vendio Services and Auctiva, have prompted eBay to consider more seriously about building opportunities for their sellers to source online from mainland suppliers.

Online merchants with Auctiva and Vendio now have direct access to almost 1.5 million supplier storefronts on and AliExpress, which was launched in April. This connection represents significant potential cost savings to eBay's sellers.

'Jack and John today confirmed that both companies should now seriously, officially explore how to make this happen, how to create value for both companies' customers,' Wei said.