That headline, which is something less than positive, may well be correct. The story is that Microsoft will not buy all of Yahoo.

Earlier this month, Microsoft walked away from a proposal to acquire Yahoo for $47.5 billion, or $33 per share, after Yahoo turned down the offer, saying it would only settle for $37 a share. Which, to be blunt, was totally stupid. The company was never worth anything like that.

Now a new deal is perhaps being brokered which is short of a full-out merger.

What is very important from the point of view of China is that as part of the deal Yahoo will put its Asian assets, including significant minority stakes Alibaba up for sale.

Which brings the deal down to more manageable proportions and is very good news for Alibaba.

The new deal, if it happens, will have Microsoft working with Yahoo to try and provide serious competition for Google.

Collins Stewart analyst Sandeep Aggarwal estimates Yahoo’s search advertising business is worth about $21 billion, while putting the value of its international assets at $9.25 billion.

Shares in Alibaba dropped 4% on the new proposal, thanks to the greater uncertainty now hanging over the two companies.

For Alibaba getting out from under would be a good thing as Yahoo already has a presence in China and melding the two together would be nigh impossible. Indeed, there are those who think getting the Yahoo search engine to work with Microsoft will take years, if ever. They come from two different cultures, two different types of programming. Alibaba would be well out of it.

Combined, Yahoo and Microsoft would, in theory, have around a 30% U.S. share, compared with Google’s roughly 60%. But that does not factor in a large loss potential as Yahoo and Microsoft customers say stuff this for a complicated game of soldiers and move over to the simplicity of Google.

Note that the proposal from Microsoft would likely complicate ongoing discussions between Yahoo and Google. The two companies are still talking about a possible search advertising partnership but there is no way Microsoft would stand still for that if its purchase of part of Yahoo goes through.

Alibaba has been lining up investors to help it buy back the Yahoo stake, sources told Reuters earlier. That seems likely. If it happens it will make Jack Ma, in our illustration, very happy.

It is all a bit of a mess and will not be resolved for some little while. Best news for Alibaba is that it may be able to get right away from it. Which it should do.
Source: Reuters

Microsoft will spend $280 million on a Beijing research and development center and double its full-time R&D staff in China to 3,000 over the next few years, according to the Wall Street Journal.

Microsoft China’s chairman, Dr Zhang Ya-Qin, said during the center’s groundbreaking ceremony that China is the company’s largest R&D area outside the US. The center will be finished in 2010.

In 2006, the firm agreed to spend US$31 million on R&D labs in China, and it entered into an R&D joint venture with Lenovo last year. Microsoft’s decision to focus R&D on China indicates the country’s importance.

Microsoft does not disclose its revenue from the Chinese market. But Fortune Magazine estimated in a story last year that the software giant’s revenue from China would exceed $700 million last year, about 1.5% of Microsoft’s global sales.

All true and interesting. But no mention of the situation with AliBaba which is owned, in part, by Yahoo! which has just spurned, or been spurned (perspectives differ) by Microsoft. Perhaps AliBaba is the elephant in the parlor.
Source: China Economic Review Daily Briefing and Sinacom

Alibaba.com, went public, in November. The offering raised more than $1.5 billion and gave the company a valuation of $26 billion. Ma, 43, taught himself English, then caught the Internet wave as China’s economy opened in the 1990s.

Today, Alibaba is China’s largest B2B site and a favorite among American and European companies that are buying from Chinese suppliers.

The site earned $39 million on revenue of $129 million in the first half of 2007. Ma has also taken Alibaba into search engines , through a joint venture with Yahoo, and his Taobao online auction site has become bigger than eBay in China.

His success story is something out of Horatio Alger:

‘When I was 12 years old, I got interested in learning English. I rode my bike for 40 minutes every morning, rain or snow, for eight years to a hotel near the city of Hangzhou’s West Lake district, about 100 miles southwest of Shanghai. China was opening up, and a lot of foreign tourists went there. I showed them around as a free guide and practiced my English. Those eight years deeply changed me. I started to become more globalized than most Chinese.

‘The other event that fundamentally changed me was in 1979, when I met a family with two kids from Australia. We met and spent three days together and played Frisbee. We became pen pals. In 1985 they invited me to go to Australia for a summer vacation. I went in July, and those 31 days changed my life. Before I left China, I was educated that China was the richest, happiest country in the world. So when I arrived in Australia, I thought, Oh, my God, everything is different from what I was told. Since then, I started to think differently.

‘I flunked my exam for university two times before I was accepted by what was considered my city’s worst university, Hangzhou Teachers University. I was studying to be a high school English teacher. In my university, I was elected student chairman and later became chairman of the city’s Students Federation.

‘ I applied for a lot of jobs, but nobody wanted me! I was turned down for secretary to the general manager of a Kentucky Fried Chicken.

Then, in 1995, a friend showed me the Internet there for the first time. We searched the word beer on Yahoo and discovered that there was no data about China. We decided to launch a website and registered the name China Pages.

‘I borrowed $2,000 to set up the company. I knew nothing about personal computers or e-mails. I had never touched a keyboard before that. That’s why I call myself “blind man riding on the back of a blind tiger.”

’In 1999, I gathered 18 people in my apartment and spoke to them for two hours about my vision. Everyone put their money on the table, and that got us $60,000 to start Alibaba.

‘There were three reasons why we survived. We had no money, we had no technology, and we had no plan. Every dollar, we used very carefully. The office opened in my apartment. We expanded when we raised money from Goldman Sachs in 1999 and then Softbank Corporation in 2000.

‘I call Alibaba “1,001 mistakes.” We expanded too fast, and then in the dot-com bubble, we had to have layoffs. By 2002, we had only enough cash to survive for 18 months. We had a lot of free members using our site, and we didn’t know how we’d make money. So we developed a product for China exporters to meet U.S. buyers online. This model saved us. By the end of 2002, we made $1 in profits. Each year we improved. Today, Alibaba is very profitable.’

Much more of this fascinating article by clicking HERE.
Source: Inc.com

According to the China Internet Research Centre in Beijing fifty-five million of China’s Internet users shopped online last year for a total turnover of RMB59.4 billion ($8.25 billion).

That is up from 43 million online shoppers in 2006, when the value of transactions stood at $4.3 billion dollars and from the $62 million spent online in 2000.

By 2011, the centre projects that online spending will hit RMB406 billion as more of China’s Internet users turn to online shopping.

Yet the level of online spending remains modest: lasy year it was about RMB1,000 last year per consumer, or 0.64% of total retail spending in China.

Growth in its e-commerce has lagged due to consumer concerns about reliable online payment methods and counterfeit goods.

Nevertheless improvements in technology have meant that online payment systems are now safer and the challenge for Internet firms is to win over consumers’ confidence.

Another challenge that Internet companies in China face is the small number of credit card users, with 75 million credit cards in circulation by the end of 2007, according to state media reports.

Although credit cards are becoming more populartheir still low penetration rates along with quality controls and infrastructure issues explain why online sales in China last year made up little more than 6% of that in the United States.

To overcome this difficulty, online business-to-business portal Alibaba has been relatively successful with Alipay, a system which allows users to pay in escrow only once the product has been received.

Currently, Taobao.com, a subsidiary of online portal Alibaba.com, in which Yahoo! invested one billion dollars in 2005, is China’s dominant Internet retailer, accounting for 80% of the country’s e-commerce turnover.

The site had sales of RMB43.3 billion in 2007; most of it in consumer-to-consumer transactions, but its profitability remains in question as it does not charge buyer or seller a transaction fee.
Source: AFP

Chinese e-commerce firm Alibaba.com has entered the fray of Internet advertising with an online platform for Websites and advertisers to match up.

Its new unit — Alimama.com — which has gone through 100 days’ trial operation, will compete with other Chinese online adverting alliances in attracting small Websites, including bloggers’ spaces, to help them make money out of their traffic. These are, of course, led by Baidu.com and Google who are formidal competitors.

Jin Jianhang, vice president of Alibaba, said, ‘We are just offering a practical business model for the small sites to grow.’ He added that small Websites ‘deserve a better model’ than relying on the commission from search engines by serving as their extended advertising space.

Alimama’s model is claimed to be more transparent in that it allows small Websites to deal with advertisers directly.

Baidu, China’s No. 1 search engine, and Google have teamed up with hundreds of thousands of smaller Chinese Websites that joined their ads revenue sharing program. The small sites display the ads from the search engines’ customers on their sites and are paid by the number of clicks.

This is pretty standard operating procedure for Google around the world and advertisers are sometimes somewhat frustrated because it is a far from transpartent procedure. Indeed, opaque would be a good word.

It has become increasingly important for search engines to boost sales. For Baidu, traffic acquisition cost in the third quarter accounted for 12% of total sales, up three percentage points from a year ago.
Meanwhile, Alimama copies the business-to-business trading model of Alibaba. Alimama charges 8 to 15% of the advertisements value.

Advertisers such as Bank of China and Citic Bank as well as some online game companies have signed contracts with Alimama to place ads on the site.

It has 150,000 small and medium Websites and 135,000 bloggers’ spaces ready to take advertising. It is an interesting concept. If it works in China it will probably be picked up elsewhere around the world. And if anyone can make it work it will be Alibaba and Alimama.
Source: Jongo News

Online shopping has long been the slow coach of the Chinese Web. Search companies and portals soar ahead but China’s e-tailers have not had it as easy. One big reason is credit cards which are far less used than in Western countries.

Matters are changing.

According to the Internet Society of China, a trade group, consumer e-commerce will top $1billion in 2007 and grow at an average of 34% annually over the next three years.

As few Chinese pay with plastic, e-tailers are working with dozens of online-payment systems offered by banks and outfits similar to the popular U.S. service PayPal which is owned by eBay.

Market watcher iResearch says Online payments by both companies and consumers are expected to triple over the next two years to $24 billion.

Hanhua Wang, head of Amazon.com’s operation in China, Joyo Amazon said, ‘There has been a lot of progress.’ About 15% of Joyo’s sales are now paid for online, double the level of two years ago.

Alibaba, which nearly tripled in value on its Hong Kong debut, is an exchange where small and midsize businesses buy and sell everything from semiconductors to shark fins. Its parent company, 39% owned by Yahoo!, also runs China’s top consumer auction site, Taobao, and is likely to use some of the $1.5 billion it raised to fund growth there.

A key part of Taobao’s success has been AliPay, the country’s No. 1 online payment service, with half the market. The system, free when used for purchases on Taobao, has helped increase the confidence of many online shoppers. It has more than 47 million users, and every day it processes some 780,000 payments worth a total of $20 million.

AliPay faces plenty of challengers. Joyo, for instance, has its own payment system and doesn’t allow customers to use other services. Hong Kong-listed Tencent, China’s top instant-messaging system, also has a payment service, as do many banks.

All told, China has about 50 such services.

One thing yet to take off is credit cards. Liu Bin, an analyst with Beijing consulting firm BDA said Chinese consumers, remain ‘afraid of online fraud, so they don’t use them.’
Source: Business Week

This is seriously important and may change the way the world shops. It could have a devastating effect on shops in the high street and could mean true global trading on an individual scale. A true revolution.

If you understand the concept of Second Life – a separate virtual world this will be easy to follow. A similar set up is bing set up by the Beijing municipality is getting in on the act with a site which you might think of as Second Life meets Alibaba. In a big way.

In partnership with private capital (and with help from MindArk of Sweden) is planning a virtual world for around 150m avatars, of which 7 million could be online at the same time. (For comparison Second Life rarely has more than 50,000 online concurrently.)

Robert Lai, chief scientist of the Beijing Cyber Recreation District project, reports that, in truth, it will eventually be even bigger. There are nine similar virtual universes being planned.

China is converting a 100 sq km site (yes, that is a very big space) on a former nationalized steel mill site to house, among other things, virtual worlds able to support not millions or tens of millions but billions of avatars.

This is not confined to Chinese avatars – where an avatar is your online personage – it also allows non-Chinese avatars.

This is where it gets a bit tricky.

On the one hand it will be a game, and a game of a size none of us have remotely, as yet, seen. At the same time it will be connected in real life almost, but not quite, to Alibaba.

That is you will be able to trade as you do now on, say, eBay. If you are buying, say, a piece of gym equipment and it is half the price on the virtual world you can order it and have the real thing delivered to your home.

In other words, China is taken the Second Life into a postion between fantasy and reality. And, in doing so, in some forms of shopping will cut out the middle man.

When asked whether the coming of virtual worlds would be on a scale commensurate with the industrial revolution, Professor Robert Lai said, ‘It will be faster, bigger, more like an explosion.’

At the moment western economies benefit from cheap Chinese manufactured goods and the low inflation they bring while also benefiting from huge wholesale, retail and distribution markups on the same goods. But with this idea of a virtual world they, too, migrate to China.

It is, perhaps, good news for DHL and other express transporters. But it sound like the kiss of death for many retailers.

To give a real idea of how this will affect them regard a small town in Australia. In Quambatook, the south-eastern suburbs of Melbourne, users on average in September bought and sold on eBay an average of $274 each.

Now extend that transaction to the idea of a super-sized China Second Life and you can see the concern for retailers. Their sales, unless for instant gratification, will start to dry up.

Retailers are already saying the Christmas coming will be very tough. As it will. But not as tough as it will be in ten years time.
Source: Guardian

Cisco Systems’ chief executive John Chambers has announced that Cisco and EMC will work closely together on various projects, particularly data centers, so this ties in with the following story.

John Chanbers is one of the seriously good guys in the IT industry. Before Cisco he was at Wang and before that at IBM. He is a favorite interview of all IT journalists.

Cisco will be spending US$16 billion in China with investments in manufacturing, venture capital and education efforts.

The ventures include a partnership with Alibaba, China’s biggest online commerce company, to develop business services for small- and medium-sized companies.

Other efforts include doubling Cisco’s manufacturing in China, a venture capital partnership with a government bank and support for technology education.

The company says its total commitments in China to date are US$8.5 billion.

Cisco and the government-owned China Development Bank will explore a joint US$100 million program to provide capital and expertise for innovative Chinese businesses. John Chambers said that would include companies in information technology, health care, communications and other fields.

Cisco and Alibaba agreed to explore collaboration in web-based business services for small- and medium-sized companies and expand Alibaba’s overseas market.

Shares of the e-commerce company partly owned by Yahoo! will begin trading on November 6 in an offering to be co-managed by Goldman Sachs and Morgan Stanley

Founder and chief executive officer Jack Ma, seen here, spoke to reporters to reveal details of the deal. The company expects to raise about $1.5 billion in an IPO to be co-managed by Goldman Sachs (GS) and Morgan Stanley (MS). Trading.

The Alibaba listing is not just a key event for the company; It also promises to be watershed moment for the Chinese online world.

With more than 160 million people using the Internet now, China has the world’s second-largest Net population after the U.S.

But while a few Nasdaq-listed Chinese dot-coms such as search engine Baidu and portal Sina have done well by selling keywords or banner advertising, until now there hasn’t been a Chinese e-commerce company that’s generated much interest among investors.

There’s also a renewed interest in some of the first-generation portals that were among the first Chinese Internet companies to go public on Nasdaq during the days of the U.S. internet bubble. The share prices of top Chinese portals Sohu and Sina are up sharply this year amid confidence that online advertising will increase ahead of Beijing’s hosting of the Summer Olympics next year.

Morgan Stanley (MS) predicts that China’s online advertising market will total $2.4 billion in 2008, an increase of about 45% year over year.
Source: Business Week

Alibaba.com will invest RMB10 billion ($1.3 billion) in the next three to five years to expand and integrate. It will extend to become an industry chain which can help small companies to effect overseas sales.

The money will be invested not only within Alibaba but also to improve external projects like logistics to extend the the e-commerce infrastructure and support industry.

Jack Ma, founder and chief executive, said, ‘In the next few years we will be devoted to the industry’s development to build a favorable environment and ‘an ecological chain’ to go with it.’ Jack Ma said the money will be used for big reforms of the e-commerce industry chain.

Tao Ran, a spokesman for Hangzhou, Zhejiang Province-based Alibaba, explained yesterday that the investment is for the overall industry, with their own businesses part of it.

Alibaba has teamed up with banks in China to extend the online payment service, Alipay.com, and worked with China Post to penetrate underdeveloped rural e-commerce regions.

Wei Zhe, who is in charge of Alibaba’s B2B business, said the group will continue its expansion outside the Chinese mainland, with the next steps to enter Taiwan and Japan. It has already set up a presence in Hong Kong. Or illustration shows Jack Ma giving the situation most careful thought. He need not worry. It is a logic progression of the business. The future is very bright.
Source: Shanghai Daily