The battle for China's Internet search market is heating up.
Alibaba.com Corp., which took over Yahoo Inc.'s China business in August, relaunched the U.S. company's Chinese site with a very different approach. The new site's less-cluttered design -- which resembles that of competitors such as Google Inc. and China's Baidu.com Inc. -- focuses heavily on search functions, pushing into the background the media content and other offerings that typify Yahoo's usual portal-style site.
"What we want [is] when people think of search, they think of Yahoo," said Jack Ma, founder and chief executive of Hangzhou, China-based Alibaba, after unveiling the Yahoo site yesterday.
Alibaba's new look for Chinese Yahoo is the latest in a series of maneuvers by Internet companies trying to grab turf in the country's search sector. Advertising revenue on Chinese Internet search sites is still relatively tiny -- $148 million in 2004, according to iResearch Inc. But ad sales are growing; Baidu's revenue nearly tripled in the most recent quarter, to about $11 million. And China's Internet-user population, at about 100 million people, is the world's second-largest after the United States.
Software giant Microsoft Corp. announced in May that it had formed a joint venture with a Chinese company to launch its MSN online service in China. In August, Beijing-based Baidu, China's most popular search site, sold $109 million of its shares in an initial public offering in the United States. And Google opened its first office in China this year, and in July hired Microsoft executive Kai-Fu Lee to head its growing operations in the country.
Yahoo was one of the first foreign Internet companies to come to China, in 1999, but it struggled to gain traction. In August, it said it was turning over its China operations to Alibaba and spending $1 billion for a 40 percent equity stake in the Chinese company. Alibaba's main business before that had been an online-commerce service linking smaller suppliers with potential customers.
Ma said his biggest competitive concern is Baidu, which he said is experiencing growing pains common to companies that have recently gone public.
"If we don't move fast, within eight to 10 months we won't have a chance," he said. "In eight to 10 months, Baidu is going to overcome its problems and get bigger."
Alibaba spent about $750 million of the money it received from Yahoo to buy shares in itself held by its employees and by investors such as Japan's Softbank Corp. That leaves $250 million, plus more than $100 million in cash Alibaba already had, that it has available to promote and upgrade the Yahoo site, although Ma said he doesn't want to spend it all.
The new site clearly imitates the feel of Google and Baidu, which Ma said was intentional. It includes a link to a search service for MP3 files similar to one that has triggered lawsuits against Baidu for allegedly abetting unlicensed copying of music files.
The Alibaba chief said Yahoo's previous China site was "not good," which he blamed in part on a lack of focus in its operations. Yahoo had actually run three different search sites in China, including Yisou.com, which more closely resembles the new version of Yahoo's site. Ma said the Yisou brand will be ended immediately, and the third site, 3721.com, would be phased out over time.
"We have to rebuild the Yahoo brand in China," Ma said. "This is a strong signal to everyone: We are learning to focus."
Ma said Yahoo executives in the United States weren't actively involved in designing the new China site. They were sent an image of the new appearance yesterday before the announcement.