Yahoo and Alibaba

3. How has the strategic value of bumpkin to Alibaba changed over time since 2005? 2005 was a strong-armer year for Alibaba. Beca do of the US$100 million investment in china strugglee by eBay, Alibaba and its subsidiary Taobao fell into a severe price war against eBay which hindered the profitability of the group and much more capital was needed for avail able-bodied and technological improvement in order to win the battle. Under this circumstance, Alibaba organise a participatorship with yokel Inc. yahoo invested US$1 million in Alibaba and transferred the ownership of hick China to Alibaba.In return, yokel got a 40% stake and 35% voting rights in Alibaba. Beside the cash injection, another intellectual for the initiation of the partnership was that Alibaba valued much on the importance of look for locomotive for its e-commerce work. At that time, owing Yahoo China was a belligerent advantage of Alibaba against eBay. At that time, Yahoo had much strategic value to Al ibaba overdue to its large capital base and locomotiveering science to help Alibaba safeguard its commercialize share under eBays attack. However, the operation of Yahoo China under Alibaba was unsatisfactory.Since 2005, Yahoo China has been losing its market share and lagging behind its rivals. Although Alibaba move to re-orientate it as more business-oriented to grasp the market niche, the effort was in vain. The cast of Yahoo China in the search engine market in China diminished. Hence, it failed to draw attention of potential customers of Alibaba and was not capable to operate enough benefit to Alibaba leading to a fall in strategic value of Yahoo. steady for the parent of Yahoo China Yahoo Inc. , the story was more or less the same.The net income of Yahoo dropped 78% in the first quarter of 2009 which resulted in a massive layoff. due to the low profitability, Yahoo formed a 10-year agreement with Microsoft. Under this contract, Yahoo had to adopt Microsofts search t echnology (Bing) instead of its own technology in all Yahoos website. Similarly, Yahoo agreed to use Googles search engine in Yahoo Japan (search ads platform). In other words, it surrendered its own searching technology which Alibaba valued most. Search engine is important to e-commerce companies.As many people use search engine comparable Google, Yahoo, Bing etc. to get appropriate results of their queries, a smart search engine can allocate much traffic to the e-commerce website by placing their website on the pull in of result pages so that potential customers can be created. Now that Yahoo garbled its own search engine, it may only be able to provide support to Alibaba under Microsofts constraints which was unlikely to be what Alibaba wants and thence lowering Yahoos strategic value. Unlike the poor action of Yahoo, the profit of Alibaba surged after the partnership.Apart from being the market leader in China, Alibaba started to have kittens its business overseas in 2008. For instance, it formed a partnership with Informedia India express set up Alibaba Japan, a joint venture with Softbank to foray and launched AliExpress in US etc. All these new strategies had no correlation with its partner Yahoo Inc. These revealed that Alibaba was keen on developing new relationships with overseas companies to take down foreign markets. Due to the poor relationship with Yahoo, Alibaba no longer seek cooperation with it and the strategic value of Yahoo further diminished.Because of the poor performance of Yahoo China, Alibaba started to provide Sogou (a local search engine) in addition to Bing for its customers. This probably make Yahoos market share further decrease as customers no longer need to choose Yahoo Chinas Etao as the only access to Alibaba and they can opt for Sogou Shopping instead. Even Alibaba loses Yahoo China, it still has its new channel to reach its potential customers. It seems that Yahoo has lost its role as an exclusive search engine of Alibaba and lost its strategic value meanwhile.