Yahoo and Alibaba

3. How has the strategic value of hayseed to Alibaba changed all over time since 2005? 2005 was a tough year for Alibaba. Beca implement of the US$100 zillion investment in chinaware by eBay, Alibaba and its subsidiary Taobao fell into a severe price war against eBay which hindered the profitability of the group and more than more(prenominal) capital was needed for military operational and technological improvement in dedicate to win the battle. Under this circumstance, Alibaba make a partnership with yokel Inc. Yahoo invested US$1 billion in Alibaba and transferred the ownership of Yahoo China to Alibaba.In return, Yahoo got a 40% stake and 35% voting rights in Alibaba. Beside the cash injection, another reason for the initiation of the partnership was that Alibaba valued such(prenominal) on the importance of look to engine for its e-commerce work. At that time, owing Yahoo China was a competitive advantage of Alibaba against eBay. At that time, Yahoo had much strategic value to Alibaba due to its large capital base and engine room to help Alibaba safeguard its foodstuff handle under eBays attack. However, the operation of Yahoo China under Alibaba was unsatisfactory.Since 2005, Yahoo China has been losing its market component part and lagging behind its rivals. Although Alibaba tried to re-orientate it as more business-oriented to grasp the market niche, the effort was in vain. The influence of Yahoo China in the search engine market in China diminished. Hence, it failed to draw attention of voltage customers of Alibaba and was not capable to bring enough benefit to Alibaba leading to a fall in strategic value of Yahoo. Even for the grow of Yahoo China Yahoo Inc. , the story was more or less(prenominal) 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 engineering (Bing) instead of its own engineering science 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 like Google, Yahoo, Bing etc. to get appropriate results of their queries, a smart search engine good deal allocate much relations to the e-commerce website by placing their website on the top of result pages so that potential customers smoke be created. Now that Yahoo lost its own search engine, it whitethorn only be able to provide support to Alibaba under Microsofts constraints which was unlikely to be what Alibaba wants and thus lowering Yahoos strategic value. Unlike the poor performance of Yahoo, the profit of Alibaba surged after the partnership.Apart from being the market leader in China, Alibaba started to expand its business overseas in 2008. For instance, it formed a partnership with Informedia India Limited set up Alibaba Japan, a common venture with Softbank to foray and launched AliExpress in US etc. All these rising strategies had no correlation with its partner Yahoo Inc. These revealed that Alibaba was keen on ontogenesis new races with overseas companies to enter foreign markets. Due to the poor relationship with Yahoo, Alibaba no longer seek cooperation with it and the strategic value of Yahoo nevertheless 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 made Yahoos market share further decrease as customers no longer need to discern 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 furrow to reach its potential customers. It seems that Yahoo has lost its role as an undivid ed search engine of Alibaba and lost its strategic value meanwhile.