A February announcement from the Hangzhou HQ of China Yahoo indicates the company is to focus on its key P2C (product to consumer) e-business and phase out all irrelevant activities, reported Economic Observer on February 22.

The streamlining will see China Yahoo abandon its real-name search engine 3721, slash its information service, and put limits on photo uploads, while the decision to shut down zhan.cn.yahoo.com, an open website construction platform, on February 28 is a symbol of Yahoo's failure to establish a viable business model in China according to industry experts.

"China Yahoo is dead", a business insider said, "Yahoo's portal and search engine no longer exist. All that's left is its brand value."

Business transformation

On August 11, 2005 Yahoo China officially merged with Alibaba, a deal in which Ma Yun gained US$1 billion and all Yahoo Inc.'s online investment in China in exchange for a 40 percent stake in Alibaba carrying 35% voting rights.

"Taking over Yahoo will help us obtain its investments, brand value, funds, technology and business channels." Ma Yun said when he was still optimistic about the transaction.

In the following year, Ma Yun introduced broad and decisive reforms in the newly merged company; axing vulgar advertisements and shutting down the short message service which accounting for 25% of its turnover. "The boss just wanted us to expand our search engine at that time", an Alibaba staff member reveals.

"Survive, regain health and become vigorous" were the three steps in Ma Yun's plan to rejuvenate Yahoo China.

In October 2006, Yahoo China was renamed China Yahoo, another branch of the global company to feature the country name at the front, but also signaling greater autonomy and independence for local management.

China Yahoo launched zhan.cn.yahoo.com website building service in 2007, and a year later merged with Koubei.com, renaming itself Yahoo Koubei. In January 2009, the company's controversial 3721 real name search engine was forced to shut down, and following this development China Yahoo began a full-scale reorientation towards e-business.

400 people had already been laid off by January 2008. "Less than 20 people are working on information services", Yahoo Koubei's Publicity Director Wang Tong told reporters.

"Brand value is the only thing left for China Yahoo," said Liu Xingliang, a leading Internet expert.

"Doing e-business is less demanding," said the Alibaba insider, "The boss has thought it through. We are not going to go into the portal business in the next 20 years."

Vision of the future

Yahoo has seen better days in China - but are they just past glories?

"Our major priority is e-business. That's to say, other than the B2B (business to business) mode characteristic of Alibaba, and C2C (customer to customer) of Taobao, our aim is to provide electronic assistance to the service sector," said Pan Guodong, COO of Yahoo Koubei, "All other business will be subordinate to this."

Yahoo Koubei's three main businesses are its Life Services classified ads, Yahoo Connection (a social interaction community based on e-commerce) and Yahoo Mail. It obtains revenue from advertisements that appear along with Life Service search results.

"I don't think we will change direction for several years; building up an e-business chain is our established strategy," Wang Tong said, adding that increasing revenue has the objective, but no targets have been set so far. Alibaba announced last year it is to invest another 300 million yuan (US$43.8 million) in China Yahoo.

China Yahoo's return to e-business reflects Ma Yun's strategic thinking. There is still enormous scope for e-commerce to grow in China, and China Yahoo can begin by profiting from its brand value. Moreover, according to a Yahoo staff member, "We have stopped chopping and changing. We have a clear target now."

(China.org.cn by Maverick Chen, February 24, 2009)