Internet

August 19, 2013

Alibaba buys into California eCommerce company

Chinese eCommerce giant Alibaba has continued its relationship with Yahoo and gained another foothold in California with its recent investment in ShopRunner, run by former Yahoo Chief Executive Scott Thompson, Shoprunner is an ecommerce firm based in San Francisco with existing relationships with many major brand names. They are growing fast with orders in 2012 increased two and a half times more than in 2011.

Alibaba, which is planning for an IPO later this year is reportedly paying $75 million for a minority stake in ShopRunner, While Mr. Thompson is no longer at the company, Yahoo owns almost a quarter of Alibaba so some relationship apparently persisted.

This is said to be one of many purchases Alibaba is making in advance of their IPO on the Hong Kong Stock Exchange, that is expected value the firm at $60-$100 billion. The move has not been without controversy. A Hong Kong journalist recently quit her job in a controversy over disputed remarks that Jack Ma, founder of the Alibaba Group, is said to have made in support of Beijing’s violent crackdown on Tienanmen Square protesters in 1989. Mr. Ma denies he said that but the newspaper is sticking to the story and it apparently caused quite a stir in Hong Kong.

Alibaba began in 1999 as a business-to-business portal to connect Chinese manufacturers with overseas buyers. It has since become the biggest eCommerce system in the world, with with sales more then Amazon and eBay combined. The planned IPO will likely secure its position as a global powerhouse in eCommerce for many years to come.

Filed under China, Internet, Mergers and Acquisitions by

February 2, 2010

Google and Apple at War?

Two of California’s biggest technology giants are increasingly at odds and it looks more and more like they are turning into fierce competitors.

Google CEO Eric Schmidt was on the board of Apple for three years and at one time it was said that they had a pact not to poach each other’s employees. They were always thought to be united in fighting a bigger enemy – Microsoft.

In 2007, however, Google released Android, a mobile phone operating system; while the iPhone runs on a propitiatory operating system developed by Apple. At first, this was was seen as primarily an attack on Microsoft and its Windows OS. Still, the handwriting was on the wall, and Schmidt resigned from the board of Apple a month later.

Then, in the July 2009 Google announced the Google’s Chrome OS, a web-based operating system meant for netbooks, and has more recently even announced its own “app store” that would directly compete with the Apple app store. With the launch last week of the iPad – essentially a high end netbook – it seems Apple now considers the Chrome OS a direct threat.

Now it has really come to a head. Apple Inc. CEO Steve Jobs reportedly verbally attacked Google Inc. at an employee meeting after rolling out the new iPad tablet computer last week. Wired reported that Google’s entry into the phone business with its Nexus One drew the ire of Apple CEO. They quoted attendees of the meeting in which Jobs reportedly let loose a tirade where he called Google’s “Don’t Be Evil” motto “bullshit” “We did not enter the search business, they entered the phone business,” it reported Jobs told his employees. “Make no mistake they want to kill the iPhone. We won’t let them.”

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January 18, 2010

China’s Alibaba attacks Yahoo for Google Support

Talk about biting the hand that feeds you.  The Alibaba group – owners of the Chinese trade portal Alibaba has strongly criticized Yahoo – its largest shareholder, for siding with Google after a cyber attack on that company.  

As reported in the New York Times, a spokesman for Alibaba, said executives at the company were “angry” because Yahoo appeared to follow Google in suggesting the Chinese government was behind the cyberattacks.  They issued a statement saying that Yahoo was “reckless” in supporting Google because they believed there was a lack of evidence that the attacks were supported by the Chinese government. 

Yahoo is one of the companies that was targeted in the attacks but the company declined to confirm that it was a victim. “The people with knowledge of the situation said that Google contacted Yahoo about the attacks before it publicized them. Google executives were dismayed that other companies were unwilling to publicly acknowledge the attacks, and they were particularly frustrated by Yahoo’s silence” the Times reported. 

Yahoo paid Alibaba $1 billion in 2005 and gave Alibaba control of Yahoo China in exchange for a 40 percent stake in the Chinese company. Yahoo’s investment in Alibaba has paid off in a big way for that company. Alibaba.com, a unit of Alibaba, went public in 2007 with a huge stock offering in Hong Kong and is now valued at $12.5 billion.  Jack Ma, the founder of Alibaba is a celebrity in China because of his success in forcing California’s Ebay to leave the Chinese market, and for taking over Yahoo’s China operations, as part of their billion dollar investment in his company. 

This was a huge amount of capital from a California company that was used to make Alibaba fantastically successful. Now that company is turning on very the people who helped it become what it is.  Is this a simple case of “sucking up” to the Chinese authorities?  Jack Ma is said to be famous for that, and some people even believe he is now milking the resources out of Yahoo so it eventually fails in that country. 

In any event, a consensus seems to be forming that this is a free trade issue.  If the Chinese government blocks Google or other American Internet firms – or forces them to leave that country, the the American Goverment should take the same action with Chinese Internet firms – and it seems like a good place to start would be Alibaba.

Filed under China, Information Technology, Internet, Opinion by

January 16, 2010

China says Google censorship will not affect trade – but should it?

China has unilaterally declared that their depute with Google over censorship and strong evidence of government sponsored hacking will not affect U.S. Trade relations, but do they get to make that call?  

“Any decision made by Google will not affect Sino-U.S. trade and economic relations, as the two sides have many ways to communicate and negotiate with each other,” Chinese government spokesman Yao Jian told a news briefing in Beijing.

Well of course the two sides have many ways to communicate with each other – that is not the point. If one party to a trade agreement censors and blocks the content of the other party, then of course it should it should be a trade issue.  In the tit for tat world of diplomacy, if they block the content from one of our companies, then shouldn’t we block one of theirs?

California buys a huge amount of Chinese imports, but they don’t by nearly as many of our exports. One of our strongest industries in the movie industry – but only 20 foreign films are even allowed to be shown in that country each year. The rest of the movies we produce here are simply pirated (i.e. stolen) there, Can you imagine if we said to China, “we will only allow the products from 20 of your manufacturers in our country each year”. Now they are blocking, and possibly even attacking, one of California’s other great industries – Internet services.

It is not at all disrespectful to China to expect our government to respond to blocking and censorship with reciprocal actions that affect Chinese companies. That is how a mature trade relationship works. Mr. Yao Jian has it wrong. This is exactly the kind of thing that should affect trade and economic relations – this is a trade issue.

UPDATE: Evidence that the Obama Administration may be looking at these blocking and censorship issues from a more sensible “fair trade” perspective, might be found in a speech Secretary of State Clinton plans to give on the issue on Thursday. From a column by Andrew Ross in today’s San Francisco Chronicle:

“The Internet is integral to the international trading system,” said Ed Black, CEO of the Computer & Communications Industry Association, who is scheduled to meet with Clinton on the matter this week. “China cannot limit the free flow of information and still comply with its international trade obligations.” “You can’t lecture the Chinese on human rights,” said another industry executive. “You won’t get anywhere with that. So, it’s best to treat it as a trade issue.”

Should the administration go that route, it will enlarge the can of U.S.-China worms already growing around the latter’s increasingly protectionist economic policies. “Greater control of the Internet is part of a wholesale tightening up of the Chinese economy,” said an executive with a high-tech trade organization that is also due to meet with Clinton. “It’s about protecting domestic industries and pushing indigenous innovation. But they’re doing it in blatantly discriminatory, brazenly unfair ways.”

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January 12, 2010

Is Google’s relationship with China turning sour?

Google Inc. will stop censoring its search results in China and may pull out of the country after experiencing an attack on the email accounts of human rights activists, according to a report in the San Francisco Chronicle:

Google disclosed in a blog post that it had detected a “highly sophisticated and targeted attack on our corporate infrastructure originating from China.” Further investigation revealed that “a primary goal of the attackers was accessing the Gmail accounts of Chinese human rights activists,” Google said in the post written by Chief Legal Officer David Drummond.

Google did not specifically accuse the Chinese government. But the company added that it is “no longer willing to continue censoring our results” on its Chinese search engine, as the government requires. Google says the decision could force it to shut down its Chinese site and its offices in the country.

It’s unclear how much of a blow to its business Google would suffer by pulling out of China. The country has the world’s largest population of Internet users but research firm Analysys International said last year that Baidu.com handled 62 percent of Web searches in China compared with 29 percent for Google.

Update, according to the New York TimesGoogle linked its decision to sophisticated cyberattacks on its computer systems that it suspected originated in China :

Those attacks, which Google said took place last week, were directed at some 34 companies or entities, most of them in Silicon Valley, California, according to people with knowledge of Google’s investigation into the matter. The attackers may have succeeded in penetrating elaborate computer security systems and obtaining crucial corporate data and software source codes, though Google said it did not itself suffer losses of that kind.

While the scope of the hacking and the motivations and identities of the hackers remained uncertain, Google’s response amounted to an unambiguous repudiation of its own five-year courtship of the vast China market, which most major multinational companies consider crucial to their growth prospects. It is also likely to enrage the Chinese authorities, who deny that they censor the Internet and are accustomed to having major foreign companies adapt their practices to Chinese norms.

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March 24, 2009

China has blocked Youtube

China has blocked the video-sharing Web site YouTube but has not offered any reason or explanation for the ban. Mountain View-based Google, which owns YouTube, said it began noticing a decline in traffic from China about noon Monday.  By early Wednesday, site users insider China continued to encounter an error message: “Network Timeout. The server at youtube.com is taking too long to respond.” “We do not know the reason for the blockage and we are working as quickly as possible to restore access to our users,” said Scott Rubin, a spokesman for Google. It’s not the first time users in China have been unable to access the site. In March 2008, China blocked YouTube during riots in Tibet.

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November 18, 2008

PayPal starts supporting Mexican peso

Online payment service PayPal, a subsidiary of San Jose-based eBay Inc. has announced that it has expanded into Mexico. Mexican buyers will now be able pay for online purchases using their credit cards or bank accounts with pesos as currency. According to a report in the San Jose Business Journal, the peso is the first Latin American currency to be added to the PayPal system. PayPal also enables payments in the U.S. dollar, Canadian dollar, Australian dollar, euro, British pound, Japanese yen, Chinese yuan, Czech koruna, Danish lrone, Hong Kong dollar, Hungarian forint, New Zealand dollar, Norwegian krone, Polish zloty, Singaporean dollar, Swedish krona, Swiss franc and Israeli new shekel. PayPal is now accepted in 190 countries around the world, and the company said users in Mexico can now shop at retailers that include including, Mixup, Sears, Match.com, Blockbuster, Best Day Travel, PlazaVIP, and PC en Linea “PayPal’s goal is to provide consumers a secure, fast and convenient way to pay and get paid online and to give online shoppers in Mexico more places to shop quickly and securely,” said Fernando Moreno, director of PayPal Latin America. “The launch of PayPal Mexico is a significant step towards our next phase of growth.”

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October 7, 2008

EBay Inc. to eliminate 1,600 jobs

EBay Inc. plans to eliminate 1,600 jobs, or 10 percent of its workforce, to reduce costs as the company tries to revive its slowing growth, according to a report in the San Francisco Chronicle:

The staff cuts include 1,000 full-time, temporary and part-time workers, plus some open positions that will be left unfilled. They come on top of 125 dismissals earlier this year by the San Jose company, whose core online marketplace is slumping in the face of stiff competition from Amazon.com and users’ growing preference for shopping for products at a fixed price rather than by auction.

John Donahoe, eBay’s chief executive, said that reducing staff will “make us a nimbler, more efficient organization.” He acknowledged that the economy and an unfavorable foreign exchange rate are hurting the company’s finances, although the cuts largely are prompted by internal problems.

Imran Kahn, an analyst with JPMorgan, said in a note to investors, “We believe the cuts could help position eBay to more efficiently weather the current challenging economic environment.” EBay expects upfront the job reductions to will cost $70 million to $80 million, which it plans to record in the fourth quarter.

Investors have been pessimistic about eBay for some time, driving its shares down and prompting calls for management to make cuts. Executives have launched a plan to revive the business by emphasizing bigger retailers in the marketplace along with changes to search and user feedback that have proved unpopular with many sellers.

EBay’s acquisition of Bill Me Later of Timonium, Md., is for $820 million in cash and $125 million in outstanding options. By combining forces, eBay is hoping to bolster its PayPal online payments service, which already dominates the industry. Bill Me Now allows users to buy online, but bills them up to 30 days later. At that time, they can pay immediately or take a loan… In addition, eBay plans to pay $390 million in cash to expand its online classifieds business by buying Danish classified site dba.dk and auto site bilbasen.dk.

Donahoe acknowledged that, given the bleak global environment, it might seem counter-intuitive to make major acquisitions. But he emphasized that eBay’s strong cash reserves – it has nearly $4 billion in cash and short-term investments in June – puts it in a position of strength. “In times like this, stronger companies get stronger, and that’s exactly what these acquisitions will help us do,” Donahoe said.

The cutbacks, the biggest ever at eBay, are yet another example of Silicon Valley giants shedding workers amid the economic slump and potentially foretell a stark job environment in the technology industry. Hewlett-Packard and Nvidia both have recently said they plan to pare their workforces, and Yahoo is in the process of reviewing its organization to make it more “fit,” as CEO Jerry Yang put it.

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May 19, 2008

Craigslist charges eBay with corporate espionage

Two California-based Internet icons- Craigslist and eBay have become involved in a bitter legal dispute. Ebay, which owns about 28 percent of Craigslist, fired the first salvo by filing suit in Delaware state court that that accused Craigslist of discriminating against eBay as a shareholder and using “clandestine meetings” to dilute eBay’s ownership stake. Craigslist has now filed a countersuit charging that eBay used its position to gather competitive information that was used to help lauch Kijiji, which many consider to be a direct competitor to Craigslist. The complaint charges that eBay code-named this its “Craigslist killer” in internal strategy discussions. Craigslist’s also alleges a plot by eBay to use its position as a minority shareholder and its position on the board to pressure Craigslist into a full-scale acquisition deal by eBay. “In the months leading up to the launch of its competing Kijiji site … eBay used its shareholder status to plant on Craigslist’s board of directors the individual responsible for launching and/or operating Kijiji,” the suit alleges. “Using the pretext that the information was necessary for Craigslist board-related matters, eBay made constant demands for confidential information in excess of what was required for that purpose”.

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February 13, 2008

Facebook: you can check out any time you like, but you can never leave

The company notorious for spying on its own users now won’t even let them leave. As reported in the New York Times:

Are you a member of Facebook.com? You may have a lifetime contract. Some users have discovered that it is nearly impossible to remove themselves entirely from Facebook, setting off a fresh round of concern over the popular social network’s use of personal data.

While the Web site offers users the option to deactivate their accounts, Facebook servers keep copies of the information in those accounts indefinitely. Indeed, many users who have contacted Facebook to request that their accounts be deleted have not succeeded in erasing their records from the network.

“It’s like the Hotel California,” said Nipon Das, 34, a director at a biotechnology consulting firm in Manhattan, who tried unsuccessfully to delete his account this fall. “You can check out any time you like, but you can never leave.”

It took Mr. Das about two months and several e-mail exchanges with Facebook’s customer service representatives to erase most of his information from the site, which finally occurred after he sent an e-mail threatening legal action. But even after that, a reporter was able to find Mr. Das’s empty profile on Facebook and successfully sent him an e-mail message through the network.

In response to difficulties faced by ex-Facebook members, a cottage industry of unofficial help pages devoted to escaping Facebook has sprung up online — both outside and inside the network. “I thought it was kind of strange that they save your information without telling you in a really clear way,” said Magnus Wallin, a 26-year-old patent examiner in Stockholm who founded a Facebook group, “How to permanently delete your facebook account.” The group has almost 4,300 members and is steadily growing.

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February 11, 2008

Anonymous poster does not have to reveal identity

A California appeals court on Wednesday said an anonymous Internet poster does not have to reveal his identity after being sued for making “scathing verbal attacks” against executives at a Florida company on a Yahoo message board, according to a report in ZDnet. The Sixth Appellate District in Santa Clara County reversed a trial court ruling that would have allowed a former executive at SFBC International to subpoena Yahoo for the names of her critics. The appeal was filed by a poster whose screen name includes a Spanish expletive but who is known as “Doe 6″ in the lawsuit filed by former SFBC Chairman and COO Lisa Krinsky in 2006. Krinsky accuses Doe 6 and nine other Yahoo Finance posters of libel, fraud, and other claims arising from posts they made about her while she was a company officer. The appellate court concluded that while Doe 6′s messages were “unquestionably offensive and demeaning,” they could not be counted as defamation since they could not be considered assertions of fact. Without a cause of action, Krinsky could not overcome Doe 6′s First Amendment right to speak anonymously on the Internet, the court said. The decade-old controversy over pseudonymous posting in chat rooms took a major twist last July when the U.S. regulators revealed that Whole Foods Market CEO John Mackey had been posting in Yahoo Finance under a fake name for several years. His messages boosted his own company’s strategy and denigrated those of rival supermarket chain Wild Oats, which Whole Foods later sought to acquire.

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January 2, 2008

California group forms to fight Chinese censorship

A group calling itself the “California First Amendment Coalition” has formed to fight Chinese government censorship of the Internet. The group has used an approach that many large and small business who have been victims of this censorship (including this one) have long encouraged: make the argument that censorship and the blocking of political content is a free trade issue. As reported in the San Francisco Chronicle:

In a presentation Monday to the Office of the U.S. Trade Representative in Washington, the San Rafael, Calif.-based California First Amendment Coalition argued that China’s blatant and sophisticated censorship of the Internet violates China’s obligations under the World Trade Organization.

The nonprofit group wants the U.S. Trade Representative to file a petition with the WTO alleging that China has breached agreements that WTO members must adhere to. China became a member of the WTO in 2001. The WTO has never addressed whether e-commerce and Internet access are covered by the organization’s bylaws — but activists say the CFAC initiative could become a test case.

According to CFAC attorneys, WTO agreements give members “rights of market access” for bilateral trade — but many electronic retailers cannot have fully operable Web sites for Chinese consumers because of government censorship. “China’s censorship of the Internet, while fundamentally an issue of free speech and individual liberty, is also a significant barrier to U.S.-China commerce and, therefore, very much a trade issue,” said Peter Scheer, executive director of San Rafael, Calif.-based CFAC.

China’s government uses software to root out offensive keywords and block blacklisted Web sites. Government censors, known as Net nannies, surf the Web looking for pornography, subversive political content or other illegal material. China — which has 162 million Web users — is among a handful of countries that have extensive filters for political sites. Iran, Myanmar, Syria, Tunisia and Vietnam also believed to block political content.I

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December 13, 2007

Ebay sued by Tiffany for not controlling counterfeiting

Tiffany & Co., the world’s second- biggest luxury jeweler, said EBay Inc. is a “rat’s nest” for counterfeiting and urged a judge to rule that the biggest online auctioneer was liable for infringement according to a report in Bloomberg. Tiffany assailed EBay in a legal brief filed Dec. 7 to U.S. District Judge Richard Sullivan in Manhattan, as the companies await his ruling in a trademark infringement trial. EBay said in its brief that it’s a “model citizen” in the fight against counterfeiting. At issue is whether EBay must pay damages for failing to make adequate efforts to block sales of counterfeit silver jewelry. New York-based Tiffany and other retailers claim online sales of counterfeit clothes, bags and jewelry cost them about $30 billion a year.

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November 29, 2007

McAfee says China could provoke cyber war

Santa Clara-based security software vendor McAfee Inc. has issued a report claiming that government-affiliated hackers in China are aggressively working to crack Internet security in other nations and this could eventually provoke a global cyber war. McAfee said that in 2007, there were more attacks reported on critical national infrastructure than ever before. Targets included financial markets, utilities and air traffic control machinery, and the attacks were believed to have been launched by governments or government-allied groups. “Within two decades, according to McAfee, the scuffle could erupt into a worldwide conflict involving hundreds of countries attacking one another’s online networks with sophisticated software. The Chinese government has denied the allegations, “China has also been attacked by hackers of some countries, so the Chinese government attaches great importance to and participates in the international law enforcement cooperation in this area,” Foreign Ministry spokesman Liu Jianchao said at a briefing.

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November 5, 2007

Alibaba’s Achilles heel

On Tuesday, the Chinese trade portal Alibaba will conduct an initial public offering on the Hong Kong market, and it seems to have set of an absolute feeding frenzy among institutional investors. The company has received an almost unbelievable $100 billion U.S. dollars in orders from investors, and many fund managers could get zero allocations when the initial public offering closes on Thursday. Alibaba has so far has raised more than 1.5 billion dollars from investors including at least $100 million from Yahoo, which owns 40 percent of the parent company. Demand for these shares has been so strong – exceeding share allocation by more than 150-fold, that the cash inflows caused the Hong Kong dollar to appreciate against the US dollar, forcing the Hong Kong Monetary Authority to sell its currency to keep it from rising beyond the official peg to the U.S. dollar.

On the surface, none of this makes any sense at all. While Alibaba has an impressive installed base- more than 24 million people have registered for the service, it’s technology is mediocre and it’s profits lackluster for a deal of this size. Alibaba made only $29 million in 2006, though this year it is forecast to make $83 million. Forbes pointed out that this works out to an “astronomical” price-to-earnings range of more than 100 times earnings.

So what got all these investors so incredibly excited? There are a couple of different theories. One is the salesmanship of their CEO Jack Ma – and he must be good if he convinced Yahoo to give away the store as they did in 2005. He skillfully sold global concepts like “China” and “manufacturing” and “the next Google” – downplaying his company’s many shortcomings. For example, in their launch prospectus they said “there are 42 million SMEs in China in 2006. Internet use has risen 23.4 percent annually since 2002, with 137 million users in 2006″. All this is true, but it has nothing at all to do with Alibaba- any company in China could have said the same thing. There may have been one more unspoken thing he sold, and that is the sense that the Chinese government will always be on Alibaba’s side. While Google is being blocked and having its traffic redirected to Chinese companies by Chinese authorities, Mr. Ma and his partners at Yahoo have made it clear that they will cooperate with the Chinese government. As the Financial Times put it, “Mr Ma has made no secret of his own willingness to co-operate closely with the Chinese authorities in any investigations into his company’s users. Clearly, a company with the support of the Chinese government, has far less financial risk then one whose business can be terminated by simply flipping a switch.

We are more than aware of the dangers here. In September, 2005 we wrote about Alibaba, and the billion dollar Investment Yahoo had just made. At the time, the Chinese Oil Company was trying to take over Unocal (since bought by Chevron) but I thought the Yahoo/Alibaba deal warranted much more attention than it was getting and expressed this concern:

I think the Alibaba takeover of Yahoo China is a big deal. Much bigger that CNOCC trying to pay too much for one of our little pissant oil companies. The Yahoo-Alibaba system could could evolve into a robust national trading platform- an export-driven engine that could help China become even more of an economic powerhouse. Since smaller countries would have to play by their rules they could even move towards a global trading platform that has domination of all major supply chains.

For writing this, this newsletter and portal was promptly blocked in China. Why would the Chinese government block an obscure little newsletter operating in a completely different part of the world, I wondered. Had I hit a nerve? In any event, my concerns about Alibaba dominating supply chains proved to be overblown and never happened- at least not yet. If anything, Alibaba proved to be rather bumbling, and there was talk in the financial community that Yahoo was greatly disappointed in Alibaba. When you pay a billion dollars for a minority share in a company that only makes $29 million a year, this is certainly understandable. Still, what if Alibaba became the “official” ecommerce system of China. Then the billion dollars Yahoo paid would be a fantastic bargain- maybe on a par with something like the Louisiana purchase. I think the possibility that Alibaba could gain some kind of quasi-official status in China is one reason for what I understand is called “wuli rexin” – or “irrational exuberance” among investors about this particular deal.

These investors should be careful of what they wish for. What do we have when you merge Government and Corporate interests? I’ll give you a hint- it is not “communism” and should the Chinese government get involved in “picking winners” – as they certainly seem to be doing, they could completely destroy Chinese entrepreneurship. Alibaba’s premium accounts cost a whopping 40,000 yuan, or $5,300 for Chinese customers, but far less for foreign customers. Isn’t it a possible that some of the Alibaba member base will begin to feel ripped off by these outrageous prices? Isn’t it also a possibility that some bright Chinese entrepreneur will figure out a way to offer the same- or much better services, at far less cost?

An interview in TechCrunch with the CEO of an American manufacturing portal had this take on the deal: “There is not a lot of depth in what their business is doing. They are basically a directory and that offers limited value beyond supplier discovery” said Mitch Free, CEO of MFG.com, “Alibaba has done a great job selling listings to suppliers in China. However, Alibaba is virtually unknown within the industrial community in North America and Europe. In order for their model not to implode”, he said, they will need to both “deliver value to their supplier customers in China” and also “build a brand and value proposition with the industrial-buying community in North America and Europe”. He concluded that, “those buyers have moved way past using directories and are looking for more transactional depth and process integration”.

There is already some indication that the smart money is getting out. Mr. Ma has even left two of his best companies out of the deal: its online shopping unit, Taobao.com, and its online payment services provider, Alipay. Why would the investors let him get away with this? Yahoo had a big run up on it shares as a result of news of this deal, but Terry Semel, Chairman of the board of Yahoo, made his largest trades of company stock in two years when he exercised options in late October to buy 2.1 million shares at $15 each and immediately sold them at prices ranging from $29 to $31.54. He walked away with a quick $32.8 million profit. If the Yahoo-Alibaba deal is so fantastic, why did buy and then immediately sell shares in his own company? Does he know something we don’t?

So the bottom line. With free and fair competition, Alibaba could be a good deal- but it probably isn’t. Without free and fair competition, however, Alibaba ironically could be a fantastic deal- but if that is the case, many people in the world may be turning to Yahoo and saying, “you created a monster”.

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October 23, 2007

Google being blocked and redirected in China

We know China will block Internet sites whose politics they don’t like (it has happened to us) but now it seems they may be blocked for business reasons as well. Worse, it has been reported that they are redirecting traffic from some sites to those of competitors. Isn’t that stealing? From Business Week, “China’s Internet Censors Strike Again”:

Google has confirmed that the search giant’s Chinese service was out of business for parts of last Thursday and Friday. “We’ve had numerous reports that Google.cn and other search engines were inaccessible in China last week,” says John Pinette, Google’s Hong Kong-based spokesman, adding that “traffic was being redirected to other sites.”

Pinette wouldn’t comment on just where that Google traffic went. But it seems the site that ended up receiving the Google traffic was Baidu, the Chinese search engine that is tops in the market and over the years has been able to win fans among Chinese officialdom for being obedient in following censorship rules. Baidu already has a big lead over Google in the Chinese search market (more than half of Chinese searches take place on Baidu, versus about 25% for Google). It doesn’t help Google’s cause that the censors seem to be steering traffic Baidu’s way, too.

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Yahoo to invest another $100 million in Alibaba

Yahoo corporation of Sunnyvale has announced that it will invest an additional $100 million in the Chinese trade portal Alibaba. This is on top of the billion dollars in cash that Yahoo already paid Alibaba in 2005 for a a 40 percent stake in the Chinese firm’s parent, Alibaba Group. As part of that transaction, Yahoo also turned over all of their China assets and operations to Alibaba making Yahoo China a wholly owned subsidary of Alibaba.

The $100 million is for a ten percent share in Alibaba.com Corp, a subsidiary of Alibaba group that is planning an initial public offering on the Hong Kong exchange that it hopes will raise 1.5 billion dollars or more.

The Alibaba trade portal has a registered user base of 24.6 million business-to-business customers. The company’s Web site connects small and medium-size manufacturers with buyers. Companies can post products for sale or buy from Alibaba’s Web site for free, but it charges Chinese companies a whooping fee of 40,000 yuan, or $5,300, to to become “premium members” that gives them access to services like a customized home page and higher placements in search results. A similar service is offered to suppliers from other regions for an annual fee of $589.

A recent analysis in Forbes titled “Is Alibaba worth more than Google?” noted that pricing for the Alibaba IPO “works out to an astronomical price-to-earnings range between 94.5 and 106.3 times 2007 earnings. By contrast, Google shares were priced at a P/E of 90 in its IPO and currently fetch a 50.66 multiple.” They also noted that Alibaba had left out two of its choice nuggets in this IPO. The listed company will not include two fast-growing Alibaba Group businesses: its online shopping unit, Taobao.com, and its online payment services provider, Alipay.

Alibaba shares are scheduled to begin trading on the Hong Kong stock exchange Nov. 6.

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October 16, 2007

Porn spammers get jail term

The Business Journal of Phoenix reports that a federal judge in Arizona sentenced two men to more than five years in prison for an international pornographic spamming business that grossed more than $1 million. Jeffrey A. Kilbride, 41, of Venice, Calif., was sentenced to 72 months and James R. Schaffer, 41, of Paradise Valley, was sentenced to 63. Kilbride received a longer sentence based on the court’s finding that he had obstructed justice by attempting to prevent a government witness from testifying at the trial. The trial in was the first to include charges under the CAN-SPAM Act of 2003, a law designed to crack down on the transmission of pornography in commercial bulk unsolicited electronic mail messages.

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October 15, 2007

Wikimedia is moving to San Francisco

The Wikimedia Foundation, the force behind the popular online encyclopedia Wikipedia, is moving from Florida to a new headquarters in San Francisco. According to a report in the San Francisco Chronicle, Founder Jimmy Wales said that the small operation is packing up its office in St. Petersburg, Fla., and moving to San Francisco in an attempt to create a larger brand, attract more talent and make better inroads in developing countries, particularly in Asia. Wikipedia, which is edited largely by volunteers, is among the 10-most-visited Internet sites in the world. “San Francisco won out for all the obvious reasons; the Internet culture, the great developers and potential partners. It’s really the place to be,” said Wales. “We’re a major Internet brand and this is where a lot of the major brands are located.” San Francisco Mayor Gavin Newsom welcomed the nonprofit to town in a statement. “Wikimedia will be an illustrious addition to our thriving information technology hub,” he said. “They represent the cutting edge of Internet-based innovation and will contribute greatly to the atmosphere of creativity that flourishes in San Francisco.”

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June 19, 2007

Yahoo replaces CEO with co-founder Jerry Yang

In a shake-up aimed at re-energizing Internet search giant Yahoo Inc., the company announced Monday that chief executive officer Terry Semel was stepping down and was being replaced by one of the firm’s founders, Jerry Yang, according to a report in the San Francisco Chronicle.  The announcement came less than a week after Yahoo’s annual shareholder meeting where Semel answered questions from anxious and angry stockholders who questioned the direction of the company in general and Semel’s compensation in particular. Last year, Semel earned an estimated $71.7 million, more than virtually any other CEO at a publicly traded company.  Yang, a longtime board member, will be joined at the top by executive vice president Susan Decker, who was named as Yahoo’s president Monday. Decker, the former head of the Yahoo’s Advertiser and Publisher Group, had been considered a future replacement for Semel.  Yahoo has struggled to keep up with rival Google, whose stock has risen by 32 percent in the past year based largely on the strength of its online search advertising business.

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