Page 52 - How China Is Winning the Tech Race

Scrambling to replace Shao, Whitman installed Martin Wu, a former
marketing officer for Microsoft’s Greater China region, as CEO in Septem-
ber 2005. She called China the largest e-commerce opportunity in the world
and poured $100 million into eBay China in 2005. However, within one
year Wu was out, and a few months later, in late 2006, the site was shut
down. Vowing not to give up, Whitman formed a joint venture with the
billionaire Li Ka-shing’s Chinese portal Tom Online, a partner to eBay-owned
Skype in China led by Tom Online’s CEO, Wang Lei Lei. The partners
were planning to launch a new site in the fall of 2007. “We are committed
to the Chinese market and remain excited about the future,” Whitman
said, noting that the new partner will help eBay leverage its “extensive local
market knowledge and keen understanding of the lifestyle aspirations of
Chinese consumers.”

Ma’ s Y ahoo! deal

As Ma’s next act after stealing the market lead from eBay China, he lassoed
Yang on a windy spring day at the Pebble Beach golf course, where they were
attending a Chinese tech outing. During a walk along the beach, Ma told
Yang of his dream of running Yahoo! China and merging Yahoo! search into
his e-commerce marketplace. He coaxed Yang into letting Alibaba manage his
faltering Yahoo! China business, which suffered from lack of local content. In
August 2005, in a complex deal that kept Debevoise & Plimpton and other
top law firms busy for months, Yahoo! paid $1 billion for a 40 percent stake
6
in Alibaba, and Ma’s firm took over management of Yahoo! China. The
landmark deal has created a new management template, with Yahoo! effec-
tively outsourcing its business in China to the local player Alibaba, pointed
out Morgan Stanley analyst Richard Ji.
Yang didn’t have much choice. Yahoo! China has been through several
reincarnations and in just the last two years has been first a stripped-down
search site and then a portal. “There’s a reason Yahoo! China has not been
successful for nine years, and to turn it around will take at least three years.
It is not a machine but three hundred people,” says Ma, who complains that
his hair is turning gray from the busiest period in his career. Two years after
the acquisition, he is spending three-quarters of his time in Beijing, staying in
a hotel near Yahoo! China to work on the turnaround. “I respect Yang for

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