Yahoo! in China: Local Problems for the Global Internet Giant

Yahoo! in China: Local Problems for the Global Internet Giant
Case Code: BSTR260
Case Length: 18 Pages
Period: 2000-07
Pub Date: 2007
Teaching Note: Not Available
Price: Rs.300
Organization: Yahoo!
Industry: Internet and e-Commerce
Countries: China
Themes: International Expansion Strategies
Yahoo! in China: Local Problems for the Global Internet Giant
Abstract Case Intro 1 Case Intro 2 Excerpts


The Chinese Internet Market

As of 2006, China was the world's second-largest Internet market after the US. According to the China Internet Network Information Center (CNNIC), the number of Internet users in China had reached 137 million by the end of 2006 and the country had 104 million broadband connections as of 2006. On an average, the Internet user in China spent 17.9 hours online per week, when compared to the 11.4 hours per week spent online by a user in the US. The Internet users in China comprised only 10.5% of the country's population of 1.3 billion, which meant that there was a huge potential for future growth. China was important for Internet companies not only because of its large market size, but also for its vast talent pool. "Whoever wins China, will win the world,"said eBay's CEO, Meg Whitman, describing the importance of China as a market for the Internet companies. (Refer to Exhibit VII for some facts on China)....

Yahoo! in China

Yahoo! had launched the initial version of its Chinese portal in May 1998. This later became the platform for the other Chinese websites of Yahoo! such as Yahoo! Hong Kong, Yahoo! Taiwan, and Yahoo! China. In the same year, Yahoo! entered into a tie-up with Cofortune Information Technology Co., Ltd.29, a subsidiary of the China International Electronic Commerce Center (CIECC), to assist Yahoo! in building its business in China. Yahoo! had also set up a team to sell advertisement space on its Chinese portal. Yahoo! China ( was set up in 1999, much ahead of other foreign companies....

Yahoo!'s Problems in China

Unwanted Pop-Ups
Yahoo! China was often accused of promoting unwanted pop-ups, which irritated the browsers. Yahoo! China's erstwhile General Manager, Zhou Hongyi (Zhou) accused it of spreading malware, a software that installed itself without permission. When Yahoo! China bought Zhou's search engine in 2003, Zhou was made the general manager. He later shifted to (Qihoo) in August 2005.34 Zhou accused Yahoo! of knowingly distributing its toolbar and getting users to visit sites through pop-up windows. His company, Qihoo, started distributing an anti-spyware program that identified Yahoo! China's toolbar as malware and removed it from computers...

Future Outlook

Analysts opined that apart from providing content and other premium services, online search and online advertising were the key focus areas that could generate revenue growth for Yahoo! China. Ma himself opined that that Yahoo! China would have to leverage on its understanding of the Chinese consumers and chart its own path in the online search market. "If you follow Google's way, you will always be a follower…We have to make the Yahoo search engine more human, more interactive ... something for the 1.3 billion people in China who aren't technology-oriented, who don't know how to ask the right questions to a search engine - for people who are like me,"Ma said describing Yahoo! China's future course of action.50 Industry experts felt that by positioning itself in the high end segment, Yahoo! China would be on a different platform when compared to Baidu. But it would have to compete with Google, a dominant player in that segment...


Exhibits I: A Brief Note on China's Local Internet Companies
Exhibits II: Yahoo!'s Mission Statement
Exhibits III: Yahoo!'s Important Acquisitions (as of 2006)
Exhibits IV: Some important Events in Yahoo!'s Journey
Exhibits V: Important Business Activities of Yahoo!
Exhibits VI: Income Statement of Yahoo! Inc.
Exhibits VII: People's Republic of China: Some Facts (2006)
Exhibits VIII: Share Price Movement of Yahoo!

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