Alibaba’s Group CEO and Founder Jack Mao stated his interest in buying up Yahoo at a Stanford conference yesterday. Amongst the news, Yahoo rose an incredible 3.5% by midday today, though by now has shrunk down to 2.28%. This, in comparison to most of the tech stocks who received a beating today in the market, most notably the Nasdaq Composite Index, which was down by 2.27% by 2:00 pm, was great news. Even so, one most surely ask oneself: with all of the declining prices and bad news from Yahoo, is this truly a good strategy by Alibaba or just practical?
With the likes of Google entering the search engine scene (plus much, much more) and blog sites like Tumblr and WordPress entering the market, one can begin to wonder precisely what Yahoo’s role is anyways. These are not the early 2000’s anymore and far beyond their glory days. They survive primarily on advertisement revenue’s yet as they become more and more irrelevant, these revenue’s are sure to shrink. A recent ad campaign has been blasting through the web yet for all of it’s slick graphics and endearing cartoon depictions of services, it is of little surprise that they are not getting much attention. This is all information that Jack Mao and Alibaba as a whole must surely be aware of.
That said, Alibaba cannot necessarily say that it has been seeing good days either. A primarily Chinese online marketplace ranging from agriculture to school supplies, they have faced even harder resistance as new and stylized websites enter the fray. At first glance, it would be wise to suggest that Alibaba may have a revamping in the workings: a revamping that could certainly use the assistance of an internet forefather like Yahoo. But when looking closer, a more practical image emerges. Yahoo currently owns approximately 43% of Alibaba, a fact which seems ironic considering that Alibaba is currently estimated to be worth more than Yahoo.
The mystery appears solved. After all, with Yahoo making little progress on it’s own, its about time that Alibaba freed itself from the lumbering giant who once breathed life into their business. Still, Alibaba would be wise to utilize this potential buyout to revamp itself. They may be worth more than Yahoo now but without changes, they may be the next Yahoo getting bought up by younger siblings.