Thinking About Thinking

What if there was a U.S. company that knew more about commerce and money flow in China, than China itself does?  Firstly, China would not be happy about that.  And, they’re not.  Secondly, this company would own an incredibly valuable asset, which they do.

This company has 300 million Chinese users using its payment platform to process payments.  This company also had the largest online retailer in China with 200 million Chinese shoppers.  This company also owns the largest B2B trading platform in China with 50 million suppliers on it giving it a granular view into China’s trading industry.  Between all of these properties – this U.S. company would be collecting invaluable data daily about how Chinese consumers shop, how Chinese businesses are transacting, and how money flows within and outside of China.  What if this were the case?

This is the case, and the company might surprise you.  The company is Yahoo.  Yahoo put itself in an incredibly compelling position in China through its $1B+ investment in Alibaba in 2005.  They are now the largest shareholder of Alibaba.  Since 2005, the three primary properties underneath the Alibaba Holding Company have all grown to become landmark properties in China.  These properties are Alibaba (largest B2B marketplace), Alipay (Chinese Paypal), and Tao Bao (Chinese eBay).  The growth and leadership position of these properties in China have put Yahoo in the position of having as much or more visibility into Chinese online commerce and money flows, than perhaps any other company in the world.  And, for that reason, China is not happy about it.

Something has to give in the middle of this conundrum as “China’s Alibaba” is now trying to buy back Yahoo’s stake.  But, why would Yahoo sell its stake in a holding company that is arguably worth more than Yahoo itself?  Something has to give as it is untenable that the Chinese government would let a U.S. company sit in such a strategic position in the Chinese economy.  It’s one of the more interesting dramas to watch over the next several months on the global technology landscape.