China's Alibaba Group may rethink Yahoo ties

SHANGHAI, CHINA: China's Alibaba Group said on Thursday it may re-evaluate its relationship with its largest stakeholder Yahoo Inc, after a Yahoo Hong Kong executive was quoted as saying the firm may compete in the mainland online advertising market.

Alibaba Group, which is 40 per cent owned by the U.S. giant, owns China's largest business-to-business e-commerce website Alibaba.com and its largest consumer e-commerce website Taobao.

Yahoo has no direct presence in China and prefers to be represented on the mainland by its Alibaba Group relationship.

But Yahoo does conduct its own direct business in Hong Kong through its Hong Kong subsidiary, Yahoo Hong Kong.

Yahoo Hong Kong's Managing Director Alfred Tsoi Po-tak was quoted by the South China Morning Post on Monday as saying the firm was thinking of luring online advertisers from the mainland to advertise on the site.

Tsoi said Yahoo HK would like to attract mainland small and medium enterprises keen to advertise online.

Alibaba.com also considers small and medium enterprises as its main customers.

Such a move could put Yahoo Hong Kong, the territory's leading portal, in direct competition with Alibaba Group's subsidiaries, such as Alibaba.com.

"If Yahoo begins to compete with Alibaba for customers in China, we will have to re-evaluate our relationship with Yahoo further in light of this activity and the intentions it implies," said Alibaba Group's spokesman John Spelich.

This statement is the latest in a series of clashes between the two firms. Earlier this year, Alibaba called Yahoo reckless for the latter's comments that it would stand by Google after Google threatened to pull out of China.

Yahoo also sold its stake in Alibaba.com late last year, surprising Alibaba executives near their 10-year anniversary.

Yahoo could not be reached for comment.

Yahoo folded its search business and invested $1 billion in Alibaba Group in 2005 in exchange for the 40 percent stake. It is believed that Alibaba wants Yahoo to sell its stake in the group, but Yahoo has said publicly it views its now multi-billion dollar stake in Alibaba as a key investment in China.