Alibaba Group plans to split its online retail operation TaoBao into three separate companies- a move which could hinder Yahoo’s plans to invest further in the company.
The move looks likely to prevent a public listing of Taobao, an option that was expected to see Yahoo, an investor in Alibaba, see an increase in the value of its investment.
The restructuring creates Taobao Marketplace, a consumer-to-consumer platform designed for consumers and small businesses; Taobao Mall, a business-to-consumer marketplace; and eTao, which will target the shopping search market. All three companies will continue under the Alibaba Group.
In an e-mail to Alibaba employees, company CEO Jack Ma said the company is making the move as e-commerce has faced “disruptive changes,” pointing to social trends and the entrance of new companies in the market. “Significant change has taken place in customer demand,” he said. “We need to offer consumers more sophisticated and customized services.”
Taobao currently dominates China’s online retail market with a 71.6 percent share, according to Beijing-based research firm Analysys International. The site is very popular and reported reaching 370 million users at the end of 2010.
But Taobao, which first took off as a consumer-to-consumer site in 2003, has also been working to expand its e-commerce business. The site launched Taobao Mall in 2008, as a business-to-consumer platform that now features more than 30,000 international and domestic brands available to shoppers. It then launched a Chinese shopping search engine called eTao in 2010.
The Chinese company has been involved in a recent dispute with Yahoo, which has a 43 percent stake in Alibaba.
The dispute arose when it was revealed last month that Alibaba Group decided to transfer its successful online payment service known as Alipay to a separate company controlled by Ma. By doing so, the move has threatened to devalue Yahoo’s investment in Alibaba Group.
Alibaba defended the move and said it was done in order to obtain a license from the Chinese government to operate Alipay. But Yahoo fired back, arguing that the transfer in ownership occurred without the company’s knowledge, a claim that Alibaba denies.
The dispute over Alipay underscores the ongoing discontent between the two companies over business issues. Last year, Alibaba held negotiations with Yahoo to buy back its stake, but those talks went nowhere.
Ma’s letter said that the company “won’t rule out” the possibility of taking Alibaba Group public. As a result, investors and Yahoo will probably have to wait longer for the company to list, Natkin said.
“It could put Yahoo in a situation (where) it has to make a decision: staying in a relationship where the romance has long ago faded, or go ahead and sell back its stake now to bring a conclusion to that relationship,” Natkin added.
