pauldenlingerPaul Denlinger by Fantake via Flickr

China’s leading eCommerce site is in another spat with its largest shareholder Yahoo (neatly summarized here in the Wall Street Journal) because it started to recruit advertisers on the mainland. Business analyst Paul Denlinger explains in the Business Insider why Yahoo has to reclaim lost ground in China.

Things were fine as long as the two companies didn’t enter each other’s territory: For Alibaba, this was the China market and for Yahoo , this was everywhere else. (Yahoo has a significant presence in Hong Kong, and commands more than 95% of all traffic in Taiwan through Yahoo ‘s acquisition of Kimo in 2000, and Yahoo founder Jerry Yang‘s Taiwan roots.) 

Alibaba is entering the global market, taking on Yahoo outside China. So, Yahoo entering China, led by its current headquarters in Singapore, is unavoidable, writes Paul Denlinger.

That’s a mighty big hole. With China’s economic dynamo, it’s impossible to sell a real ad package if China is not included. This is why Yahoo needs to move into ad sales in China. 

But the problem, from the Chinese government’s perspective, is that the ad sales center is based in Singapore, which is not a part of China. When Google skedaddled out of Beijing to Hong Kong in March, it could at least claim that Hong Kong was a part of China, and that it had not in fact left China, even though Hong Kong is not covered by the Great Firewall of China which censors content in the PRC.

But that is not the case with Singapore, which China recognizes as a sovereign nation, even though more than 70% of its population are ethnic Chinese. And diplomatically, China and Singapore, along with the other countries of Southeast Asia, have been going through some rough patches lately.

In short:: Yahoo is not only taking on Alibaba, but also the Chinese government, warns Paul Denlinger.
More at the Business Insider.

Paul Denlinger is a speaker at the China Speakers Bureau. Do you need him at your meeting or conference? Do get in touch.

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