Chapter Ten: Yahoo’s Billion-Dollar Bet
1
. With David Filo.
2
. In the first nine months of the year.
3
. Launching gbchinese.yahoo.com (“GB” standing for
guo biao
, or
national standard) and another chinese.yahoo.com in the complex
characters used by Chinese speakers outside the mainland.
4
. For a period of fifty years under the Basic Law, part of Deng Xiaoping’s
“One Country, Two Systems” formula.
5
. Qu Weizhi.
6
. Later CEO of the Chinese online video company Youku.
7
. Acquired in 1998 by AOL for $407 million.
8
. A market that would dramatically reverse the fortunes of NetEase and
propel the rise of another online games specialist based in Shanghai, called
Shanda (Shengda in Chinese), which was listed on the Nasdaq in 2004.
9
. Today they represent $18 billion in online revenues, bigger than China’s
$5
billion movie box office, and accounting for 13 percent of all Internet
revenues in the country.
10
. Including major portals like Sina, Sohu, and Tom.
11
. By the end of 2009, Baidu had captured 63 percent of the Chinese search
market, almost double Google’s 33 percent share. In March 2010, when
Google decided to quit the Chinese market amid bitter accusations of
hacking and the pressures of censorship, Baidu would reign supreme with
over 75 percent of the market by the end of the year.
12
. Zhou had accused the CNNIC of lacking a legal foundation.
13
. Called Yisou.
14
. To improve its advertising business by matching
it more closely with its
users’ search queries, Yahoo made a $1.3 billion purchase of Overture in
2003.
15
. Qihoo 360, which went public on the Nasdaq in March 2011, would become
best known for its free antivirus software, which would bring Zhou once
again into conflict with Baidu and others, including Yahoo.
In China, and
among some former Yahoo colleagues in the United States, Zhou Hongyi
developed a reputation as “the father of malware in China,” a label he
vigorously disputed. In December 2015, Zhou led a consortium of investors
to take Qihoo back into private hands for $9.3 billion, with plans to delist
the company from the New York Stock Exchange in the first half of 2016.
16
. In May 2015, Yahoo injected its 384 million shares in Alibaba, worth more
than $33 billion, just shy of Yahoo’s
total valuation, into a new entity,
“SpinCo,” in an effort to avoid paying over $10 billion in U.S. taxes.
17
. The gathering was an off-site summit hosted by the Hua Yuan Science and
Technology Association (HYSTA), a group of Silicon Valley–based
entrepreneurs and engineers mostly hailing from China, ahead of their
annual conference at the Santa Clara Convention Center.
18
. The Yahoo-Alibaba transaction has proved so successful that many have
claimed responsibility for teeing up the Jack-Jerry meeting at Pebble Beach.
Jack has credited, among others,
Wu Ying from UTStarcom, Liu Erfei of
Merrill Lynch, and Deng Zhonghan of Vimicro Corporation. Joe Tsai says,
“Of course eighteen different people took credit for putting together that
meeting. It was the Hua Yuan event [that] took credit. Everybody did.” He
added, “If you knew each other . . . you were at the same conference.”
19
. Traveling to Beijing with Jerry were Yahoo CEO Terry Semel and CFO Sue
Decker and corporate development executive Toby Coppel.
20
. A twenty-four-year veteran of Warner Bros., where he rose to become
chairman and co-CEO.
21
. Li, a protégé of Jiang Zemin, was in charge of propaganda for the
Communist Party, a post he was appointed to in 2002.
He served in that
capacity for a decade, overseeing the extensive system of censorship for the
Internet.
22
. The company had listed the year before and had a market cap of more than
$2.2 billion, with revenues of $165 million.
23
. Instead, he dreamed of turning his company into the Disney of China,
having earlier that year taken a 19.5 percent stake in Sina as the first step in
a hostile takeover (which never materialized).
24
. After selling part of its 40 percent stake in Taobao to Alibaba for $360
million.
25
. In a talk at the Computer History Museum in Mountain View, California,
hosted by HYSTA, whose conference had helped tee-up the original deal.
26
. Yahoo also bought out a SoftBank investment in Taobao for $360 million,
half of which SoftBank then used to acquire more shares in Alibaba, in
addition to another $30 million to exercise convertible notes it had
purchased in 2003.
27
.
The amount was so large that, on hearing the news of the investment, one
CEO of a smaller e-commerce player recounted to me, “I thought the news
must be fake, many people did. One hundred million dollars would have
been a big number, but one billion dollars? I had never imagined such a
large number.”
28
. Now CEO of Shazam.
29
. Once he had established Qihoo 360, using the proceeds of Yahoo’s
investment, Zhou set about building a product designed to help users
uninstall the very product he himself had built at 3721, which had since
been rebranded Yahoo Messenger, but which he now described as malware
that should be removed.
30
. huoyan-1989@yahoo.com.cn.
31
. The Beijing State Security Bureau issued a Notice
of Evidence Collection
and requested “email account registration information for huoyan-
1989@yahoo.com.cn, all login times, corresponding IP addresses, and
relevant email content from February 22, 2004,” from Yahoo China’s
offices in Beijing.
32
. Including Human Rights Watch, the Committee to Protect Journalists, and
Reporters Without Borders.
33
. Who had already taken flak from Alibaba’s rival eBay for committing to the
event.
34
. The House Foreign Affairs Committee.
35
. After fielding an enquiry from the U.S. embassy
about the background of
Google’s decision, I found myself being quoted later on in a cable leaked by
Wikileaks. Rather disappointingly, no one took much notice.
