Yahoo's Fiasco in China - Introduction

Translator: This article was the cover story of September, 2006 issue of IT Time, a prestigious tech/business magazine in China. The same article had been widely published and republished on almost all major Chinese news and technology portals, including Sina, DoNews, 163, and qq, just to name a few of the biggest. I guess it is an interesting phenomenon itself to westerners that the major media firms are not restricted and are indeed interested to publish the exact same article. And hopefully after reading this article, more intreguing insights about China Internet will be revealed for the audience.

This is one of the first few English translations Yeeyan's translators will produce. Being a translator whose first language is not English. I appologize for imperfect and sometimes incorrect use of the language. Any comments and suggestions that will help improve this translation are highly appreciated. And we welcome bi-linguals whose first language is English to join us - I bet there is good stuff on the web outside English!

Yahoo founder Jerry Yang had never imagined, only half a month before his arrival to China, all that painful history of Yahoo China was completely revealed in a bitter public dispute between Yahoo China's ex-CEO and current-CEO.

This was the most influential "spit war" in China Internet history; therefore the entire industry paid attention. However, Yang could only watch helplessly.

"Go ahead and ask Tian Jian whether he took that 2.5 million RMB bonus! (Translator: RMB is the unit of Chinese currency, CNY. 1USD=7.7RMB)"

This was the morning of August 15. On the second floor of Beijing Huitong Time Plaza, Building D-1, in Qihoo.com's grand conference room, Qihoo's CEO and ex-CEO of Yahoo China, Zhou Hongyi was furious. (Translator: Qihoo is a Chinese portal and community search site founded in Sep 2005 by Zhou, a global top 500 site according to Alexa.com.) In front of national media, he asked the reporters to question Tian in public, via hand-free conference call. The reason why Zhou's anger was out of control was that Tian, his subordinate in the old days and the current executive general manager of Yahoo China, criticized him of being unethical and unprofessional.

Tian's accusation did not come out of nowhere. Right after Microsoft and China Telecom cancelled partnership with Yahoo China, Zhou's Security Guard 360 (Translator: A spyware removal software developed by Zhou's new company.) was about to kill Tian's most lucrative milk cow - Yahoo Toolbar. Indeed, Yahoo Toolbar was an enhanced release of 3721 plugin, which was a core product of 3721 Corporation. And 3721 was founded and led by Zhou. (Translator: 3721 was a Chinese Internet keyword, or real-name, service. The company was know for its 3721 plugin, which was regarded as malicious software by many professionals. As you will read later, 3721 was acquired by Yahoo.) Therefore, Tian released an article, "For the First Time, Ex-colleague Revealed Hongyi Zhou's Crimes", to several influential media. This article revealed stories behind the "black curtain" when Zhou served as Yahoo China's president.
 
Tian’s article said that when Yahoo acquired 3721, part of the money should belong to employee of the new entity combined by Yahoo China and 3721. However Zhou treated this money as his own. Tian also revealed that in 2005, when Yahoo China did not meet performance expectations, Zhou leveraged Yahoo's resources to found Qihoo. And before leaving Yahoo, Zhou dug out key employees from Yahoo China, including arranging YiSou's general manager and other 9 people leaving Yahoo for Qihoo. (Translator: YiSou is Yahoo China’s search engine brand.)

Zhou reacted strongly to this accusation: "Bonus for employee was a gift from 3721's share holders. As the largest share holder, I have the absolute power to control how to distribute this money. And the question to Tian above was to refute this accusation.

When Tian and Zhou's anger was totally out of control, they accidentally opened up some internal affairs of Yahoo China. However, the industry was more interested to understand why Yahoo failed in China so badly than judging the dispute among Tian and Zhou.

A good reference for understanding Yahoo China's failure is that when talking about stealing employees, Zhou said: Others can dig out one or two of your people, even a dozen. However if hundreds of employee jump the boat, don't complain others, it is your own fault!

When invited by Ma Yun (Translator: Yahoo China's current CEO) to attend China Internet Business Festival in Hangzhou on September 9th, Jerry Yang said in response to Zhou: "It appears he (Zhou Hongyi) is getting personal now, which is not appropriate." And the criticism from Ma was even more direct - in his words Zhou had excavated Yahoo China nearly empty. "When I took over, Yahoo China was in critical condition, it was almost empty, and could collapse any time." Ma said.

What a bomber! How could the Internet giant that was respected worldwide get excavated empty in China? What did Zhou do when he was Yahoo China's CEO? In addition, since the merger between Ma's Alibaba.com and Yahoo China, Yahoo China has still been experiencing management shakeout and strategy changes. (Translator: Alibaba.com is a top e-commerce site in China.) And people are getting interested to know whether Ma will be able to revert Yahoo China's downhill run.

Continue - Chapter 1: Losing from the Starting Line