Interview: Alibaba plans big expansion for Yahoo China

BEIJING (Reuters) - E-commerce company Alibaba.com is preparing a major expansion for the online search business it acquired in a deal with Yahoo Inc as part of a plan for sharp growth in the Chinese company's revenue and value by 2009.

Alibaba expects to add 400 to 500 engineers to the 100 it inherited in the Yahoo deal announced in August, chief executive Jack Ma told Reuters on Wednesday. In that deal, Alibaba acquired Yahoo's China operations and was paid US$1 billion in return for handing 40 percent of its equity to the US company.

It now aims to more than double its value to US$10 billion by 2009 from a current US$4.2 billion, he said in an interview.

"Human resources are the key for the next stage for Alibaba and Yahoo," he said, adding he was preparing to go on a national roadshow to hunt for local talent as part of the build-up.

"We want Yahoo China to be a local company."

Alibaba began life as a business-to-business e-commerce company, expanding later to online auctions and online payments before adding Yahoo's China-based search service to the mix.

As part of the plan to make his company more local, Ma said Alibaba has now moved all of its 2000 Yahoo China servers from the United States to China and plans to add another 3000 servers next year.

The strategy of combining with a local partner mirrors Yahoo's strategy in Japan, where Yahoo Japan is a partnership controlled by Japan's Softbank Corp.

Ma, a former English teacher, hopes to generate company-wide revenue of 10 billion yuan (US$1.2 billion) for Alibaba per year by 2009 -- a huge leap from the US$68 million in cash revenue and US$46 million in GAAP revenue it generated last year.

That growth would come in one of the world's fastest expanding internet markets. China's 100 million total of web surfers is now second only to the United States.

Ma expects to grab market share from current search leader Baidu.com, a Wall Street darling whose shares more than quadrupled in August in one of the Nasdaq's most successful initial public offerings since the dot-com bubble.

Alibaba also hopes to expand its share of the online auctions business from eBay's Chinese operation.

Alibaba's auction service, called TaoBao, handled US$200 million in transaction volume in the second quarter of 2005. The service has been growing rapidly, in part because Alibaba does not charge fees, whereas eBay's service does.

Additional reporting by Doug Young in Shanghai.