alibaba and yahoo Why is Yahoo selling its stake in Alibaba?

If you stumbled upon this using the Google search engine or any other search engines other than Yahoo, then this article will reflect Yahoo’s trouble’s and decline on the World Wide Web.  Yahoo has just announced that it will about half its stake in the Chinese e-commerce group Alibaba for about $7.1 billion. Why is Yahoo so in need of cash?

If you stumbled upon this using the Google search engine or any other search engines other than Yahoo, then this article will reflect Yahoo’s trouble’s and decline on the World Wide Web.   Yahoo has just announced that it will about half its stake in the Chinese e-commerce group Alibaba for about $7.1 billion.  Why is Yahoo so in need of cash?  Let’s delve into it shall we?

For starter, the stock prices of Yahoo have been steadily declining since 2000.  Before the dot com bubble burst, Yahoo stock prices reached an all-time high of $110.38 per share on 12/31/1999.  Right after the dot com burst, Yahoo decides to do a 2:1 split on their stocks in hopes of regaining their stock value.  However, Yahoo’s stock value continued to decline as two shares was worth less than $40 at around 2003.  So if you owned a single share of Yahoo stock at around 2000, and kept that share until 2003 you actually held onto a stock that lost about 2/3 of its value.

 Why is Yahoo selling its stake in Alibaba?

(yahoo.com)

However, Yahoo stock value began to increase and in 2003 another 2:1 split was conducted thereafter.  This time around people who held on to their stocks had something to rejoice about as they’ve essentially had their stock value doubled.  Yahoo stock prices remained relatively steadied at around $30-40 per share, but went below $20 at around 2009.  There haven’t been many companies that have been able to maintain high stock values once they went public, and Yahoo was no exception.

Onto my main point about why Yahoo is selling its stake in Alibaba.  Google has always dominated the search engines, but ever since Bing entered the search engine market, Yahoo has seen a steady decline in market share. 

 Why is Yahoo selling its stake in Alibaba?

(statowl.com)

According to statowl.com, at Bing’s inception into the search engine market in June 2009 its market share was 4.21%, and Yahoo’s was 7.92%.  However, Yahoo has clearly lost its advantage on Bing as Yahoo and Bing are now almost even in Market shares (Yahoo: 7.48%, Bing:7.26%).  How can a company with nearly double the advantage in market share allow its competitor to catch up within a span of only approximately three years?  The answer to this question would possibly require another full article to analyze, but in short, Yahoo hasn’t been innovative enough to entice users to continue to use their search engine.  

So to answer my initial question of why Yahoo decided to sell its stake in Alibaba—It might as well be Yahoo’s plan to launch long term campaign to regain second place in the search engine market, and $7.1 billion can help it achieve that.  But let’s just hope that Yahoo doesn’t squander it and fall to the ranks of MSN or AOL.  However, as it still stands—if you didn’t use Yahoo to find this article, then we know there hasn’t been any movement yet from Yahoo.