![]() ![]() Tsai said Alipay so far brings in just $60 million in annual revenue from payment processing on sites other than Taobao.The story might just sound familiar. That means if Alipay hopes to become a thriving business on its own, it will have to become a major payment provider on other websites. Those terms will remain intact under the new agreement. That “preferential” relationship has called for Taobao to pay Alipay just enough to cover its costs. “If you own 100 percent of a business that doesn’t have a license to operate, that’s 100 percent of zero,” Tsai said.Īlipay so far has primarily processed payments on Taobao, a rapidly growing electronic commerce site owned by Alibaba. Given that, Tsai said, Yahoo shareholders should be happy to have a chance to share in Alipay’s profits and IPO under the new arrangement that leaves Alibaba with a 37.5 percent stake in the payment service instead of full ownership. If Yahoo and Softbank had still held indirect stakes in Alipay through Alibaba, the service wouldn’t have been licensed in China. Neither Bartz nor Ma participated in Friday’s conference call, raising questions about whether the tensions between the two executives are so bad that they can’t even be diplomatic toward each other in a public forum. Yahoo’s value has shed $7 billion since the news of the Alipay spinoff. Anmuth estimates Yahoo’s stake in privately held Alibaba is worth about $4.76 billion, accounting for more than one-third of Yahoo’s current market value of $17 billion. That’s because Alibaba has emerged as a prized asset while Yahoo’s own revenue has been falling during Bartz’s tenure. Yahoo has consistently indicated that Bartz has the support of the company’s board, which hired her despite her lack of Internet experience.īartz, 62, also has had a rocky relationship with Alibaba’s Ma, another source of worry for Yahoo shareholders. The sour reaction keeps the pressure on Yahoo CEO Carol Bartz, whose inability to turn around the company or boost its stock after two and half years on the job has spurred talk on Wall Street that she might be replaced before her contract expires in January 2013. Alibaba’s potential windfall from an Alipay IPO has now been capped at $6 billion, a ceiling that might look low if Alipay can realize its ambition of becoming the China’s equivalent of PayPal, which has steadily risen in value since eBay Inc. Instead of owning all of Alipay, Alibaba now owns a 37.5 percent stake in the service. The terms confirmed what investors had suspected all along: Yahoo won’t make as much money off of its Alibaba investment as it would have if Alipay hadn’t been spun off into a separate company controlled by a group led by Alibaba CEO Jack Ma. A big chunk of that money eventually could flow to Yahoo and Alibaba’s other major shareholder, Japan’s Softbank Corp., which also signed off on the Alipay agreement. It will culminate in Alipay writing a check of $2 billion to $6 billion to Alibaba if it becomes successful enough to pursue an initial public offering of stock within the next decade. The settlement will require Alipay to share nearly half its profits with Alibaba.
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