Google and Alibaba had a bit of a beef last year, regarding the OS. Acer was set to unveil a smartphone utilizing the OS, which (according to Google) is based on Android, but Google felt that it was a problem in that it was not compatible with the Android ecosystem. As TheNextWeb recaps:

Rejecting Google’s claims that Aliyun OS is a forked version of Android, Alibaba pledged not to deviate from its mobile strategy. The company did, however, move to put some distance between it and Aliyun OS by spinning off the division.

As Greg Sterling at Search Engine Land notes, Google only has less than 5% of the Chinese search market, but Aliyun’s search results pages more closely resemble Google’s (or at least an older version of Google’s) than they do market leader Baidu’s.

Last month, Alibaba founder and CEO Jack Ma announced that he would shed his CEO title, but remain executive chairman. In December, the company, more known for its ecommerce offerings, announced that it had hit a huge annual sales milestone.

Ma sent a letter around to Alibaba employees, which is quoted on the company’s blog:

As a founder CEO,” Ma wrote in the e-mail, “stepping down as CEO is a difficult decision, for this could be confounding especially for someone of my age who should be at the height of his career.”

“I believe that doing what makes oneself happy, staying within one’s own limits and being a good partner to one’s more capable colleagues, is the right thing for me to do,” Ma wrote.

Ma will officially step down as CEO on May 10. He has been executive chairman as the company has shown impressive growth. The company has yet to choose his successor.

Alibaba has 24,000 employees, and is valued at $40 billion. Last month, the company announced that it hit $157 billion in annual sales.

The company hit the milestone on November 30. In a post on Alibaba’s Alizila blog, Jim Erickson writes:

Speaking on Dec. 1 at a panel discussion in Hangzhou, China, Alibaba Group Chairman and CEO Jack Ma noted that only two companies—Alibaba and U.S. retailing giant Wal-Mart—have ever recorded annual transaction volumes greater than RMB 1 trillion (or the equivalent in U.S. dollars).

Wal-Mart’s revenues totalled $444 billion last year, so the Alibaba websites—which unlike Wal-Mart do not sell goods directly but act as online marketplaces for millions of large and small merchants—still have some catching up to do.

But Ma said achieving the RMB 1-trillion mark means Alibaba will this year surpass Amazon and eBay to become the largest e-commerce company in the world by annual GMV (Gross Merchandise Volume, a measure roughly equal to gross sales). “It’s very likely that next year, our transaction volume will be bigger than all the American e-commerce companies combined,” Ma said.

Total retail sales in China (including brick and mortar) were RMB 18.39 trillion last year.

The two companies announced the plan back in May, which would see Yahoo reduce its stake in Alibaba in stages over time, and over a series of agreements. The initial repurchase of shares represented half of Yahoo’s 40% stake in Alibaba, and was valued at about $7.1 billion.

Yahoo got about $6.3 billion in cash and $800 million in preference shares in Alibaba, while Alibaba paid Yahoo a one-time cash payment of $550 million “in connection with the amendment of their existing technology and intellectual property license agreement.”

Under the terms of that agreement, Alibaba has the right to repurchase half of Yahoo’s remaining stake upon a qualifying IPO in the future.

“The completion of this transaction begins a new chapter in our relationship with Yahoo!,” said Alibaba Chairman and CEO Jack Ma. “We are grateful for Yahoo!’s support of our growth over the past seven years, and we are pleased to be able to deliver meaningful returns to our shareholders including Yahoo!. I look forward to working with Marissa Mayer and her team in our continued partnership.”

Alibaba financed the transaction with cash, senior debt and issuance of convertible preference and ordinary shares. According to the company, it’s the biggest private financing for a private sector Chinese company ever. The financing was completed at a valuation of about $40 billion.

Alibaba CFO Joe Tsai said, “Over the past several months we have witnessed significant dislocations in the financial markets driven by global macro events and developments specific to China and the Internet industry. Our ability to raise financing in these difficult market conditions speaks to the strength of our business, our market leadership position and the confidence our investors and financial partners have in the future of Alibaba.”

Yahoo originally acquired its stake in Alibaba in 2005 for $1 billion and sale of its Yahoo China business.

Google has always painted Android as an open platform, but this philosophy has had its share of critics. That “openness” debate has come back into the spotlight as a result of the Acer phone situation.

Google’s point of view in this case is that Alibaba’ s Aliyun operating system, while built upon Android, is not compatible with the rest of the Android ecosystem, and that’s a problem, as the company sees it.

“When we first contemplated Android and formed the Open Handset Alliance, we wanted to create an open virtuous cycle where all members of the ecosystem would benefit,” says Google’s SVP of Mobile and Digital Content, Andy Rubin, in a blog post. “We thought hard about what types of external factors could intervene to weaken the ecosystem as a whole. One important external factor we knew could do this was incompatibilities between implementations of Android.”

“Imagine a hypothetical situation where the platform on each phone sold was just a little bit different,” he continues. “Different enough where Google Maps would run normally on one phone but run terribly slow on another. Let’s say, for sake of example, that Android implemented an API that put the phone to sleep for a fraction of a second to conserve battery life when nothing was moving on the screen. The API prototype for such a function might look like SystemClock.sleep(millis) where the parameter ‘millis’ is the number of milliseconds to put the device to sleep for.”

“If one phone manufacturer implemented SystemClock.sleep() incorrectly, and interpreted the parameter as Seconds instead of Milliseconds, the phone would be put to sleep a thousand times longer than intended!” Rubin says. “This manufacturer’s phone would have a terrible time running Google Maps. If apps don’t run well across devices due to incompatibilities, consumers would leave the ecosystem, followed by developers. The end of the virtuous cycle.”

Alibaba’s point of view is that Aliyn is not part of Android or its ecosystem, so it doesn’t need to be compatible. Liz Gannes at AllThings D shares some comments she received from John Spelich, Alibaba’s VP of international corporate affairs.

“Aliyun is built on open source Linux,” he’s quoted as saying. “It has our own applications (e.g. email, maps, etc.) Designed to run Cloud apps designed by parties in our own ecosystem It has the ability to run some but not all Android apps. But it is not an Android fork.”

“It is ironic that a company that talks freely about openness is espousing a closed ecosystem,” he added. “Aliyun OS is not part of the Android ecosystem, so of course Aliyun OS is not, and does not have to be, compatible with Android. This is like saying that because they own the Googleplex in Mountain View, therefore anyone who builds in Mountain View is part of the Googleplex.

He didn’t stop there. Read Gannes’ piece for the entire thing.

Rubin, had the following words for Spelich on Google+:

Andy Rubin1 day ago

Hey John Spelich — We agree that the Aliyun OS is not part of the Android ecosystem and you're under no requirement to be compatible.

However, the fact is, Aliyun uses the Android runtime, framework and tools.  And your app store contains Android apps (including pirated Google apps).  So there's really no disputing that Aliyun is based on the Android platform and takes advantage of all the hard work that's gone into that platform by the OHA.  

So if you want to benefit from the Android ecosystem, then make the choice to be compatible.  Its easy, free, and we'll even help you out.  But if you don't want to be compatible, then don't expect help from OHA members that are all working to support and build a unified Android ecosystem.

---

The Benefits & Importance of Compatibility
We built Android to be an open source mobile platform freely available to anyone wishing to use it. In 2008, Android was released under the Apache open source license and we continue to develop and in… 815    153 Powered by socialditto

Both parties make reasonable points, but to me, it seems Alibaba will face a pretty big uphill battle in getting widespread adoption of its own ecoystem, in competition with Android and others on the market.

The deal was announced formally yesterday in a joint press release. Yahoo currently holds a 40% stake in the Chinese company. 20% will be bought back by Alibaba during the rest of 2012, the other 20% will be sold off at the time of Alibaba’s IPO. The negotiation brings a conclusion to a long dispute between the two parties about what should be done with Yahoo’s controlling shares of Alibaba.

Ross Levinsohn, Interim CEO of Yahoo comments on the deal being made official:

“Today’s agreement provides clarity for our shareholders on a substantial component of Yahoo!’s value and reaffirms the significance of our relationship with Alibaba,”

“We look forward to continued collaboration with the Alibaba team on business initiatives as we explore joint opportunities for growth and benefit from Alibaba’s future. I want to thank Jack Ma, Joe Tsai and the Alibaba team, as well as Tim Morse, Michael Callahan and our Yahoo! team for their dedication in achieving this successful outcome.”

Jack Ma, Chairman and Chief Executive Officer of Alibaba Group also comments on the deal:

“This transaction opens a new chapter in our relationship with Yahoo!,”

“I look forward to working with Ross Levinsohn and the Yahoo! team as Alibaba builds China’s leading e-commerce company. Yahoo!’s global audience reach will provide attractive partnership opportunities for Alibaba to explore markets outside of China. The transaction will establish a balanced ownership structure that enables Alibaba to take our business to the next level as a public company in the future.”

The deal represents a significant value to Yahoo shareholders. If you remember, Yahoo recently experienced an overhaul in leadership after a bloody proxy battle with investment firm Third Point and activist shareholder Dan Loeb. Yahoo is expected to be making some drastic changes as a result of the battle in the coming months.

The main gist involves Yahoo selling a majority of their shares back to Alibaba, who is currently raising capital for those efforts. It is quite a bit more involved than just the buyback however, Alibaba has plans for an IPO brewing. The deal further requires Yahoo to part with the remainder of their stock in Alibaba after the company goes public. So it’s kind of a half now, half later agreement.

According to All Things D, Yahoo is holding about a 40% share of Alibaba which is valued at $7 billion. Currently Alibaba is valued at $35 billion, so it is safe to say Yahoo will make some rerun on their investment with the sale.

Despite the recent shift in power over at Yahoo the deal with Alibaba is still expected to be approved. If you remember, Dan Loeb got his way and with Thompson out of the picture, he is now on the board of directors and Ross Levinsohn is acting as interim CEO.

Last year, Yahoo was reportedly in consideration of getting rid of some of its Asian assets, but a $17 billion deal to sell Alibaba outright fell through. Though, on April 17th, Yahoo CEO and resume padder Scott Thompson asserted that Yahoo was still pursuing a sale, stating, “We are currently exploring a simplified transaction structure which, if executed, would provide greater certainty of closing to monetize a portion of our Alibaba stake.”

The two companies are again getting close to a deal, in which Yahoo would reportedly sell 15% to 25% of its ownership. Yahoo has declined to comment beyond what was stated on April 17th.

In related news, a recent poll conducted by Business Insider shows that 80% of those surveyed think Yahoo CEO Thompson should be fired for allowing the board to believe he had a computer science degree.

[Via: Business Insider]

PayPal announced today their intentions to bring domestic transactions through their service to the people of China and India. Of course, the biggest issue in terms of entry lies with China and PayPal is currently “applying for a domestic payment license” within the country according to PC World.

China would be a fantastic market for PayPal to enter due to its estimated 193 million e-commerce users. Besides government regulations, PayPal has another obstacle in their way – AliPay. AliPay is the already established e-payment group under the Alibaba Group. AliPay owns the largest share of the online payment market at 46.9 percent.

This leaves PayPal with quite the challenge when and if they enter the Chinese marketplace. Analysts speaking to PC World seem to agree with one saying that the “competition will be fierce.” In what could be an even larger threat, however, is obtaining the business license.

Chinese law requires that any online payment system be Chinese owned. Alibaba Group is an internationally owned company so it was required to spin off AliPay into its own Chinese-centric business. What if PayPal fell under the same regulations? Would they create a new company just for China?

It’s important to note that PayPal operates within Hong Kong. While it doesn’t automatically give PayPal the go ahead for mainland China, it probably is a bargaining tool. The amount of transactions that flow into Hong Kong everyday must entice the Chinese government into wanting PayPal for the mainland.

Fortunately, PayPal would face no such hurdles in India. While the online payment economy is much smaller in India, it can only go up from here. Research had indicated that 4.5 percent of all retail transactions will be performed online in India by 2016. This leaves PayPal the perfect spot to swoop in and get in on India during its growth phase.

All of this is just the next step in PayPal’s move to expand beyond their initial offering. They recently announced PayPal Here which is a mobile payment system for small businesses. Just think if PayPal was able to get PayPal Here into China, it would explode.

The company has also moved into big box retail by offering PayPal Checkout to customers of The Home Depot. The service allows customers to buy products with only their phone number and a PIN.

It will be a while before PayPal hears back on whether or not they will be allowed to operate in China. We’ll keep you updated on any developments.

Neither executive was found to be actually involved in the fraud, but the company found a significant increase in claims against particular sellers over the last year.

In a statement, Alibaba said it "confirmed that Mr. Wei and Mr. Lee and other members of senior management were not involved in any of the activities that led to the claims by buyers against fraudulent suppliers and management made good faith efforts to address the problem," the company said in a statement."However, our board has accepted Mr. Wei and Mr. Lee’s wish that they take responsibility for the systemic break-down in our company’s culture of integrity." (Via Dow Jones Newswires/Wall Street Journal)

Jonathan Lu, who is the CEO of Alibaba Group’s Taobao, will now run both Alibaba.com and Taobao.com. He said customer growth and robust long-term revenue are both expected.

Last month, Alibaba announced plans to build a network of warehouses across China, and drive major investment in logistics in that country, with the aim of allowing merchants to meet growing domestic consumption.