Yahoo Invests $1 Billion in Chinese E-Commerce Site

Yahoo has confirmed that they're investing $1 Billion in China's, Ailbaba, an online e-commerce company. The investment will give Yahoo a 40% stake in Alibaba.

The average China city dweller spends the equivalent of only $1,000 a year, so it is little wonder Alibaba reports twice as many sales from businesses as from consumers. Currently, less than one-tenth of the Chinese population is online. "This is a great time to build brand for Yahoo," said [Yankee Group analyst Patrick] Mahoney.

Yahoo CEO Terry Semel talks with by Bambi Fransciso about the Alibaba investment here. They also touch on search.

Marketwatch.com: You mentioned making a bet on the greatest and fastest-growth company in China. Baidu sure looks like it was one to bet on. Are you sure you chose the right company? And did you ever have conversations to invest in Baidu?

Semel: Baidu is doing a good job. Yahoo search is No. 2 -- let's not forget that. We're very excited about our search. Alibaba brought [commerce] to the equation. Yahoo's going to bring communication and search. Technology in search will be a big factor down the road for the new entity.