Yahoo Pulls Out of China, Citing ‘Challenging Business and Legal Environment’

Courtesy of Yahoo Inc.

Yahoo has officially exited China, shutting down all of its services in the communist country as of Monday, Nov. 1.

“In recognition of the increasingly challenging business and legal environment in China, Yahoo’s suite of services will no longer be accessible from mainland China as of November 1,” a company spokesperson said in an emailed statement.

“Yahoo remains committed to the rights of our users and a free and open internet. We thank our users for their support,” the rep added.

Yahoo’s exit from China coincided with the enactment of the country’s Personal Information Protection Law, a privacy law that went into effect Nov. 1 that imposes new data-collection restrictions on tech companies, the Wall Street Journal reported.

Last month, Microsoft’s LinkedIn announced it was shutting down its primary service in mainland China, saying it had encountered “significantly more challenging operating environment and greater compliance requirements in China.” Later this year, LinkedIn said, it will launch InJobs, a new standalone jobs application for China that “will not include a social feed or the ability to share posts or articles.”

China blocks major internet services including Google, Facebook and Twitter via the regime’s “Great Firewall,” which is used to censor online content.

In China, Yahoo had already discontinued some services, including mail and Yahoo News, dating back to 2013 because of the country’s internet content laws. Now Yahoo has shut down its remaining services, including AOL.com, TechCrunch, Engadget and Yahoo Weather.

Yahoo officially separated from Verizon in September, through a $5 billion deal to sell Verizon Media (renamed Yahoo) to Apollo Group. After the close of the deal, Jim Lanzone, former head of CBS Interactive and Tinder, took over CEO role at Yahoo, replacing Guru Gowrappan, who has been named a senior adviser to Apollo’s private equity business.

The disengagement in China brings to a close a business that once was the most successful U.S. Internet company in the Middle Kingdom.

Yahoo China started in 1999 as a platform for email, messaging, translations of U.S. news and a web directory. Management quickly realized that to keep up in a market which played by different rules and cultures it needed local partners. In 2003, Yahoo acquired Chinese search company 3721. By 2005, the Yahoo parent company acquired a 40% stake in Chinese e-commerce firm Alibaba, paying $1 billion for the privilege but also crucially handing control of Yahoo’s China operations to Alibaba.

Other U.S. companies, including EBay, Google, AOL and Amazon entered China in the early 2000s, but by the second decade of the new century all were struggling or had pulled out.

Alibaba’s mushrooming growth and Yahoo’s erosion by newer U.S. tech firms such as Google and Facebook over the following years meant that Alibaba was soon the bigger company and that much of Yahoo’s valuation was tied up in its previously junior partner.

The initially fruitful relationship between Alibaba and Yahoo reached crisis point in 2011 when Yahoo claimed it claimed that it had been kept in the dark about the 2009 transfer of Alibaba’s Alipay financial services business into wholly Chinese ownership. The same year, Alibaba founder Jack Ma openly spoke of acquiring the whole of Yahoo.

That did not happen. But the Yahoo China businesses became steadily less relevant compared with local champions Baidu, Tencent and Alibaba. And since the 2013 cutbacks they have struggled on as an anachronistic rump.