Yahoo’s $120 Million Search Finds New Symbols

Yahoo is moving into the growing domain name business in Asian markets with its $120 million cash purchase of Hong Kong-based 3721 Network Software. The move strengthens Yahoo’s presence in the vast and rapidly-growing Chinese market as both a brand and as a search resource.

3721 Network Software designs keyword search engines and bills itself as a seller of Chinese-language keywords for Roman alphabet domain names. Its keywords are supported by Chinese language Web portals.

3721 NSC claims 90 percent of Chinese Internet browsers use its real name service, which allows users to type in the Chinese name of an organization, instead of its cumbersome domain name address.

The deal, which Yahoo announced Friday, is to be paid out in cash over two years. It would make 3721 NSC a wholly-owned subsidiary of Yahoo Holdings (Hong Kong).

Yahoo also said it plans to work with Beijing 3721, a Chinese affiliate that was not sold to Yahoo in the acquisition. The partnership is expected to focus on listing domain names of Asian small- and medium-sized businesses on the Web.

By striking the 3721 NSC deal, Yahoo now is in the business of selling domain names in China and has established relationships in Hong Kong and Beijing.

The deal comes as chatter builds in financial markets over whether several Chinese Internet companies have plans go public in the near future, including 3721 NSC, eLong.com, Baidu.com, Joyo.com and Shanghai Shanda Networking.

In 2002, 3721 NSC listed about $16.9 million. Company officials have said they would like to list the company on stock markets in Hong Kong or Singapore. It’s unclear at present whether 3721 and Yahoo plan to move forward with a public offering.

The Chinese government has established new rules for registrar companies that manage Internet addresses in China. They must have a minimum of $121,000 in startup capital, at least 15 employees, and must offer 24-hour customer service.

New Chinese Internet regulations said these firms, “must have strict and effective filtering mechanisms for cleaning bad and offensive domain names, which should be done once a day,” per China’s Ministry of Information Industry’s Web site, www.mii.gov.cn.

In an official recognition of the rapid growth of Internet usage in China, The China Internet Network Information Center, which maintains a national registry of names, said it had at least 300,000 unique Web sites and added 10,000 new addresses every month.

Estimates put the number of Chinese Web surfers at 68 million, making it the second largest Internet population, after the United States.

The transaction is expected to close during the first quarter of 2004.

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