HONG KONG - Alibaba Group Holding Ltd started its search engine service last year to "cause sleepless nights" for Baidu Inc, the industry leader in China, Alibaba CEO Ma Yun said.

"Making life difficult for companies with established positions is what we most want to do," Ma said at a Saturday conference in Hangzhou, Zhejiang province, where Alibaba is based. He didn't elaborate on the remarks about Baidu.

Alibaba, China's biggest e-commerce company, started its eTao search engine last year and expanded it to mobile phone operating systems this year, seeking new revenue sources. Baidu currently fields more than 80 percent of China's search engine traffic after overcoming competition from Google Inc, the world's largest search service operator.

"If Alibaba wants to compete on search, bring it," said Kaiser Kuo, a Baidu spokesman. "Baidu doesn't obsess over what the competitor is doing. We obsess about what our users want."

Ma is also overseeing changes at Hong Kong-listed flagship Alibaba.com Ltd, whose website is used by companies including Walmart Stores Inc to find suppliers.

Alibaba.com, which said in February that some buyers were defrauded by vendors on its site, is now offering product inspection and escrow payment services to help boost protection for buyers, Linda Kozlowski, the director of international marketing of the company, said last week. All Chinese exporters that pay Alibaba.com to market their products will be audited, she said.

Customers on the China Gold Supplier program declined as Alibaba.com started a "proactive cleanup", Kozlowski said. The increased monitoring of customers was "a good thing", she said.

Subscribers to its China Gold Supplier program for exporters fell by more than 4,200 in the quarter ended June to about 112,000, Alibaba said last month. In the previous three months, the company lost more than 4,800 members.

More than 2,300 vendors used Alibaba.com's website to defraud buyers, and about 100 employees were responsible for letting sellers create bogus storefronts, the company said in February.

Baidu accounted for 75.9 percent of China's search engine market by revenue in the second quarter and 75.8 percent in the previous three months, according to research company Analysys International. Google's share dropped to 18.9 percent from 19.2 percent, the researcher said.

Alibaba Group aims to increase transactions on Taobao, its consumer-oriented arm, to 1 trillion yuan ($156 billion) next year, Ma said. Taobao generated 396 billion yuan of transactions last year, according to estimates by Credit Suisse Group AG.

In June, closely held Alibaba Group reorganized Taobao, China's biggest online shopping operator, creating separate divisions that serve bigger retail brands and smaller wholesalers.

Alipay, the online payment business at the center of a dispute earlier this year between Alibaba Group and biggest shareholder Yahoo Inc, is making Chinese banks "worried" because it plans to lower transaction fees, Ma said.

Yahoo said in May that Alibaba Group spun off Alipay to a private company controlled by Ma without consulting shareholders. Ma said the reorganization was necessary to facilitate an application for an online payment license in China, and was discussed by Alibaba's board for three years.

In July, Alibaba reached an agreement with Yahoo and Softbank Corp, another shareholder, over compensation for the Alipay reorganization.

Bloomberg News

(China Daily 09/13/2011 page17)