Yahoo pulls out of China, ending tumultuous two-decade relationship

Yahoo said it had ceased to offer its services from Nov. 1, becoming the second well-known U.S. technology firm to downsize China operations in less than a month following the closure of Microsoft Corp.’s LinkedIn social-networking site.

“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 Yahoo spokesman said.

Yahoo’s pullout coincided with the implementation of China’s Personal Information Protection Law, a privacy law that will curb data collection by technology companies that went into effect on Nov. 1, though Yahoo didn’t refer directly to it.

Yahoo’s China departure was largely symbolic, as the company had already begun shutting down its main services such as email, news and community services in China starting in 2013. Still, Yahoo’s exit is a reminder of the increasing challenges foreign companies face in operating in China, including tighter data security and privacy regulation, geopolitical tensions and tough Covid-19-related rules.

LinkedIn said it had made the decision to shut down its operations in China after “facing a significantly more challenging operating environment and greater compliance requirements.”

Fast-fashion company Hennes & Mauritz lost sales after it was targeted in March for a boycott months after raising concerns about forced-labor allegations in China’s Xinjiang region. Shanghai Disneyland was temporarily closed this week after a visitor was found to have Covid-19.

Many foreign multinational companies also face hurdles trying to bring in new staff or host visiting executives because of China’s closed borders policies.

On Tuesday, Chinese internet users browsing websites run by Yahoo such as AOL.com, and media outlets TechCrunch and Engadget, were told that Yahoo’s services will no longer be accessible from mainland China. Chinese users of apps such as Yahoo Weather also received prompts beginning in October that the apps would be discontinued from Monday.

In addition, Applecensorship.com, a website run by anonymous anticensorship activist group GreatFire, showed other Yahoo apps such as Yahoo Finance and Yahoo Mail had been unavailable on Apple’s China app store as early as Oct 14. The company’s platforms aren’t widely used by regular Chinese citizens.

The newly introduced regulations governing privacy and data security have increased the uncertainty and compliance costs of operating in China, and some companies are preferring to pull out rather than deal with the added business risk, said Cameron Johnson, a Shanghai-based management consultant at FAO Global.

Modeled after the European Union’s General Data Protection Regulation, China’s new privacy regulations kicked in on Monday, and require organizations and individuals that handle the personal information of Chinese citizens to minimize their collection and obtain user consent.

Last weekend, Apple Inc. sent an email to users of its Chinese App Store informing them about the company’s preparations for the privacy law and explaining a new privacy policy rolled out Oct. 27. Other legal requirements include the need to localize data, which companies such as Apple and Tesla Inc. have sought to comply with by building data centers in China to store Chinese data.

The regulations are part of a broader crackdown by Beijing on big tech this year, which has swept up China’s largest internet companies in its wake. Alibaba was fined a record $2.8 billion in April for antitrust violations.

China has also tightened gaming regulations. Tencent Holdings Ltd. said Oct. 31 that it is shutting down Fortnite, the videogame developed by Epic Games Inc., from Nov. 15 in the country. China introduced new rules that severely restrict young gamers’ playtime in August and has put new game approvals on hold.

Tencent, which operates Fortnite in China, didn’t give a reason for the shutdown. The game has been running under a test mode for three years, but Tencent never received approval to sell in-app items and monetize from the game, which has also failed to prove as popular as similar types of videogames such as League of Legends.

Once dominant in the early internet boom, Yahoo has since seen its market share eroded by rivals globally. It now runs niche news distribution platforms such as Yahoo Finance, Yahoo Sports, and owns media outlets such as TechCrunch. The firm has about 900 million monthly active users.

Yahoo’s announcement brings to an end a sometimes turbulent more than two-decade relationship between the former search giant and China.

Yahoo entered the Chinese market in 1999, launching email and search directory services, and offering translations of U.S. news articles. Since 2005, following a partnership agreement, most of the company’s Chinese operations had been run by Alibaba Group Holding Ltd., which has gradually phased out Yahoo’s platforms.

More than a decade ago, the company was Exhibit A of the reputational risks and content challenges U.S. technology and social media companies might face operating in China. In 2007, Yahoo was blasted in a congressional hearing by lawmakers after data shared by the company with Chinese authorities led to the imprisonment of at least two dissidents in China.

Jerry Yang, the company’s co-founder and then chief executive officer, apologized to the mother of journalist Shi Tao, who was jailed after Yahoo’s China unit handed information about him to Chinese authorities in 2004. Mr. Shi was sentenced to 10 years of imprisonment for allegedly sharing government secrets based on the data Yahoo China had shared.

Alibaba shut down Yahoo’s email, Chinese music, news and community services in 2013. Two years later, Yahoo pulled the plug on its Beijing research and development center, laying off between 200 and 300 staff.

Yahoo was acquired by Verizon Communications Inc. in 2017 and more recently was sold off to private-equity firm Apollo Global Management Inc. Apollo agreed to pay about $5 billion to acquire Yahoo and AOL from the wireless company in September this year.