Fresh on the heels of Chinese search engine Baidu’s wildly successful initial public offering, reports have surfaced that No. 1 online portal Yahoo is planning to buy a 35 percent stake in Alibaba, China’s biggest e-commerce company.

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Over the past two years, most major Internet companies have been scrambling to get a piece of the Chinese market which is the second-largest market the world, after the United States. And with 100 million users, it’s nowhere near saturation point, unlike the more developed markets in the west.

United States

Taking share is what companies like Google, eBay, and Yahoo are betting on. And China’s Internet Gold Rush is on, with Google and MSN both recently having opened offices in the Middle Kingdom.

eBaythe Middle Kingdom

Meanwhile, Yahoo purchased a Hong Kong-based keyword search company last year, 3721 Network Software, for $120 million. This year, according to a report on Forbes.com Monday, the company is looking at Alibaba.

Sunnyvale, California-based Yahoo did not immediately return a call seeking comment.

Headquartered in Zhejiang, China, six-year old Alibaba is a privately held company with $68 million in revenue and 2,000 employees. Its online auction site, Tao Bao, is often viewed as eBay’s Chinese nemesis. Reports indicate that Yahoo could pay as much as a $1 billion for a 35 percent stake.

China

“That’s rather unlikely,” said Safa Rashtchy, an analyst with Piper Jaffray. “It’s hard to imagine that they would put $1 billion into a single segment.”

He pointed out that though Yahoo’s keen on expanding in China, it’s a company that tends to be cautious. That said, he agreed it would be a good investment, as Yahoo would benefit from boosting its presence in China. Besides, Alibaba seems to fit the bill perfectly for what the media giant needs in China.   

China  

“Alibaba is a very solid company,” said Mr. Rashtchy. “It has a solid presence in business-to-business, and in consumer-to-consumer, and so it’s a very good move.”

Countering Google

The combination of China and search is generating a lot of interest these days, as seen by the recent IPO of Baidu, China’s most popular search engine. Shares of Baidu.com jumped another 20 percent Monday as U.S. investors brushed off skepticism that the outfit may be vastly overvalued after rising 354 percent in its IPO last week (See Baidu Moving Yet Higher).

ChinaBaidu.com jumped another 20 percent Monday as U.S. investors brushed off skepticism that the outfit may be vastly overvalued after rising 354 percent in its IPO last week (See Baidu Moving Yet Higher).

Taking a stake in Alibaba would give Yahoo, which has its own search engine, more resources to counter China’s Google. The move would also enable it to go after eBay’s market in China, thanks to Tao Bao.

China

In other search industry news, TheNew York Times said Monday it invested in Indeed.com, a search engine for jobs. The Times, Union Square Ventures, and Allen & Company have together pumped in $5 million into the Stamford, Connecticut startup.

New York TimesStamford, Connecticut

AOL said Monday it had expanded in the wireless space through the acquisition of Wildseed, a Kirkland, Washington wireless software company. The financial details of the transaction were not disclosed.

said Monday it had expanded in the wireless space through the acquisition of Wildseed, a wireless software company. The financial details of the transaction were not disclosed.