PART ONE: Imagine there were a company that offered on-line shopping, business-to-business sales, online payments, wholesale trade and cloud computing- in other words a combination of eBay and Amazon that is actually bigger than eBay and Amazon combined. Welcome to Alibaba.
Started by a schoolteacher named Jack Ma on his kitchen table in Hangzhou in 1999, the company, now based in Hong Kong, is about to launch what may be the biggest initial public offering in history, one which could easily surpass Facebook’s fumbled IPO of $16B in 2012. Why will be the biggest beneficiary? Yahoo, which owns 24% of Alibaba and will probably use the infusion of cash from the IPO to continue its buying spree of smaller tech companies. To give you an idea of the scale, Alibaba processes $248B in retail sales yearly. Here’s a description from the Mercury News:
‘”Nearly 8% of all Chinese online shopping goes through Alibaba sites; on Singles Day last year, a popular holiday in China for online shopping, the site processed $5.8B in in purchases. By comparison, eBay’s total sales on its online marketplace for all of 2013 were $6.8B.”
Alibaba is also moving into mobile commerce in a big way, investing in American companies like Mountain View -based Tango Me and in Lyft, the San Francisco -based ride sharing app, while attempting to consolidate its position amidst its nearest rivals, Baidu and TenCant, which is already rolling out its own IPO. (Google and eBay have departed the China market). Alibaba’s IPO was scheduled for August 8 (eighth day, eighth month- the Chinese like “8”s) but may be delayed due to last-minute glitches involving SEC approval of some of their subs which are based in the Cayman Islands. Ma, who is worth over $8B, has stepped down as CEO but remains as Chair of the 21.000 employee firm and is devoting his time to a charitable trust.
It’s a global economy for sure, and becoming more so every day. Wonder how long it will be before we start seeing Singles’ Day promotions? That ‘s too good an idea to skip.
PART TWO: The Analects of Jack. The early history of Alibaba is set forth in a documentary and a book (Alibaba, by Liu and Avery, 2009) which describes how at one time in the early days, Ma was literally kidnapped and held hostage in a Malibu mansion at gunpoint until he talked his captor into going into business with him). Ma only got into college on his third entrance exam but his English major has definitely been put to good use in the following phrases which were compiled by American City Business Journals from various interviews and an appearance on Charley Rose that I’m sorry I missed. Here’s a sampling.
Why he likes small businesses and tries to help them through Alibaba: “I’ve seen people make a fortune by catching shrimps, but I’ve never seen anyone make a fortune by catching sharks and whales. It’s like Forrest Gump.”
On putting customers first: “It’s customers No, 1, employees, two, and shareholders, three. It’s the customer who pay us the money, it’s the employees who drive the vision, and it’s the shareholders who when the financial crisis comes, these people ran away. My customers and my people stayed.”
On technology: “I know nothing about technology. I use the computer to browse the Internet and receive email. That’s it.”
On developing a business: “If you want to be a great company, think about what social problem you could solve.”
On money and Alibaba’s large cash reserves: “When you try to solve problems with money, that is when your real problems start. A company’s assets are like a country’s armed forces.You cannot use it lightly, but if you ever need to mobilize it, you must win.”