This is a guest post by Shanghai-based entrepreneur George Godula. His company Web2Asia partners with Western Internet companies for market entry in Eastern Asia, and also does early stage investments in local tech startups.
George had the opportunity this weekend to attend Chinese e-commerce behemoth Alibaba Group’s 10 year anniversary celebration, dubbed the “Alifest”.
Alibaba is best known for its international B2B e-commerce and sourcing market place Alibaba.com, but also operates Taobao – the “eBay of China” and largest C2C Internet retail web site, Alimama – an online advertising exchange and affiliate network – as well as Alipay, China’s most popular third-party online payment system modelled after Paypal but offering additional features such as escrow services.
Alibaba’s chairman Jack Ma, a former English teacher, founded Alibaba in 1999 out of his Hangzhou apartment. Ten years later the company has grown to China’s second largest Internet company, after digital entertainment giant Tencent. His company Alibaba.com’s 2007 IPO on the Hong Kong stock exchange was the second largest Internet offering ever after Google’s debut on NASDAQ in 2004.
Since 2005, Yahoo! is a strategic shareholder when it acquired 39% of Alibaba Group for US$ 1 billion. In return Alibaba operates the portal Yahoo! China, but the secondary role Yahoo! China plays for Alibaba became evident when Ma shared his vision for the next 10 years of Alibaba during this weekend’s press conference. This was once again underscored yesterday when Yahoo! sold $150 million worth of shares in Alibaba.com.
Jack’s dream is to focus on empowering and encouraging small and medium sized enterprises (SME’s) across the globe and it centers around 3 major goals for the next 10 years:
Goal 1: 10 million people “work at” Alibaba
By “working at” Jack symbolically referred to millions of SME entrepreneurs that will not literally be employed by Alibaba but are turned to “netrepeneurs” and independently utilize and work online with Alibabas trade platforms and software solutions:
Alisoft was established in January 2007 and offers software as a service solutions for SME’s. In July 2009, Alisoft was merged with Alibaba Group R&D Institute to lay a solid technology foundation to further develop Alibaba Group’s businesses. At the same time Alibaba Group this weekend announced the establishment of a new subsidiary focusing on cloud computing. In the medium run, it is evident that Alibaba will strive to emerge as a leading software solution provider for SME’s, eventually competing with Western players such as Salesforce.com.
Goal 2: 100 million new jobs created worldwide by Alibaba
A megalomaniac target at first glance, this could very well become reality when considering Alibabas resources and Jack Ma’s obviously wide-reaching personal connections that became more apparent to me through the course of Alifest.
In May 2007, Alibaba.com introduced the Ali-loan program offering financing to small Chinese businesses in partnership with leading Chinese banks. This model was now hinted to be extended across other countries in cooperation with Muhammad Yunus’ Grameen bank. The second corner stone to achieve this goal involves Alibabas training department, Ali-Institute that was upgraded this July to become a new profit-oriented business unit under Alibaba.com.
During the cleverly staged Alifest program speakers such as Nobel prize winner Muhammad Yunus, former president Bill Clinton (both over video) and Starbucks CEO Howard Schultz underpinned the importance of fostering SME development across developing nations and endorsed Alibabas global efforts. This is quite remarkably for a Chinese company. Provided, you still consider it as such: “In 10 years we wont make differences between local or international companies any more, but only between differences in integrity”, Jack Ma said during his speech this weekend.
All points considered Alibaba is indeed in a powerful position to shape the worlds economy in the coming decade. Taking Alibabas already undisputed status among SME manufacturers in what is soon to become world’s largest economy, even the third proclaimed goal by Jack Ma can seem plausible:
Goal 3: 1 billion people trading on Alibaba Group’s platforms
The roadway to Alibabas most eager goal was visualized to us impressively when Alibaba.com’s CEO David Wei gave us an exclusive tour of his company’s new headquarters. (Which by the way also has a basketball court inaugurated by another of Jack Ma’s friends Kobe Bryant, who was also present in Hangzhou this weekend)
David presented us Alibaba’s realtime trading statistics generated from the three pillars of its business: international trade, domestic Chinese wholesale and domestic Chinese retail. (the according graphs can be seen in the picture above from left to right).
During the time of our visit last Friday evening at around 7pm Chinese time, 2.87 million concurrent users were active on Alibaba.com’s B2B portal. According to David the daily average concurrent user number is 4 million, around 10% of its 42.8 million worldwide registered users. The groups domestic C2C e-commerce marketplace Taobao holds around 78% of the online consumer market in China. As of mid-2009, it served 156 million registered users. Transaction volume on Taobao reached nearly US$ 11.8 billion in the first half of 2009, and by that exceeded the largest retailer in China in transaction volume during the same period.
David continued to say that “Alibaba’s combined trading statistic give us 3-6 months lead time to predict Chinas domestic trade and export volumes”. These are without doubts immensely powerful insights to possibly the biggest driver of our current world economy. Not without reason, Alibaba’s founder Jack Ma was one of the first to recognize the economic downturn in February last year, when he predicted “a though (economic) winter is coming, dark clouds are forming and the thunder is coming closer” during the annual Alibaba all-employee conference. “Today, the darkest period for Chinese exporters is over”, Alibaba’s CEO David Wei confirmed to us.
I asked David to tell us more about AliExpress – a new international wholesale platform for small-sum orders from its Alibaba.com database of Chinese manufacturers. He confirmed “the platform is still in beta but bound to launch in rather weeks than months from now”. The service offers minimum orders as low as 1 item, escrow payment and delivery with full tracking. Advertising “factory prices on even the smallest orders” the service is de facto a B2C marketplace just like Amazon and in part eBay that connects the Chinese manufacturers on Alibabas existing B2B portal Alibaba.com with the US consumer market. It will also be the first international roll out of Alibaba’s online payment and escrow system Alipay now competing with PayPal China in fight for Chinese SME merchants. Alipay currently facilitates about 4 million online payments worth up to US$100 million per day. It surpassed 200 million registered users in early July 2009.
With AliExpress the company for the first time attacks eBay directly in its home market. In China the US company already lost against Alibabas Taobao, giving up its domestic eBay platform and partially selling it to Chinese Internet group TOM Online in 2006. Not included in that sale, however was eBays and PayPals cross-boarder business of Chinese merchants selling to US consumers, that continues to be operated by PayPal China itself. This remaining eBay asset is now under serious threat, with Alibaba entering the B2C export business.
The move nevertheless comes with many risks for Alibaba. Only in December last year, Alibaba’s competitor Global Sources Direct, a division of NASDAQ-listed online sourcing platform Global Sources, announced it would discontinue its wholesale services. The platform was established in 2005 as a joint venture between Global Sources and eBay. A major part of the failure was attributed to the fact, that in such a cross national market place setting, it is impossible for its operator to guarantee quality, availability and delivery times. Instead it has to rely on the goodwill of its merchants, which in a developing market like China is a huge challenge. It remains to be seen how Alibaba can solve this problem better than its competitors.
Additionally to its international challenges Alibaba Group is under constant attack from rising Chinese rivals such as Baidu’s new C2C e-commerce platform Youa. Since the end of last year China’s number one search engine Baidu.com has blocked all Taobao merchants offers in its natural search results, leading to a huge loss of search volume. In retaliation Alibaba Group, previously one of the biggest ad spenders on Baidu, stopped all its PPC campaigns.
In the “Art of War”, Chinese military strategist Sun Tzu writes “concentrate your energy and hoard your strength”. However, Alibaba’s Jack Ma seems to ignore this advice by competing on multiple battlefields both at home and abroad, potentially stretching his company’s resources too thin. Yet the man reinforced his modesty in yesterdays closing speech when he said “looking back we are now a big company, but looking ahead we are still a very small company”. Having seen Ma passionately in action this weekend, it is clear that he’s lost none of the tireless energy that has made him successful, instead gaining in charisma and determination that will be necessary for the next 10 years ahead.
WTF
This article isn’t the normal TechCrunch fare for sure.
I like his flair. An orchid and a fancy chair! This man presents in style.
geek’s ultimate style
Silicon valley has serious competition.
Very skilled Chinese developer are paid 1/3 of the silicon valley price.
Excellent and well written article
I’ll second that WTF.
This reads like it was put out by the PR wing of the Chinese government’s Commerce Dept.
Wow, I’d obviously heard of Alibaba and had some idea of what they did in terms of connecting suppliers and manufacturers with businesses, but… there’s almost so much to that company I’m having a hard time wrapping my head around it. Who knew they had so much going on, and so much influence. Where do I buy some shares?
香港交易所
Hong Kong Exchanges and Clearing Limited
Yahoo owns 36% of Alibaba
Cross-border, not cross-boarder?
As a chinese in Singapore who is bilingual and surf both western and chinese websites frequently, it is my personal take that the chinese internet landscape is very capable of producing the next google and microsoft (though till now, they have been limited to mimicking what the West has done).
Due to language barriers, i often see chinese companies and websites looking out for new and interesting ways to engage their own chinese-ed readers.
Not sure if Techcrunch has a presence in China, if you guys dont, its time to set up one.
Alibaba is only part of huge Chinese expansion…
grt post buddy thnxx
Alibaba should use microblogging like Twitter.
Alibaba use twitter? That is so dumb.
taobao has web im builtin its auction site, just like gtalk in gmail.
Twitter is not microblogging. It’s an extremely limited messaging system.
At the rate Yahoo is going their Alibaba shares will be worth more than the US operations!
I was thinking the same thing. The search is now worthless and their email system now sucks since they strapped on this bugging messaging crap. Who are all these people trying to send me messages that I have never emailed before in my life?
tiff sfite is full of sfcammers, there is no way it can provide any customer serices, to efvery sfucessful deal there are 10> scams to cfontend wiff !!
ok so this is clearly a PAID POSTING.
WTF!!!
hi, its not. sorry if it came through as such. i was part of approx. 100 other invited foreign journalists & guests. the event really was impressive and i learnt a lot i didnt know about alibaba before. so i tried to give a objective overview of the company and mentioned both the strength and weaknesses/threats. in fact i got an email from an alibaba pr person 10 min after it was posted complaining that Taobao didnt have a huge loss due to the Baidu ban. as you can see that part is still there
one thing to add though: i didnt make up the title. that was a tc editor.
this is the kind of diversity TC needs
Diversity? More like Propaganda.
Impressive…
Look forward to the time when according to Jack Ma “…we won’t make differences between local or international companies any more, but only between differences in integrity”.
Sounds very similar to the expansionist plans of Dubli.com, a German website – I think they just launched in Australasia. Be interesting to see how both these websites pan out.
I love these stories. A monster company founded by a former English teacher. Based on his ambitions I can see that his vision is becoming clearer and stronger.
RB
These guys have started advertising alibaba.com on mainstream television in the UK.
Definitley one to watch – whatever you think of China or Jack Wa.
Alibaba.com is the best B2B service in China, and it aims to be the best one in the world.
It is interesting and amazing.
The hidden takeaway from this article might be: sell Baidu.com. They are apparently not above damaging their natural/algorithmic search results for short-term gain.
Turning 10? here’s a big cheer then and more to come.
A man with ideas and visions
great for us they are ASIA´s No. 1
great information. I love to see more diversified tech news like this, it just broadened my view.
Jack Ma is one of few CEOs with both great business talent and amazing personality. He inspires lots of people, including myself, into the entrepreneurship life.
Alibaba B2B is traded on HK market: 1688.hk.
what s B2B?can you tell me ?thanks
nice post – good luck
a lofty goal but not a realistic goal.
while American companies get restricted, regulated, over run with government interfearence to the point communist are buying all of our SUV’s!!
Ahhh, yes, that is change I can believe in right there
Excellent post Guest Author, that’s quite a comprehensive and detailed write-up if I ever saw one.
Inspiring story. It is refreshing to hear about english teachers halfway around the world who launch successful ideas from their apartment, instead of hearing about Stanford/Berkeley rich kids whose parents connections hook them up with some nice capital.
I’ve used Alibaba for research into products that the US could expect to see or just to find the OEM hardware for branded products in the US.
I also was almost overly-opportunistic at one point and got some pricing for bulk order. Amusingly, as I did not follow-up in 24 hours, I was verbally torn to pieces by the sales person for wasting their time, cussing at me etc. I found it as a humorous culture clash with a tightly-wound frustrated sales manager who could not unload their merch. In the 24 hour period, my research showed me that it would have been a poor decision to go ahead with the purchase.
Other than that, their web properties are not the best designed but it is a great source for Asia hardware availability and OEM research.
Looks like they’re doing well for themselves. Nice write up.
Thanks George for sharing insight into Alibaba. I’ve looked at them a number of times after meeting at CES almost 3 years ago when I was looking into sourcing products from mfgs. It’s been interesting watching them continue to expand and you shared even more areas they operate. Though I think setting their sites on eBay is limited and they should look hard at what Amazon has done well as SME’s have been moving to Amazon marketplace over the last couple of years.
I didn’t see this in the writeup but I would be interested to know if Jack Ma’s has thought about including in his ecosystem resources and contacts to design mfgs that can help entrepreneurs find companies to help engineer and build inexpensive prototypes? @robblewis
I was also at AliFest this past weekend in Hongzhou (I run their US ad agency – see success.alibaba.com if you’re interested in the campaign) and was struck by Jack Ma’s vision.
I actually wrote down his comment slightly differently that it was Alibaba’s dream to “build a new business culture based on rules so that there where there was no difference between a foreign enterprise or a domestic enterprise, but only an enterprise with integrity.”
The importance of this vision was underscored by Bill Clinton who told the audience that he believed a shift in wealth from a handful of mega-corporations to a large number of SMEs was the world’s greatest chance for stability and sustained growth.
It’s ironic this week that while a great entrepreneur like Jack Ma is working to break down borders between the countries and small businesses of the world, our governments are getting into trade spats that are building more walls.
I have a pretty good feeling, it’s the entrepreneurs who will win in the long-run.
I had the chance to listen to Ma talk to entrepreneurs in the 2008 Small Business APEC Summit that took place here in Peru. What I can say is that his passion is to empower people to create a business that is sustainable and open access to a broader market.
I must say that pursuing his passion is making him lot’s of money. I myself will buy some Alibaba stocks.
My encounters with the Alibaba (admittedly only those I could access in English) left me with a bad taste reminiscent of a 1999 era dot-com. This company will be the pets.com of China. Probably more like the Enron of China. This breathless hype filled posting isn’t helping my opinion.
a ,realy? that s great ,if that ,there will be more and more people in china can make a job
I’ve listened a lecture of Jack Ma for Chinese students , very impressive and i think he is very charming and his passion impressed me a lot. In China, many many people use Taobao which under Alibaba for C2C purchase.
Globalsources Direct doesn’t constitute a rival against Alibaba Wholesale. Moreover, Alibaba is becoming too big, and offering too much information to a specific product, not to say its ranking method based on money paid rather than actual quality.
hao
George– Imma let you finish, but Braveheart had the best speech all time!
George, great post! Thanks especially for the info on AliExpress–fascinating, but it will likely take a few years to make it work. The WTF and “propaganda” comments suggest that their authors really just Don’t Get It. But it’s understandable: there is no other web company in the world that has the particular combination and reach that Alibaba does, which includes b2b, c2c, and b2c. I think it’s hard for people who don’t know them to comprehend the scale and opportunity. Keep up the great work!