Alibaba>>>>Amazon

How did an eccentric Chinese man, who came from nothing, go on to become one of the richest men in the world. Well let me tell you a quick story about Jack Ma, and his little company called Alibaba….

Lets Introduce Jack Ma

Many of you may now know who Jack Ma is. He is an eccentric billionaire that owns a piece of one of the world’s largest e-commerce websites, Alibaba. However, how we got to this point is an interesting story in itself. Ma was born in in Hangzhou, China to a lower class family. Ma strived to get ahead in life, and quickly realized learning English was key to moving up in this world. Ma started to study English at a young age and practiced English daily by conversing with English speakers at a hotel near his home. He would give them tours around the city for free to improve his English. Doing this for nine years, in the hopes of helping himself gain a college education. However, his new found mastery of English didn’t help him pass the national college entrance exam, which he managed to fail three times in a row.

Ma’s life was filled with hardship following his college failures. Ma applied for 30 different jobs and got rejected by all of them. “I went for a job with the police; they said, ‘you’re no good,'”. “I even went to KFC when it came to my city. Twenty-four people went for the job. Twenty-three were accepted. I was the only guy …”.  Ma’s life seemed to be heading for nowhere, until he heard about this little thing called the internet.

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Alibaba’s Humble Beginnings

In 1994, Ma heard about the Internet. In early 1995, he went to the US and with his friends’ help, and was introduced to the Internet. During his first encounter he searched the word “beer”, and this little word helped fuel his obsession for the internet. Ma was surprised  find no information about beer from China. Further, he tried to search for general information about China and again was surprised to find none. So he built a website to meet this need.Within five hours of creating the website he had received emails from several Chinese companies wishing to know more about him and his new site. This is when Ma realized that the Internet had something great to offer.

In 1999, he quit his current job working for the goverment and returned to Hangzhou with his team to found Alibaba, a China based business to business marketplace site in his apartment with a group of 17 friends. He started a new round of venture development with 500,000 yuan.

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What Is Alibaba

Some may define Alibaba as a marketplace, a search engine, and a bank all rolled into one e-commerce platform. It is China’s and by some measures, the world’s biggest online commerce company. What’s interesting about this is that Alibaba limits itself  to a purely domestic operation, working only with in China. While some may say this is a limiting operation, many disagree. Alibaba through its various sites  hosted $248 billion of online shopping transactions last year, which is, according to the Wall Street Journal, is more than eBay and Amazon.com combined. The Journal cites data from a group called iResearch projecting that China’s e-commerce market has gone from $74 billion in 2010 to $295 billion by the end of 2013, with a  projected total of $713 billion by 2017.

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Alibaba owns stakes in all sorts of things, but operates chiefly through three sites: Taobao, China’s biggest shopping site; Tmall, which specialises on online sales of branded goods and focuses on China’s fast-growing middle class; and Alibaba.com, which connects Chinese exporters with companies around the world. Between them they host millions of merchants and businesses, and have hundreds of millions of users. In terms of the amount of business handled, one can argue that Alibaba is actually the world’s biggest online commerce company, not just China’s. On top of its core sites it owns alipay.com, a Chinese equivalent of Paypal; and has large stakes in Sina Weibo, China’s version of Twitter; and Youku Tudou, the closest Chinese equivalent to YouTube. Lately, Ma has taken to making some different kinds of  acquisitions, buying a film business and half of the Chinese football club Guangzhou Evergrande. He has even talked about entering the banking industry, and already has a remarkably popular mutual fund called Yu’e Bao.

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Even though Alibaba pulls in more total sales then it’s competitors, it’s revenue has yet to reach the same levels. Most sites, charge people to post products on their site. Alibaba  however strays from this method, and instead lets people list for free, but charges for advertising. Alibaba’s revenues were $8.5 billion, compared to $74.5 billion for Amazon, which is surprising considering that Alibaba dwarfs them in sales. However, this potential for revenue growth is what excites investors, and has led to  many grade A investment banks and investors to line up in order to back the company.

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Setting Records

Alibaba recently smashed it’s sales record on their annual Singles Day event (China’s equivalent of Black Friday). The company said sales this year had reached $18 billion, a rise of 32% on last year’s sales which were worth $14.3 billion. Alibaba has been ahead of the technology curve with regards to this event. Registering 82% of  sales through mobil phone purchases.  The company has also been experimenting with new technology including augmented reality and virtual reality to give shoppers other ways of buying items.  Events like this show the power that Alibaba has within China, and the purchasing power that a Chinese economy has as we move into the future.

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All in all Alibaba is a pretty interesting company, led by a very cool guy. Something and someone we should all keep an eye out for as the world moves forward.

THE END

Until next time….

beast

10 comments

  1. Wow, Jack Ma’s determination really can’t be understated. Neither can the immense potential of Alibaba. The company’s vast revenue disparities with Amazon despite facilitating so many more transactions is pretty interesting. I wonder whether they will pivot to charging sellers to post on the site or even go as far as selling products with their own brand name, like Amazon. Regardless of the path Alibaba chooses, this article makes me confident that we will see some interesting changes in the e-commerce behemoth’s revenue model in upcoming years.

  2. I was surprised to read that Alibaba was as old as it is! I thought this had been a recently developed Amazon “me too” offering, probably built buy some cunning Chinese businessman. How very wrong I was.

    I think it’s an interesting strategy to stay domestic to China, especially given the power of the internet to connect them with the entire global marketplace. I’m curious to see how long they decide to hold onto this strategy, especially once American investors are brought onboard. Hopefully as this company continues to grow, we’ll see some more direct competition between Amazon and Alibaba. Not only would it be interesting to watch that unfold, but I think Bezos and Ma will drive some cool new innovations into this space! Great post.

  3. Great post! What a crazy journey for Jack Ma with a (so far) great ending. It is interesting that Alibaba hasn’t gone international yet, because I think that it could have great potential. It’s well know that there aren’t any notable Chinese brands or companies that have a large global presence, so perhaps this could be the first one.

    It’s also crazy to me that China, which still has many developing regions, has fostered such a strong a tech-savvy e-commerce culture. I’m curious as to whether it was a desire to purchase things online that has led to Alibaba’s success, or if it’s Alibaba’s offerings that have driven online sales. My guess is probably a combination of both.

  4. dabettervetter · ·

    What a great tale, DJ! I had no idea who was behind Alibaba and what their story was until reading this blog. Before it had just been a name to me. The success of business, especially digitally, success comes from perseverance and resilience and MA demonstrates both of those qualities. As time goes on, I am curious to see if Amazon and Alibaba work together or will be the last two standing in the digital business war.

  5. I was also surprised to see that Alibaba was such an old company. I recall hearing first about it when they were planning to IPO, so I’m sure it was doing well before. I think it’s so interesting that China has so many different platforms that are able to do a multitude of things, whereas here in the states companies are not able to have that kind of versatility. Furthermore, I think it’s weird that Amazon doesn’t talk much about companies like Alibaba being competition. If Alibaba is able to do so much e-commerce in China, I’m very surprised to not hear Bezos doing anything actively in China (unlike Uber who was very public about their investment into China before throwing in the towel against Didi). Thanks for sharing – great post!

  6. michaelahoff · ·

    Nice job, Doug. Always good to include some Charlie Rose whenever possible. That infographic is staggering, too, and Alibaba is obviously in a growth industry so the next infographic will only be more impressive.

  7. Obviously online shopping is rapidly expanding. That’s no secret. With China being the manufacturing capital of the world, this website is a recipe for success. Has Jack Ma stated his reasoning for why he doesn’t charge companies to put their goods on Alibaba? If Amazon is bringing in so much more in revenue with this method, why wouldn’t Alibaba duplicate this model?

  8. Great information on Jack Ma and Alibaba. I knew about the company, but had never heard the back story of its founder. very interesting.

    Alibaba is in a great position as the Chinese middle class continuous to grow. I’ll be watching how they look to continue to diversify themselves in the future.

  9. Awesome story, I hadn’t known about Jack Ma’s background at all. For me it seemed like he only suddenly popped up on the radar when Alibaba decided to go public. I find it pretty amazing that they process so many orders and yet their revenue is significantly lower than Amazons. I’ve scrolled through the website before and sellers seem much less Official than those on Amazon – I imagine this too is due to the free listing policy. The company is becoming a much larger global power now, and I expect their business model will change as they partake more and more in the US market in the future. It’s likely that the model will begin to Mimic that of Amazon’s and offer a large revenue increase.

  10. Great post. We do tend to overlook the Chinese sites in this class, only because we have less exposure to them. Thanks for bringing this in.

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