Face value: China's pied piper. Check it out:
(The Economist Via Thomson Dialog NewsEdge) Jack Ma is attracting a following among entrepreneurs in China and internet companies worldwide
ON A rainy weekend this month 10,000 businessmen, hobby traders and "netheads" gathered in Hangzhou, a pretty Chinese city near Shanghai, to talk about e-commerce. Most went to meet and swap tips with other online traders. All came to the "Alifest" to sit at the feet of Jack Ma, a pixie-sized, boyish 42-year-old who is the founder of Alibaba, an e-commerce firm, and is regarded as the godfather of the internet in China. In a country where businessmen are viewed with suspicion, his popularity is unusual. When he was invited recently to speak in Beijing's Great Hall of the People, Mr Ma needed six bodyguards to escape a mob of online traders waiting outside to give him a hug.
Mr Ma's rock-star status reflects how he has enabled thousands of his countrymen to become their own bosses, build businesses and make money--a dream ingrained in Chinese culture but repressed by decades of Communist antipathy to private enterprise. Alibaba has become the world's largest online business-to-business (B2B) marketplace, Asia's most popular online auction site and, as a result of its acquisition of Yahoo! China, the 12th most popular website in the world. That combination makes Alibaba one of the few credible challengers to the global online elite of Google, eBay, Yahoo! and Amazon.
Alibaba is far from being just a Chinese knock-off of these American giants. Indeed, they have borrowed ideas from him. "Jack is not just a Chinese visionary, but a global one. Western companies are taking pages from the Alibaba book," says Bob Peck, an analyst at Bear Stearns. At Alibaba's heart sit two B2B websites (alibaba.com and china.alibaba.com), one a marketplace for firms from across the world to trade in English, the other a domestic Chinese service. Rival e-commerce outfits, such as America's Ariba and Commerce One, sought to cut multinationals' procurement costs. In contrast, Alibaba's intention was to build markets for China's vast number of small and medium-sized enterprises, which make everything from cufflinks to motorcycles, by allowing them to trade with each other and linking them to global supply chains. Today, traders in America buy from Alibaba and resell on eBay.
Mr Ma has also led the charge into online communities and social networking, both now booming areas. In 2003 he added a consumer auction site, Taobao, that allowed instant-messaging--a feature later added to his business sites. In contrast with eBay's relative anonymity, Taobao lets buyers and sellers get chummy through messaging and voicemail, and by posting photographs and personal details on the site. Turning e-commerce into a community of "friends" has been critical in a country beset by a lack of trust. And with 70% of China's web users aged under 30, Taobao's informal, blog-like format struck a chord--attracting more than 20m users. Many have now gone professional, buying goods wholesale on Alibaba and reselling them on Taobao. The story goes that, shortly after visiting Alibaba's offices and seeing Taobao, Meg Whitman, eBay's boss, bought Skype, an internet-telephony start-up, for its instant-messaging.
Alibaba has also outflanked the opposition in online payments. Aware that most Chinese do not have credit cards, Mr Ma introduced AliPay, a system that keeps cash in escrow until goods arrive. That trick for getting round settlement risk was later adopted in China by eBay. China's powerful banking regulator has a hawkish eye on AliPay, which is, in effect, an online bank with thousands of credit histories (something mainland banks crave). Taobao's success has been startling. Its market share jumped from 8% to 59% between 2003 and 2005, while eBay China's slid from 79% to 36%. Mr Ma trumpets that it is "game over" for eBay China. Many industry watchers expect eBay to retreat and sell out to a local outfit such as Tencent (a rising star in auctions) or Alibaba itself--as Yahoo! China did.
Mr Ma is also at the forefront of the trend to integrate paid search with e-commerce. Alibaba's takeover of Yahoo! China last October gave the firm a search engine just as Google was demonstrating the huge potential of paid search, and the deal anticipated eBay's link-ups with portals (Yahoo! in America, and Google elsewhere). Baidu, China's main search engine, is a strong rival. But online advertising is surging in China and small firms are the biggest users of paid search, giving Alibaba an edge.
Keep it simple
Mr Ma seldom mentions technology. Whereas most internet entrepreneurs are geeks (think of Yahoo!'s or Google's founders), Mr Ma first touched a computer in 1995 on a trip to Seattle. "Someone as dumb as me should be able to use technology," he says. He insists on simplicity. A new feature is rejected unless he can understand and use it. Mr Ma's approach to running the company is similarly independent. He reads neither business books nor case studies, and ascribes Alibaba's survival and success to the fact that he "knew nothing about technology, we didn't have a plan and we didn't have any money." In truth, Mr Ma had powerful backers early on, including Goldman Sachs and Softbank. Yahoo!'s Jerry Yang--who joined Mr Ma at the Alifest--is also a longtime friend. In any case, he has money aplenty today: as part of its takeover by Alibaba, Yahoo! paid $1 billion for a 40% stake in the company.
Only one thing is missing: profits. As the boss of a private company in no rush to join the stockmarket, Mr Ma is relaxed. Revenues should double to more than $200m this year. But Alibaba has so far pursued market share rather than revenue. The global business site charges its users, but Taobao does not; an attempt to do so this year failed. Mr Ma says it is too early: only 30m of China's 120m online users have bought anything online. He wants to help the market grow--creating 1m jobs in China in the next three years--not stifle it with charges. He will have to tackle profitability if he is really to call the tune.
SOURCE: The Economist
Copyright 2006 Economist Newspaper
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