A Brief Overview of Alibaba

Those close to me know of my interests in China and the changing Chinese economy. One of the major factors involved with this are the massive, innovative Chinese tech companies, such as Baidu, Tencent, and Alibaba.

In this post, I’d like to give a brief overview of what Alibaba is for interested readers.

Let’s start with the history of Alibaba and its founder. As many know, Jack Ma has a pretty interesting (and inspirational) backstory. Jack was born in 1964 in the Zhejiang Province on the Eastern Coast of China. It took him 4 times to pass the Chinese college entrance exams. He was focused on getting into a top university, but was rejected from Harvard 10 times. Later he was rejected from 30 jobs, including a job at a KFC.

Introduced to the internet first in 1995 when visiting the US, Jack realized that there were no websites back in China. He quickly understood just how big the potential of the internet was.

In 1999, Jack founded what would become a legendary company, Alibaba. It took only 2 years for Alibaba to become profitable. In 2005, it took over the operation of Yahoo China.

In 2014, Alibaba broke the record for the largest IPO ever, raising an insane $25B. To put this into perspective, the second largest IPO of 2014 was Lending Club, at a mere $870M raised.

So what is Alibaba? Similar to the major tech companies in the United States, Alibaba is a multi-faceted venture. The company owns a large variety of site types — its largest site is Taobao, a peer-to-peer marketplace, similar to eBay or OfferUp, but without bidding. It also has a cloud-computing service, a mobile-payment service (known as Alipay), and a recently purchased video service which is known as the Youtube of China. Some in the US would say it’s a bit of a mix between Amazon and Google.

When being talked about in the western technology press, Alibaba is most commonly compared to Amazon. However, there is no true equivalent of Alibaba in the United States.

So let’s take a few moments to throw out a few facts to compare these two giants.

For full disclosure, I must note here that I am currently employed by Amazon and any views stated are my own.

According to ParcelHero, Amazon is only responsible for 3 million packages a day, a fraction of Alibaba’s reported 12 million a day. In terms of 2016 revenue, Amazon was at $136B while Alibaba followed at $101B.

While both of these companies have cloud ventures, Amazon’s Amazon Web Services (AWS) had revenue of $7.9B in 2015, while Alibaba’s Cloud Computing revenue stood at $400M.

Right now, most Alibaba operations are domestic, but the company is quickly globalizing. Jack even met with then president-elect Donald Trump in January to discuss expansion plans in the United States.

Alibaba has been criticized in the past for allowing counterfeit goods to be easily sold on their website. In December of 2016, the US Office of the Trade Representative, or USTR for short, named Taobao in its public report on its Notorious Markets list due to pervasive counterfeits.

But in January, for the first time, Alibaba filed lawsuits against counterfeiters on its sites. This action should act as a deterrent to future would-be counterfeit sellers on Alibaba’s conglomeration of website.

In addition to this action, the company is now working with Samsung, LV, Swarovski to prevent counterfeit goods. The goal is to share data on counterfeit products and certain companies in order to more easily find fake items.

Alibaba has a myriad of interesting products and features coming down the pipeline in the near-future. Mentioned before, the company very recently, bought out Youku Tudou, the Youtube of China for about $3.5B. The company has also been venturing into the realm of Virtual Reality. Its Virtual Reality shopping experience, dubbed Buy+, was first showcased in late 2016. Alibaba is also working on a logistics and delivering network, like FedEx, called China Smart Logistics Network. The goal is 1-day delivery for all of the major cities in China

Alibaba still has plenty of room to grow and develop, especially in an economically growing China. I’ll be following them closely in these next few years.