Synopsis/Summary/Review of Alibaba - The Inside Story Behind Jack Ma and the creation of the World's Biggest Online Marketplace

Chapter 7

How Can You Catch a Tiger if You Don’t Go into His Lair?

The word for “tiger” in Chinese is pronounced hoo. The founders of Yahoo! may not have thought of this when they chose the company name, but everyone in China thinks of Yahoo! as a tiger. In August 2005, Alibaba and Yahoo! China set up a strategic cooperation valued at $1 billion that involved the transfer of all of Yahoo! China’s assets to Alibaba and the transfer of 40 percent of Alibaba shares to Yahoo!. By 2007 Yahoo!’s revenues worldwide exceeded $6.7 billion, and employees totaled over 11,400.

Yahoo! in China
Inside China, as the head of the combined local forces of Yahoo! and Alibaba, Jack Ma was widely regarded not only as the head of a colossus but as a courageous man for daring to hold on to a tiger. Although it was one of the earliest portals in the United States, Yahoo!’s experience in China began only in 1999. A man named Zhang Pinghe was president of the China entity at the time, and he recalls the times as exciting and challenging. Yahoo! enjoyed a clear first-to-market advantage in China; the three large Chinese portals at the time, Sina, Sohu, and NetEase, had already burned through most of their money.

 Bought Whom?
When the long-rumored merger or “strategic cooperation” between the two companies received public confirmation, the ongoing question of who had bought whom did not receive much clarification. Alibaba acquired all of Yahoo! China’s assets and at the same time received $1 billion from Yahoo! in investment in order to create China’s most powerful Internet search platform. Alibaba and Yahoo! made simultaneous announcements in China, the United States, and Japan.

Who Runs the Show?
In the face of questions from reporters, Jack Ma was clear on the subject of who was boss. Journalists wondered how he was going to manage what might be a sticky relationship with Yahoo! headquarters in the States. Ma did not mince words. “Many people are asking what the reporting relationship is going to be with America. I tell them that in China Jerry Yang should report to me. I am chairman of the board. He is a board member. I am his boss, he is not my boss. All of the decision making is right here in China.”

Yahoo! China Challenges Google and Baidu
The major search engine players in China are Baidu and Google. Over the course of 2004 and 2005, these two surged ahead of competitors, most importantly ahead of Yahoo! China. After Alibaba acquired Yahoo! China, Jack Ma decided to implement a total revision of the Yahoo! site, and he did it to resemble the Google look. At the end of the day, Alibaba and Google have different concepts in mind when they discuss search. They therefore also have different formulations of market strategy.

Search Engines and Keyword Services
Ma’s emphasis was necessary when Yahoo! China came under the Alibaba rubric, for the temptation was to copy and paste the old system into the new. In order to meet the needs not only of the Chinese public but also of the special user groups operating in the realm of Taobao and Alibaba, Ma transformed the old Yahoo! search engine into one that took advantage of paying customers in China. Both Taobao and Alibaba offer paid services that allow clients to put their keywords at the head of search results. This service is connected to the primary rationale of the enterprise, which is to provide useful tools to companies engaged in e-commerce that help them make money.

Chapter 8

How Can You See the Rainbow if You Don’t Go Out in the Rain?
Nobody goes out in the rain without getting a little bit wet. As Bill Gates always says of Microsoft, “We expect to get sued. That’s just part of the business.” Alibaba found the same thing to be true, and it has handled its legal issues with a fair degree of success.

One of the first lawsuits came in 2001 with regard to Alibaba’s domain name. The plaintiff was the Beijing Zheng Pu Science & Technology Development Company, Ltd, which used the domain name 2688.com. In Chinese, the numbers 2688 are pronounced similar to “Alibaba.” This company brought suit against Alibaba for infringing its trademark rights in the Beijing Municipal People’s Intermediate Court. Another legal matter on April 20, 2004, Taobao’s COO declared to the world that the company had absolute proof that Yahoo! China was siphoning large quantities of data from its servers. COO Sun Danyu said that Taobao had analyzed the problems and, after ruling out internal server problems, realized it was dealing with a very sophisticated hacker.

Yahoo! China: Challenges After the Acquisition
The combining of Alibaba and Yahoo! China forces confronted Jack Ma with several major dilemmas. First and foremost was how to keep to the e-commerce focus when Yahoo! was a portal with a wealth of other capabilities. Second was how to reallocate human resources in a way that did not capsize the boat, and third was how to capitalize on the Yahoo! brand.

Capitalizing on Yahoo!’s brand name was equally troublesome. Google and Baidu dominate the search market in China, and it has not been clear whether Yahoo! can overcome such competitors, which have a strong lead in habitual consumer use.  Daily habits of search consumers are quite established, however, and it is not clear whether Ma will succeed. Despite his efforts to bring technical experts to China who have been meeting one-on-one with Chinese developers in a Herculean effort to develop the platform, there have been many doubters.

Status of the Internet in China
On January 17, 2008, China’s authoritative CNNIC issued its twenty-first annual report on the state of the Internet in China. The first line of this report declares that the total number of “Net people” in China is 210 million, 5 million fewer than in the United States. The numbers have already changed, however, and Chinese users now surpass the number in the United States. From being a country that forbade mention of the Internet a dozen years ago, China now dominates Internet communications. How this affects the weiqi board of Internet players is unclear, but it is certain that any strategic moves by global players must take China into consideration.

Chapter 9

The Personal Life and Thoughts of Jack Ma
Family
December 15, 2005, marked the date of a major change in Alibaba’s senior-level personnel. On that day, Jack Ma announced that an employee named Zhang Ying would be leaving the company. When he made this announcement, the auditorium was at first silent, then many in the audience began to cry. Zhang Ying was Jack Ma’s wife. She had been with the company from the beginning and rendered outstanding ser vice. Ma and his wife, Zhang Ying, came to know each other in college. First acquaintances, then friends, then lovers, then man and wife, they have been together ever since.  Zhang Ying has always remained in the background, as a support to Jack Ma, but friends say that in the final analysis, the two rely on each other mutually and are total partners..

Jack Ma’s Idol, and His Martial Arts Avocation
Few in China can resist the addictive novels of Jin Yong (the pen name of Louis Cha); Jack Ma succumbed many years ago and has modeled his life on the martial code described in the stories. In general, Ma is a contrarian who uses wu xia thinking to conceptualize scenarios that others might miss. In Western terms, the phrase “thinking outside the box” is a start on understanding the process, but it is relatively unidimensional compared to the multidimensional training that wu xia novels talk about. The training includes sustained focus on logical consequences. The same is done in terms of time: training an internal eye to see different realities or scenarios at different times as factors change. Jack Ma has said that he sees the world as an enormous weiqi board, which similarly requires sustained logical thinking and focus.

Natural-Born Performer
It is clear that Jack Ma has absorbed the lessons of martial arts to an unusual degree and applies them to his business strategy. It is equally clear to most who have heard Jack Ma speak that he is a natural-born performer. Jack Ma has street smarts. He speaks to the heart of an issue in down-home language and will never be accused of a lack of self confidence. This is a take-off on the name Ma (meaning “horse”), but it also refers to the ancient Asian tradition of a white steed galloping through metaphysical realms at the head of his tribe. Not a businessman, MBA, programmer, nor engineer, Jack Ma is seen as someone who transcends these limited spheres. To his admirers, he strides the heavens.

Wealth
On October 17, 2005, Jack Ma was listed as number four in a list of thirty names of the wealthiest entrepreneurs in the IT field in China. This ranking can be accomplished only by published reports of wealth, so it skips over privately held fortunes. Privately held wealth is able to operate in a freer manner than wealth that is subject to government scrutiny, and therefore some people feel it is a most unhappy thing to be put on the list. Ma finds it unfortunate for other reasons as well: the ranking creates a taste for money that affects people’s attitudes. Worshiping wealth changes a community’s sense of values.

A Missionary for E-Commerce
Alibaba is beginning to take its place among those companies that bring to mind an individual with a mission. With Matsushita, one thinks of its founder, Matsushita Konosuke; Whampoa brings to mind Li Ka-shing; Microsoft is Bill Gates. Jack Ma’s mission is e-commerce.

Chapter 10

Keep It Up! Reorganization and IPO
In 2007 Alibaba underwent a major reorganization preparatory to raising money by listing part of the company on the Hong Kong stock exchange. An umbrella parent called the Alibaba Group became the repository for several of the affiliated Alibaba companies, including 75 percent of the B2B online marketplace called Alibaba.com. To prepare for this reorganization, a new management team was installed at Alibaba in November 2006. The new CEO of Alibaba.com, in charge of all Alibaba’s B2B business, is David Wei. Wei comes from outside the Alibaba fold.  A new CFO, Maggie Wu, was also hired from outside to handle Alibaba.com’s finances.

The Business Model
Alibaba makes money by charging customers for membership services. Alibaba.com operates international (English-language) and domestic (Chinese-language) online marketplaces, which charge companies, primarily small companies, to list products online. Buyers can go online and browse these products for free: suppliers therefore have twenty-four-hour access to a global audience. Buyers click on product listings and are taken to suppliers’ storefronts. Buyers are allowed onsite for free, but Alibaba charges fees for services to sellers. Because of the free access, Alibaba states that “together our marketplaces form a community of more than 24 million registered users from over 200 countries and regions.”

Looking Forward
Creating Alibaba has required two key talents: an ability to recognize the direction of technology and a determination to force its pace. It required an ability to read future moves on the weiqi board: to understand how technology is linked to human social organization and how to leverage small moves into large consequences. As Alibaba moves farther into the global arena (possibly through a future affiliation with Microsoft), it will be interesting to see how Jack Ma plays his next moves. All eyes will be on the wu xia master. Whatever happens, the scrappy little boy turned master performer is not likely to disappoint his audience.