Delighted Stupid Wind | Empire Illusion » alibaba

Alibaba is ten years old now – International B2B E-commerce

Kent — Wed, 16 Sep 2009 18:50:45 +0000

I have to mention about alibaba, a company even older than my working experience years.

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.

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

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Alibaba Group Launched New SNS for B2B and B2C businessman

Kent — Thu, 18 Jun 2009 05:26:00 +0000

More and more Social Network website are launched these days.

Last month the Bai community is launched by Sohu.com

and also the Taobao(Alibaba Group) SNS called Tao Jianghu.(Jianghu is a name to descripe a industry in china. )

the top 3 big site Sina.com is preparing its own social network, integrate with its wonderful blog system, But sina was making a kind of invitation marketing: only release the news of the product, but never open the registration, caused many people excited to try.

and Yesterday Chinese B2B e-commerce group Alibaba announced plans to launch a newly-developed product “Ren Mai Tong” today, integrating e-commerce and the social networking service functions to provide an online community for business people.

It will not only provide online gaming interactive functions, but also focus on the business networking activities to promote better business relations.

one of the chief engineer for the “Ren Mai Tong” product, told local media that the new service includes functions such as business card production, friends’ business cards holder, latest news, and customer news aggregation. In addition, if two parties reach an agreement on the website, they can realize online trading with Alibaba’s online payment platform Alipay.

I list some big SNS in china here

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China Internet compared to USA Internet

Kent — Fri, 12 Jun 2009 08:03:58 +0000

yes, that’s china.
when the products from different companies are the same, then the key point is to fight with the details of UI,UE, speed, service of the consultant ,and even the GuanXi.
and who becomes the first one to get the market, who’ll succeed.

but there is a website called douban(www.douban.com), it’s the best innovation in china, to share the life.

and also in shenzhen the second internet company is called XunLei(http://www.xunlei.com/), it’s a download software(C/S), the speed is the fastest with its core technology, but still facing the copyrights problem when they want to IPO, as it’s inlegal out of china.

had a coffee break with my new friend Guang Yao (english name is Justin), who is an avid social media guy, loving twitter, blogs, and other social online stuff. Here are some notes of what I got from our discussion this evening:

There is a coffee shop in Hangzhou city, China called “Beta Cafe” that is founded by some Alibaba Group execs. It has not spent any money on advertising, all of its customers come from word of mouth and SOCIAL MEDIA – blogs, social networks, etc – AND IS doing really well, as a token of chinese internet success and social networking.

We then talked about US internet, of course the google, ebay, amazon, twitter, and some other smaller sites. I’m not gonna bother writing about that, as this is an ENGLISH blog (haha) and you guys all know about this, and there’s tons of ENGLISH (amazing….) blogs talking about ENGLISH seo and internet marketing. Lets talk about these top chinese sites for those of you who don’t know:

I’m sure you may have heard, but if not, Alibaba Group is a major internet company in China, traded on the Hong Kong stock exchange (1688.hk. They own a portfolio of companies in ecommerce, listed below:

a) Alibaba International – this is the flagship site, which started as a bulliten board by Jack Ma in 1999 for manufacturers to post their products. It turned into a huge directory where factories and trading companies all over the world (well, mainly in China, but then again, theres most of the manufacturing these days) could promote their products to wholesalers, importers, and buyers.

b) Alibaba Domestic – in Chinese for chinese b2b transactions. Factories and Trading companies can sell to other chinese companies.

c) Tao Bao (www.taobao.com) – The Chinese ebay. Well, yea EBay tried to enter the chinese market a few years ago, and Tao Bao kicked its a$$! Tao Bao is free for both buyers and sellers though, so that may be a reason its such a dominent player. But Chinese love this site, and I would say is where 90% of chinese e-commerce is done. They also have an “amazon” fulfillment type system they’re working on, that will connect factories to buyers directly – with tao bao as the platform to “drop ship” direct to consumer (not taking on any inventory though)

d) Alipay – e-payment system. Basically the Chinese Paypal. 99% of the market share.

e) Alisoft – mainly a CRM system, it is cross promoted to its other channels in Alibaba and Tao Bao – and is how Alibaba attempts monetizes these other products, as they do not charge for usage on tao bao, nor do they charge much on alibaba china.

f) Alimama – an advertising platform, like google adwords and adsense. also another way it monetizes tao bao, with banner advertisements and the like.

Next we have Baidu , which is traded on the US NasDaq stock market (BIDU) is the dominant search engine in China, with approximately 75% market share of the search market here. Google China is trying to penetrate the market with maybe the 25% remaining market share, but Baidu still seems to dominate by a wide margin. They have the same business model as Google, selling sponsored advertisements, except they also have some advertisement IN THE ORGANIC results, not just on the left and the top. In addition to their flagship search engine, they also have:

payment system, shopping portal, and a new instant messaging tool. But there clear moneymaker is the baidu search engine.

Tencent, or more commonly known as QQ is a hugely successful Instant Messaging (IM) platform started and still based in the same city I live in now, Shenzhen. A private company (from as far as I can tell) this company makes the most profit of the 3, almost printing money.

Instant Messaging – A IM system like skype or MSN, with voice and video chat like those, But one cool feature I like is YOU’RE NAKED. Yea, you have a virtual “you” that is either a girl or a boy. You can then BUY clothing for your virtual person, picking shirts, pants, shoes, and accessories.

ONLINE GAMES make up 30% of its revenue, as the Chinese market loves to play online games, and Tencent’s games are really popular.

Pai Pai – C2C shopping site, a pretty much copy of tao bao.

Ten Pay – another alipay / paypal e-payment solution.

Other sites in china are more media (yahoo news) sites, that are also emerging with more products:
Sina.com
Sohu.com
163.com

What really amazes me, and was pointed out by the others tonight, is THEY ALL COPY EACH OTHER. And everyone has a product for every major internet function, payment, shopping, chat, etc. We discussed how its harder to copy in the USA because of trademarks and copyrights. But its sad to see in China. My friends tonight are almost afraid to share their ideas. here is why

THERE ARE REPRESENTATIVES From these above MAJOR Chinese internet companies building 100s of products in their R&D departments. they will attend events, work in social media sites, and then report back to their companies the ideas – AND COPY THEM.

So how can a young entrepreneur start his internet company? his ideas are stolen before he can even develop them…by huge multimillion dollar companies. Its sad. Its amazing, and it makes you wonder how innovation can continue.