Open sesame! The iconic words spoken by the protagonist in the Arabic folk tales hundreds of years ago – Ali Baba. The widespread popularity and recognition of Ali Baba led one non-descript Chinese man in Seattle settle on the name for his business.
Alibaba is now a behemoth in the e-commerce world and a household name in Asia, particularly China. Its founder, Jack Ma, is China’s richest person, but his story from a failed KFC job attempt to where he is now is fascinating. Alibaba is among the world’s largest technology companies joining the leagues of IBM, Google and Oracle.
Alibaba [NYSE: BABA] listed on the New York Stock Exchange following feverish anticipation on China’s largest e-commerce player. Hong Kong was the exchange of choice, but due to regulatory requirements, Jack Ma went across the world to list on the NYSE. The IPO was expected to be among the largest ever, but it surpassed all expectations to become the biggest IPO in history raising more than USD 25 billion on opening day, making it worth in excess of $230 billion. The Chinese dragon has soared to new heights.
How Alibaba Began
The diminutive former English teacher started off with a salary between 100-120 renminbi ($12-$15) per month teaching basic English at a Chinese university. His interest in English was spurred on when he spent a month with his pen pals in Australia in 1985. His indoctrinated thinking that China was the happiest and richest country in the world was changed when he landed in Australia.
“Before I left China, I was educated that China was the richest, happiest country in the world. So when I arrived in Australia, I thought, Oh, my God, everything is different from what I was told. Since then, I started to think differently.” – Jack Ma.
During his travel to Seattle as an interpreter for a trade delegation, the wonders of the internet were shown to him and a search for “beer” returned results, but none from China. With the idea of an internet company planted in his mind, he now needed a name. A casual question to a waitress asking if she knew Ali Baba would change his life forever – except he didn’t know it then. He went out into the streets and posed the same question to others – Indians, Americans, Germans and all replied in the affirmative. It was then he decided on the name Alibaba, an easily recognizable name.
Bumpy Road Ahead
Not many shared his vision of e-commerce in China and he was dissuaded by his closest friends and relatives. When he asked his wife if she would like him to be a rich man or a respected businessman, she said the latter and Jack Ma said that it’s because she didn’t think he was going to be a rich person. In an interview with Xiao-Ping Chen of University of Washington, Ma talks about how a CEO told him he was a mad man and his ways of managing the company in China wouldn’t work. When Ma invited him to China to visit his company, the CEO, after the visit said: “Now I understand. Here you have 100 mad men just like you.”
Rise and Steady Increase In Growth
Alibaba is a combination of Amazon and eBay – giants of the e-commerce industry. There are some key verticals within the group – Taobao Marketplace (C2C), TMall (B2B2C) , Alibaba.com (B2B), Alipay (e-payment), eTao (price search) and Aliyun (cloud computing). Together they contributed $8.5 billion in sales in the last fiscal year ending in March, with a net income of $3.8 billion. In 2012, sales were $5.4 billion and $1.4 billion in profits. In comparison Amazon reported revenues of $74.4 billion but took home only $274 million and also reported a loss of$39 million in 2012. This continued trend of profitable growth is what sustained Alibaba in the fiercely competitive market and catapulted its value on opening day. With internet growth exploding in Asia, it was not surprising that in 2012, Alibaba bought back half the stake Yahoo held in the company, signalling the intention for an IPO.
Rejection To Success
The man who was rejected for a position as the secretary to a KFC manager, he went on to borrow $2,000 to set up China Pages in the mid 90s into which China Telecom invested $185,000. He parted ways with China Pages in 1999. Subsequently, he gathered 18 people who spent 2 hours listening to Jack Ma on his vision for an e-commerce company in China. Although they did not seem to understand most of his speech, they put $60,000 to back this man who had spoken with much passion and Alibaba was born.
Jack Ma, who loves Forrest Gump, is now worth more than the company who rejected him for a position. The company he founded on the likes of Amazon and eBay is now worth more them – combined. He hopes that Alibaba will last for at least another 102 years, thus seeing three centuries. He closely guards his family life and only when an old black and white photograph of his family went viral earlier this month, did the world know he had siblings.
The 13-year-old who started out learning English from foreign tourists trickling into China is now China’s richest man, with a net worth of $21.8 billion, according to the Bloomberg Billionaire’s Index. Alibaba’s management sees this IPO to be the door to a magical world of global e-commerce. The ticker symbol, BABA, while reflecting the company’s name – repeats the Chinese translation for the number “8”, which is considered as luck in the Chinese culture. When quizzed about what he was going to do with his personal wealth, Ma in his interview with CNBC said: “Well, this is a headache thing. I guess I’m going to spend.”
Future Of Alibaba
It remains to be seen if the company’s 22,000 strong people can take on the likes of Amazon and eBay on their home turf. Alibaba is also actively looking to enter Indian retail e-commerce,the other sizeable market in the world, possibly through an investment in Snapdeal. With Jack Ma at the fore, the competition will hot up like never before. But with his zest, energy and vision, Jack Ma and Alibaba will be a force to reckon with.