The Yangtze Crocodile
The tale of Ali Baba in China's New
An interview with
Ma Yun (Jack Ma), Founder, CEO and Chairman of Alibaba,
by Jorge Nascimento
Rodrigues, editor of www.gurusonline.tv, December
«Wo men shi Yangzi jiang zhong
de e yu» (We are crocodiles of the Yangtze)
Born as Ma Yun in 1964, it seems the young guy loved
English. He grown up listening "Voice of America"
and guiding tourists in the margins of the scenic Xi
Hu, the west lake of Hangzhou city, 2 hours south of
Shanghai, in costal Zhejiang Province. He graduated
from the city Teacher's Institute in 1988 and became
a lecturer in English and International trade.
He was lucky: Ma was part of the Chinese generation
- today under-50 - that take-off in graduate studies
and professional life in the blossom of the Reform Era
of Deng Xiaoping. With the spirit of the Yangtze - the
longest river in Asia, known in Chinese also as Chang
Jiang, precisely the Long River -, Ma Yun (Jack Ma,
for westerners), the schoolteacher, founded a translation
business. Far away from today's ranking in the "10
business leaders of the year" in China. He claims
that the entrepreneurial impulse comes from the spirit
of the "crocodiles of the Yangtze".
He met the "Internet thing" in a bizarre
way. A story at the New York Times, last August (2005),
described an incredible Hollywood picture around the
trip to South California of Jack Ma in 1995. He travelled
to the sands of Malibu, in LA,, intending to recover
a debt owed to a Chinese joint-venture by an American
businessman. But the Yankee refused to pay and held
him captive for two days. Ma managed to get his release
by agreeing to help the bandit start an Internet company
in China! He had no further connection with the guy,
but once he returned to mainland, he borrowed $2,000
from relatives to found China Pages. He began designing
home pages from his house in Hangzhou for Chinese companies,
with the help of friends in the US. His translation
company's website went up first, in the middle of drinks,
TV watching and playing cards. An Internet star was
born. In 1995 it was the true pioneering years of the
Net in China.
For a brief period, Ma worked for the Ministry of Foreign
Investment and Trade, in Beijing. It was there that
he founds by chance in 1998 Jerry Yang, the Stanford
student, a Taiwanese native raised in San Jose, heart
of the Silicon Valley, that co-founded Yahoo!. He gave
Yang a tour to the Great Wall. The two became friends,
and, imagine, seven years later they become strategic
partners in one of the biggest deals in the Internet
market in Asia.
After a stint as head of the China International Electronic
Commerce Centre's Infoshare division, he founded from
home Alibaba, in 1999, after returning to Hanghzou.
He partner with seven colleagues, and all of them put
$60,000 over the table to begin an e-commerce business.
That was the first round of financing.
Alibaba was a nice brand, inspired in the famous tale
"Ali Baba and the Forty Thieves" added to
The Book of One Thousand and One Nights by the
French orientalist Antoine Galland in the 18th-Century:
"We wanted a name that was known throughout the
world, since we wanted Alibaba to be a global business.
Everyone seems to know the story", told us Jack
Ma. And the password "Open Sesame" is a good
metaphor: "The Internet was an almost magical place
where SME could find opportunities", said Jack.
From 1999 to 2004 he managed to convince international
institutional investors to put more than 100 million
US dollars in the company in three rounds. Only Softbank,
the Japanese group, invested 20 mm USD- even today Masayoshi
Son is shareholder number two.
The strategy of Jack Ma and his partners was clear
- to occupy most of the value chain of the e-commerce.
Alibaba has developed two B2B platforms - one in Chinese
for domestic SME and another in English as a bridge
for the import-export business -, one proprietary online
payment system coined "AliPay" (necessary
in China, where credit and debit cards are not widespread)
and in 2003 launched Taobao.com (translation: Treasure
hunt), a consumer to consumer auction website similar
to eBay, the Californian "mother" of auctions
online, that in the same year bought the Chinese company
EachNet. Through those 3 portals, Alibaba attracted
more than 18 million people. Alibaba was named "Best
of the Web" five years in a row by the American
Forbes magazine and the Far Eastern Economic Review
refer the platform as the most popular B2B in Asia.
The strategic alliance with Yahoo! was the last stone.
With Yahoo.com.cn, Alibaba gets the search segment of
the value chain and the money invested by the American
friend is pocket money for the ambition of being number
one in the Orient, where the bigger e-business market
of the world will develop in the next decade.
Jack Ma remains as chief executive officer and chairman
of the board after Yahoo! acquired a 40% stake (35%
voting rights) in Alibaba in exchange for 1 billion
USD plus all of Yahoo!'s Chinese-based assets (valued
at $700mm). Some critics said this was "irrational
exuberance", that Yahoo! has overpaid Alibaba,
one more incredible event of the Chinese Internet bubble
going on. If we calculate the global potential value
of Alibaba, the figure we get - more than $4 billion
- means 170 x the free cash flow of last year. "But
it could become a tremendous investment in the long
term. This is simply because Alibaba has built some
interesting and practical business model", says
Zhibin Gu, a Shenzhen consultant and author. Also, you
have to forecast Alibaba in a future IPO, probably in
Jack was chosen by the World Economic Forum as a "Young
Alibaba has international offices in Hong Kong, offices
in China, US and Europe. At the end of 2005 the group
will have over 3,000 employees.
You can explore Alibaba in the Web at www.alibaba.com
Media contacts: firstname.lastname@example.org
«You can see that e-commerce is
converging at a much faster rate in China than in other
countries, and I think the world is learning from this.
Now, we have business-to-business marketplaces, consumer
marketplaces, online payment and search under one roof.
You will probably see a similar convergence trend outside
of China, based on what people are learning in the China
What are the main consequences for the extended
China market (including the Diaspora abroad) of the
strategic partnership with Yahoo Inc?
Our strategic partnership with Yahoo is going to allow
us to focus on building the world's best Chinese-language
search engine. Although this search engine will be focused
on the domestic China market, using simplified Chinese
characters, the site will also be available for Chinese-speakers
anywhere in the world. So while the Diaspora outside
of China is not our main focus, the search technology
will be available to any Chinese language searcher,
which will be a great benefit to the extended China
Why you decided to partner with Yahoo! ?
Our main reason was to add search to Alibaba's portfolio
of businesses. Search has emerged to become especially
important for e-commerce. Alibaba is an e-commerce company,
and search is going to play a huge part in helping entrepreneurs
in China find buyers in China and around the world.
And since our companies have very similar company cultures,
with similar values, we felt that Yahoo represented
the best partner with which to do search.
What are the main consequences for competition in
the global market from your strategic movement?
You can see that e-commerce is converging at a much
faster rate in China than in other countries, and I
think the world is learning from this. Now, we have
business-to-business marketplaces, consumer marketplaces,
online payment and search under one roof. You will probably
see a similar convergence trend outside of China, based
on what people are learning in the China market.
Do you think the Chang Jiang/Yangtze spirit is stronger
than the Silicon Valley Culture (where competitors like
Google, eBay, even Yahoo Inc, were born)?
Interesting question. The Yangtze river delta is home
to one of the most entrepreneurial engines in the world.
Alibaba is based in Zhejiang province, where the entrepreneurial
spirit has to be seen to be believed. Although entrepreneurs
are in industries that are seemingly low-tech, more
and more are moving into high tech. So yes- I actually
think the entrepreneurial spirit in the Yangtse river
delta could be much stronger than in Silicon Valley.
Today the industries may be ball bearings and bicycles.
In the future it may be semiconductors and biotechnology.
Can you explain better the role of your 1000 sales
force? Is it a secret advantage and a differentiation
from Chinese and multinational competition?
Our sales force is critical to our success. We operate
one of China's largest call centres and we have 14 local
sales teams throughout China. We consider ourselves
more a service company than an internet company, and
the sales team's first role is to provide great service
to our customers.
Why an English schoolteacher decided to play the
card of Internet in 1995?
I could see that the Internet was going to change the
world. And I knew that it was just getting started in
China. So I decided there was no better way to really
make a large contribution to China than get involved
in the Internet.
Do you plan an IPO at Nasdaq in the near future?
Or at other stock market?
We will go public some day but only when we feel we
are ready. 3-5 years is the most reasonable time frame
and Nasdaq is a very likely place.