Alibaba's World: How a Remarkable Chinese Company Is Changing the Face of Global Business
253
Alibaba's World: How a Remarkable Chinese Company Is Changing the Face of Global Business
253eBook
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Overview
In September 2014, a Chinese company that most Americans had never heard of held the largest IPO in history – bigger than Google, Facebook and Twitter combined. Alibaba, now the world's largest e-commerce company, mostly escaped Western notice for over ten years, while building a customer base more than twice the size of Amazon's, and handling the bulk of e-commerce transactions in China. How did it happen? And what was it like to be along for such a revolutionary ride?
In Alibaba's World, author Porter Erisman, one of Alibaba's first Western employees and its head of international marketing from 2000 to 2008, shows how Jack Ma, a Chinese schoolteacher who twice failed his college entrance exams, rose from obscurity to found Alibaba and lead it from struggling startup to the world's most dominant e-commerce player. He shares stories of weathering the dotcom crash, facing down eBay and Google, negotiating with the unpredictable Chinese government, and enduring the misguided advice of foreign experts, all to build the behemoth that's poised to sweep the ecommerce world today. And he analyzes Alibaba's role as a harbinger of the new global business landscape—with its focus on the East rather than the West, emerging markets over developed ones, and the nimble entrepreneur over the industry titan. As we face this near future, the story of Alibaba—and its inevitable descendants—is both essential and instructive.
Product Details
| ISBN-13: | 9781466878860 |
|---|---|
| Publisher: | St. Martin's Publishing Group |
| Publication date: | 05/12/2015 |
| Sold by: | Barnes & Noble |
| Format: | eBook |
| Pages: | 253 |
| File size: | 456 KB |
About the Author
Read an Excerpt
Alibaba's World
How a Remarkable Chinese Company is Changing the Face of Global Business
By Porter Erisman
Palgrave Macmillan
Copyright © 2015 Porter ErismanAll rights reserved.
ISBN: 978-1-4668-7886-0
CHAPTER 1
THE RIGHT PERSON
@ THE RIGHT PLACE
@ THE RIGHT TIME
I slid into the backseat of the taxi as the driver dropped the meter's flag and turned to me. "So where you headed?"
"Wensan road. Alibaba headquarters."
We bumped along the Hangzhou streets for a bit, past construction sites, shops, and Hangzhou's West Lake. Then the driver struck up a conversation.
"Do you work at Alibaba?"
"Yes, I joined the company in 2000. I've worked there for about six years now," I said.
"Oh, really? I didn't know Alibaba had foreigners. So why did you decide to work in a Chinese company?"
"I thought it would be more fun to help a Chinese company go global than to help a foreign company enter China. It's an exciting challenge."
The driver hesitated a bit and then went on.
"I actually know Jack Ma. We were in grade school together. The same class. Do you work with him much?"
"Yeah, we work closely together. I've traveled with him to a lot of different countries."
"Do you want to know why Jack Ma is so successful today?" he asked.
Hmm. I wasn't sure I wanted to know where the guy was heading, but I let him go on.
"It's because he's lucky. He was at the right place at the right time."
Having seen all of the hard work that Jack and his team had put into building Alibaba, I tried to resist getting defensive. If building China's largest e-commerce company was just a matter of being at the right place at the right time, I thought, why didn't 1.3 billion other people in China see and grab the same opportunity when the Internet came to China? And if the driver and Jack were classmates in the same city, wouldn't the driver have been at the right place at the right time as well?
But I kept mum, because I didn't see any point in debating him. Yes, Jack had been in the right place at the right time. But on paper millions of other people were more qualified to start an e-commerce business than a schoolteacher from Hangzhou who twice failed his college entrance exams. Yet Jack was the only one who seized the moment. He was the right person at the right place at the right time.
So why Jack? What made him different? What motivated him? In many ways the answer lies in his life before Alibaba, a story I heard in bits and pieces over the years.
Jack was born on September 10, 1964, just two years before Mao's Cultural Revolution. Jack's early years were no doubt shaped by the political turmoil that marked the period from 1966 to 1976, a time when intellectuals, artists, and capitalists were tormented by round after round of class warfare. As the grandson of a landlord and son of a performer of Pingtan—a traditional folk art combining music with storytelling—Jack was on the wrong side of history in the eyes of the Communists. This led to Jack's being bullied by classmates, and his frequent fights got him into trouble at his school and with his parents.
Perhaps as an escape Jack spent his free time absorbed in martial arts novels. He started with the Chinese classics and then moved on to the contemporary writer Louis Cha, whose popular wuxia (martial arts and chivalry) novels told tales of noble warriors defending the common people and underdogs using their wits—rather than brute strength—to defeat more powerful opponents.
The martial arts stories may have helped Jack overcome the first thing anyone ever notices about him—his appearance. Alternately described as elfish and impish by the media, Jack's diminutive figure brought him unwanted attention and ridicule. Even within his own family he was sometimes teased as being the runt. When introducing his three kids, his dad was known to joke, "And this one we found in the garbage."
You'd think being teased about his appearance and bullied by peers would destroy a young person's confidence. But in Jack's case it somehow gave him strength. As China opened after Mao's death, foreigners began to trickle into Jack's home town of Hangzhou to visit West Lake. When Jack's middle school geography teacher told him that she'd seen foreigners near the lake, Jack became curious and went down to see for himself. He soon made a daily habit of pedaling his bicycle to the lake to befriend foreign tourists and practice English with them.
Jack developed a relationship with one Australian family in particular with whom he bonded over a game of Frisbee. They remained pen pals for many years. Through his relationship with the Australian family, Jack first traveled out of China, which he said "showed me that everything I had learned about the outside world in my Chinese textbooks was wrong." The family became such a strong influence on Jack that he described the family's father as "like a father to me."
Jack's many friendships with foreigners improved his English well beyond his contemporaries' in Hangzhou while also opening his mind to international thinking. So he was a natural candidate to become an English teacher. Despite failing his college entrance exams twice because of his struggles with math, Jack finally entered the Hangzhou Normal University, a teachers' college, where he was elected president of his class.
After graduation he began work as an English teacher at a local university, where he made $12 per month. Most Chinese teachers required rote learning from textbooks, but Jack taught extemporaneously, straying from the texts and relying on storytelling and humor to engage his students. He incorporated in his lessons a bit of showmanship learned from his performer father, and Jack became a favorite teacher on campus.
After fulfilling a commitment he had made to a mentor to serve as an English teacher for five years, Jack decided it was time to "jump into the sea" and start a business. "Everything I taught my students was from books," he said. "I wanted to get some real-life experience. Whether I succeeded or failed was not important. Because I knew I could always take that experience back to share with my students."
Jack's first venture was the Hangzhou Hope Translation Agency, which he started in 1994 to serve the growing number of local businesses engaged in tourism and foreign trade. As Jack became known around Hangzhou for his English skills and ability to communicate with foreigners, local government officials asked him to travel to the United States to try to sort out a dispute they were having with a US partner who had promised to fund the construction of a toll highway.
Jack flew to the United States with high hopes, but when he arrived in Los Angeles, he began to suspect that the man he'd been sent to meet was a con man. His fears were heightened when his host flashed a gun and then left Jack stranded without a car in a Malibu mansion for a couple days to stew about whether or not he would report back to the Chinese partner that everything on the US side of the deal was on the up and up. Terrified and suspecting his US host was hiding important information from the Chinese partner, Jack eventually made his way to Seattle, where he had American friends.
In Seattle Jack's friends introduced him to the Internet by sitting him down in front of a computer for the first time. "I was afraid to touch the computer, such an expensive thing. But they told me, 'Jack—go ahead. It's not a bomb!' So I typed in the word beer, B-E-E-R, and I could see German beer, Japanese beer, but no Chinese beer. So I searched the word China and the response was 'no results.' So I said to myself, This is something interesting. If we can take companies in China and make a home page for them, this could be something big."
When Jack returned to China, he set up China's first Internet company, China Pages, a sort of online English-language directory for Chinese companies and information. Unfortunately Hangzhou did not yet have Internet access. So the businesses he initially targeted as prospective clients reacted as if he were trying to sell them magic beans. Once he finally did make sales, he had to gather the client company's information and have it couriered to his friends in Seattle, who would build a web page. To prove that Jack's website existed, the Seattle friends would print out the pages and courier a copy to China for Jack to present to the customers.
China Pages had some early success and soon caught the eye of the state-run Hangzhou Telecom, which had started its own rival service. Fearing he might have to compete against a government-backed player, Jack decided the only way to survive would be to team up with Hangzhou Telecom. They formed a joint venture, but Jack soon found himself at odds with Hangzhou Telecom's management and left in frustration.
Next he headed to Beijing, where he worked at a company started under the Ministry of Foreign Trade and Economic Cooperation (MOFTEC). Thinking he could help pioneer e-commerce from within the government, he took charge of an organization designed to help small- and medium-sized enterprises take advantage of the Internet. But once again Jack felt stifled by the government bureaucrats ultimately responsible for the organization. "My boss wanted to use the Internet to control small businesses, but I wanted to use the Internet to empower small businesses. We had a totally different philosophy."
Finally, as China's own Internet boom began to take off in 1999, Jack gathered the friends he had dragged to Beijing to work on his team at MOFTEC and told them he had a new idea for a venture—Alibaba. He had learned from the ups and downs of his experiences with China Pages and the government. Jack now had a clearer vision for how e- commerce could finally take root in China. He'd chosen the name Alibaba because it was a globally recognized story and conjured up images of small businesses saying "open sesame" to new treasures and opportunities through the Internet. Thus Alibaba was born.
Which brings us to early 2000....
CHAPTER 2BOOM!
I'll see you in Shanghai. Let's go have some fun!!!!
—Jack
It was the first email I ever got from Jack. The one-line delivery sounded more like a kid on his way to Disneyland than the CEO of a company that had just raised $25 million from Goldman Sachs and Japan's Softbank. But the playful tone didn't surprise me, given the spirit of the times. After all, it was March 2000 and a great time to be alive—if you were involved in the Internet industry in China.
During the previous five years those of us working in China could only watch with envy as friends and former classmates took part in the thrilling US Internet boom. As companies like Yahoo!, Amazon, and eBay became listed on Nasdaq, wave after wave of Internet mania spread throughout Europe and the United States, minting thousands of fresh millionaires with each new IPO. But with less than 1 percent of the country's population online, China's Internet industry seemed destined to languish for decades.
Everything changed in the summer of 1999, with the IPO of China.com, a Hong Kong–based consumer Internet portal that styled itself as the "Yahoo! of China." Never mind that it was a hollow company with no real business model. China.com had a great domain name and appealed to investors chasing China's 2.6 billion eyeballs. Just as Netscape's IPO had triggered the Internet gold rush in the United States, China.com's IPO sent investors rushing to China. And for those of us patiently waiting for the Internet mania to arrive, it was a welcome stampede.
At the time I was working as the head of a technology group at Ogilvy & Mather in Beijing, managing PR and marketing campaigns for foreign companies entering the China market. When I first took the role at Ogilvy, I had assumed that I'd be helping grow the business of multinational companies like Nokia, our largest tech client at the time. But as the Internet boom took hold, my client list quickly grew to include an increasing number of foreign Internet companies that showed an interest in China. Not long after the US companies started entering the China market, homegrown start-ups emerged, modeling themselves after their US counterparts. Within a year, the number of Internet clients in my group had grown from one to ten. I watched these clients not only having a lot of fun but discovering the possibility of changing the world along the way. I was beginning to think it was time to join a start-up myself.
Little did I know, while I was toiling away in Beijing, that Jack Ma and a team of his friends were secretly working day and night in a small apartment in Hangzhou, two hours south of Shanghai. While other companies in China were chasing consumers, creating Chinese clones of the hottest US properties, Jack and his team set out to capture businesses. Their vision was to build a marketplace connecting the world's small- and medium-sized businesses engaged in global trade—the "widget economy" made up of manufacturers, trading companies, and wholesalers comprising the global supply chain. And their website—Alibaba.com—was meant to allow these small businesses access to the riches that only the Internet could unlock.
In October 1999 Alibaba finally came out of hiding and was officially launched at a press conference in Hong Kong, where Jack also announced a $5 million round of investment in Alibaba led by Goldman Sachs. Word began to spread as news stories trickled out about a little-known schoolteacher who was trying to build a platform for global trade. In January 2000 Jack and his team raised another $20 million, led by Japan's Softbank. And by March, in preparation for the company's global expansion, Alibaba began to hire a professional international management team.
At about this time I started looking for a start-up to join. But my hunt for the next big thing got off to a slow start.
I started with an interview with a leading Internet portal. I met with the vice president of marketing, a transplant from Hong Kong who was hiring a corporate communications manager in preparation for a possible IPO.
"I think it would be exciting to work with the team to help craft the vision for you and the company as it moves forward," I told my would-be boss.
"Let's be clear here. I'll set the vision and you execute it," he coldly replied.
With that I scratched them off the list. I was looking to join a team, not a dictatorship.
I next interviewed with an online stock trading company that billed itself as the "E-Trade of China." But when I met with the husband-and-wife team who had founded the company, something didn't smell right. Their company headquarters was a virtual office. And the sources of their investment seemed suspect. By the end of the interview I was convinced all they wanted was a Western face for their company as they pursued activities of questionable legality.
Finally I interviewed with a Taiwanese e-commerce company called pAsia that operated an online consumer auction website in mainland China. The company was gearing up for an IPO and had invested in an expensive corporate identity and logo design based on the name eAsia. But when its executives learned that the name eAsia was already registered by a company in Central Asia, the Taiwanese company changed its name to pAsia to avoid redesigning the logo. This might have been fine if, when pronounced in Chinese, the letter P wasn't a homonym for fart.
On the sidelines of an Internet conference, I told a friend about the difficulties I was having finding a start-up to join. Even if the company had a good business model, I explained, the management styles seemed too top-down and regimented.
"Oh, I didn't even know you were looking. I should introduce you to Alibaba. They are trying to build China's first global Internet company and are looking for someone to manage their international PR. You'd be based in Hong Kong but traveling to Europe, the US, and all around Asia."
My eyes lit up. I'd known many US Internet companies that were coming into the China market and many Chinese companies that were trying to become a local Internet giant. But I had never heard of a Chinese Internet company that wanted to go global. It was about as big a dream as one could have, and the challenge appealed to me. Plus, I liked the idea of being based in China but traveling worldwide. Even if Alibaba failed, I thought, surely more Chinese companies will be going global, and the skills would be great to have.
"Alibaba's just raised a lot of money, and it's building an international team. You should give them a look," my friend advised.
A few weeks later I flew to Shanghai to meet Jack and his team. We attended a customer gathering Alibaba had organized to celebrate the opening of its new Shanghai office. As a taxi took me along the overhead expressway to the Galaxy Hotel, the Shanghai skyline whizzed by. The entire town seemed to be under construction; cranes adorned the sites of new skyscrapers and office buildings everywhere. Silicon Valley may be booming, I thought, but that was nothing compared to the changes going on in China.
(Continues...)
Excerpted from Alibaba's World by Porter Erisman. Copyright © 2015 Porter Erisman. Excerpted by permission of Palgrave Macmillan.
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Table of Contents
Introduction
The right person
Boom!
Bust
The Foreign Experts
Alibaba's Cave
Around the World with Jack
Alibaba's Falling Carpet
Back to China
Last Man Standing
The Long March
Lock Up
War on eBay
The Google Guys
Crocodile in the Yangtze
The eBay-Alibaba Hotline
Yahoo
The Deal Heard Round the World
The China Search Wars
Free is Not a Business Model
AliMania
Leaving Alibaba
Winter
Spring
Alibaba and the Forty Lessons