Jakarta Globe, Lulu Yilun Chen, May 08, 2014
The online world opened to billionaire Jack Ma, founder of Alibaba Group Holding, on his first trip to the United States in 1995. While visiting a friend in Seattle who showed him the Internet, Ma typed the word “beer” and couldn’t find any Chinese information. He decided to fix it.
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| Alibaba founder Jack Ma gestures during a celebration of the 10th anniversary of Taobao Marketplace, China’s largest consumer-focused e-commerce website, in Hangzhou, on May 10, 2013. With Alibaba’s IPO, the 49-year-old entrepreneur could become the third-wealthiest in China, according to Bloomberg Billionaires Index. (Reuters Photo/China Daily) |
The online world opened to billionaire Jack Ma, founder of Alibaba Group Holding, on his first trip to the United States in 1995. While visiting a friend in Seattle who showed him the Internet, Ma typed the word “beer” and couldn’t find any Chinese information. He decided to fix it.
Almost 20
years later, Alibaba is China’s largest online retailer, and Ma’s US-inspired
brainchild is readying for an initial public offering in New York that could
raise as much as $20 billion, potentially making it the largest IPO there ever.
The valuation may make the 49-year-old entrepreneur the third-wealthiest in
China, with $12.5 billion, and one of the 100 richest worldwide in the
Bloomberg Billionaires Index.
The IPO
will represent the crowning feat of Ma’s two decades spent building a
25,000-employee powerhouse that forced EBay to pull back from China and drew an
initial $1 billion investment from Yahoo! Alibaba has grown from an online
experiment in Ma’s living room that offered two dozen items for sale to a venue
for 7 million retailers flogging everything from Alaskan salmon to airplanes.
Its businesses generated about $8 billion in revenue last year, a 62 percent
increase over 2012, according to quarterly figures compiled by Bloomberg.
“A lot of
people hate change, but precisely because we grasped all the changes, we were
able to see the future,” Ma said at a speech to employees when he stepped down
as chief executive officer a year ago. Ma remains chairman. The company
declined to make him available for an interview, citing pre-IPO restrictions.
Transforming
China
Alibaba has
helped transform life in China, offering opportunities to entrepreneurs and
revolutionizing retailing for consumers who just a few decades ago used ration
coupons to buy items such as clothing, rice and bicycles. Like Mark Zuckerberg
of Facebook, Steve Jobs of Apple and Jeff Bezos of Amazon.com, Ma has become an
iconic figure whose impact stretches far.
A former
English teacher who lingered outside his native city of Hangzhou’s main hotel
to practice the language with foreigners, Ma and his story reflect China’s
emergence as an economic superpower. Chinese Internet users have grown to 618
million, greater than the population of any other country except India, and
could exceed 850 million by 2015, according to government data.
McKinsey
& Company predicts online retailing in the world’s second-largest economy
will reach $395 billion next year, triple its 2011 level. Ma has positioned
Alibaba to ride China’s surging forces of technological change.
Pushing
forward
“If Steve
Jobs created the operating system for the smartphone, Jack Ma and his team
created the operating system for commerce in China and the future,” said Porter
Erisman, who directed the documentary, “Crocodile in the Yangtze: A Westerner
Inside China’s Alibaba.com,” that chronicled his eight-year employment at the
company starting in 2000. “He’s someone who loves a challenge. He’s motivated
by doing things that push China forward.”
Already,
Alibaba is the source of more than 70 percent of package deliveries in China
and has broken what may be a worldwide sales record of $5.6 billion in a single
day. It has also pioneered a service that lets users deposit money into
accounts via smartphone, drawing about $87 billion in its first nine months,
more than double Goldman Sachs Group’s 2013 revenue. Alibaba has helped create
15 million jobs, Ma said in a February letter to employees on the company’s
official microblog.
“Going
public has never been our goal — it is just an important strategy and method to
achieve our mission, a gas station which can help us move forward,” Ma said in
a separate e-mail to employees just before filing for the IPO.
Expanding
realm
After
achieving dominance in the businesses of Amazon.com, EBay and PayPal combined,
Alibaba is expanding into the realm of Sony Entertainment. Last week, it
announced a $1.22 billion stake in China’s largest online video site, Youku
Tudou after saying in March it would acquire a producer and distributor of TV
and movie dramas. Ma is also putting his own money into one of the first
companies in China with an Internet TV license.
“Jack is
very passionate,” Jonathan Lu, Ma’s handpicked successor as chief executive of
Alibaba, said in an interview last year. “He has a strong awareness of crisis
and is very farsighted.”
The first
step to building an online empire began when Ma registered a website, China
Pages, a Yellow Pages-like directory, in the US after his visit to Seattle,
where a friend had showed him the Internet.
‘Something
interesting’
“I searched
the word beer, b-e-e-r, very simple word,” Ma recalled in a television
appearance shown in the documentary. “I found American beer, Germany beer, and
no Chinese beer. So I was curious. I searched ‘China,’ and all search engines
said no China, no data.”
Ma said he
asked his friend to help him create a home page in Chinese, and within five
hours of posting it, he received five e-mails from the US, Japan and Germany
seeking more information.
“I was so
excited,” he recalled. “I said, ‘This is something interesting.’”
To start
China Pages, Ma took 7,000 yuan from his savings and borrowed money from his
sister, according to a book in Chinese by Ma’s personal assistant Chen Wei and
verified by an Alibaba spokesmen.
The
company’s first two employees were Ma’s wife Zhang Ying, who was his university
classmate and colleague when he taught English. Zhang played an important role
in Alibaba’s early days until she turned to more-domestic responsibilities and
raising their son, according to Chen’s book and company spokesmen, who declined
to give the son’s age.
Meeting
Yahoo
Ma’s early
attempts with China Pages didn’t take off, so he joined the Ministry of
Commerce in Beijing, helping the agency set up a website. It was there he met a
first-time visitor to China, Jerry Yang, the co-founder of Yahoo who eventually
invested $1 billion to obtain 40 percent of Alibaba, a stake that was later
reduced after Yahoo said the Chinese company spun off its PayPal-like
online-payment business, Alipay, without informing shareholders.
By 1999,
the Internet stock boom had gripped Wall Street. Ma, feeling the change as far
away as China’s capital, left government service and returned home to tackle a
new idea.
Back in his
Hangzhou apartment, with his wife and a group of friends, Ma set up
Alibaba.com, a yellow page-like site that allowed businesses to sell to each
other. Believing that the moment would become of historic value, Ma had the
kickoff meeting recorded on film.
‘Internet
dream’
“Don’t
worry, I think the Internet dream will not die,” Ma was filmed saying at the
February 1999 meeting, which was later aired by China’s state-run broadcaster,
CCTV. “The reward we will receive for the price we pay in the next three to
five years is not this apartment, but 50 of these apartments.”
Among the
18 founders was Joseph Tsai, a Taiwan-born Canadian lawyer working for Sullivan
& Cromwell in New York whom Ma had persuaded to join the team and help
secure funding. By 2000, Alibaba had raised $25 million from investors
including SoftBank and Goldman Sachs.
Alibaba.com,
which had struggled to find a way to generate revenue, learned that merchants
were willing to pay for better displays of their goods. The website attracted 1
million users in 2002 and became profitable that year, according to details
released by the company.
It didn’t
take Ma long to tackle a bigger challenge: EBay’s expansion in China. To
counter it, Alibaba started Taobao, a platform where individual sellers could
trade with each other, in 2003. Taobao publicly declared war against EBay, and
the resulting media coverage drew attention to the website.
Countering
EBay
“By
generating a public-relations battle with EBay, there would be a lot of buzz
about Taobao, and therefore with every dollar that EBay spent, it would help
feed this buzz about Taobao,” said Erisman, a former executive at the company
including in the marketing department.
He cites
Ma’s professed interest in Chinese martial arts as a motivating strategy: using
an opponent’s strength against him.
“EBay is a
shark in the ocean; we are a crocodile in the Yangtze River,” Ma was quoted as
saying on numerous occasions at the time. “If we fight in the ocean, we will
lose, but if we fight in the river, we will win.”
They did.
Using search-engine technology that came with Yahoo’s stake in 2005, Alibaba
made Taobao listings free for merchants. EBay, which charged them, announced in
December 2006 that it would close its unprofitable site in China.
Tai chi
Ma’s
management philosophy has roots in tai chi. He sometimes travels with a
personal tai chi trainer and formed a company spreading awareness of the
Chinese martial art with movie star Jet Li.
Ma also
cites motivation in the works of Hong Kong novelist Louis Leung-Yung Cha, who
writes under the pen name Jin Yong, and encourages employees to give themselves
nicknames based on the novels’ characters.
Inside
Alibaba, Ma goes by “Feng Qingyang,” who in one of Ma’s favorite books is a
reclusive swordmaster and kung fu guru who trains his apprentice to become a
hero. Naming himself after the unpredictable-yet-nurturing Feng traces to Ma’s
own roots as a teacher, Ma told Chen Xiao-Ping, a professor at the University
of Washington in Seattle, in an interview published last year by the
International Association for Chinese Management Research.
“Jin Yong’s
martial-arts novels are the most down-to-earth way of explaining Confucianism,
Buddhism and Taoism,” Ma said in the interview. “They cherish brotherhood,
morality, courage, emotion and conscience.”
New leaders
Ma has
handpicked Alibaba’s next generation of leaders, including chief executive Lu
and two women: chief financial officer Maggie Wu, and Lucy Peng, who oversees
one of the fastest-growing areas of Alibaba’s future, Alipay and its investment
platforms including Yu’E Bao. The financial arm isn’t included in the entity
Alibaba is listing in New York.
“The
success of a CEO should be determined by the number of people he trained that
can surpass him,” Ma said in the Chen interview. “If someone warns me about an
employee who is trying to overstep me, I reply that I’m a teacher, and that’s
the way it should be.”
Ma was born
Sept. 10, 1964. His parents were Chinese traditional musician-storytellers in
Hangzhou, according to details confirmed by company spokesmen. The city of 8.8
million people about 161 kilometers southwest of Shanghai is a favorite of
foreign tourists because of its West Lake, stone bridges and other historic
sites.
Meeting
foreigners
When he was
a teenager, Ma began meeting foreigners just starting to make China a tourist
destination again following the Nixon-Mao rapprochement of 1972. For nine
years, Ma hung around outside the Hangzhou Hotel, now a Shangri-La, getting up
at 5:00 a.m. to talk with travelers, according to the Crocodile in the Yangtze
documentary and the Chen interview.
Ma failed
China’s national university entrance exam twice before he was admitted to what
is now Hangzhou Normal University. He graduated in 1988 and spent five years
teaching English at a local university, earning $15 a month, according to
details confirmed by company spokesmen.
With Ma’s
net worth now set to be five times what it was in 2012 — when Alibaba delisted
its business-to-business unit Alibaba.com from the Hong Kong Stock Exchange
after share prices slumped — he’s come a long way from a teacher’s wages.
Ma’s
economic interest in Alibaba is about 7.4 percent, after subtracting for stakes
he controls through a non-profit organization.
Maintaining
control
By listing
in New York instead of Hong Kong this time, Alibaba will set up a partnership
of executives to nominate the majority of board members. A breakdown in talks
with Hong Kong’s stock exchange last year led Alibaba to seek its IPO listing
in the US, where Alibaba’s partners will be allowed to maintain greater control
over the company. Arrangements allowing shares with different voting rights
helped Facebook founder Zuckerberg and Google co-founders Larry Page and Sergey
Brin maintain control after they went public.
Controversy
in Hong Kong over the move to list in New York, the rift with Yahoo in 2011
over the handling of Alipay, and Ma’s public outspokenness on a number of
issues sometimes damages his reputation and draws scrutiny, said Teng
Bingsheng, a Beijing-based professor at Cheung Kong Graduate School of
Business.
“Ma has a
controversial reputation,” said Teng. “He’s willing to take a bet on really big
decisions and not be bound by concerns for his reputation.”
Just like
Larry Ellison, Richard Branson, Ted Turner and other billionaire founders the
world over.
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