Happy Tuesday.
Much is going on in the world on this fine autumn Tuesday. The weather is starting too cool down here in Austin as we prepare for the city’s annual Austin City Limits music festival, where tens (hundreds?) of thousands of festival goers will be in town starting this week for the always stellar musical lineup.
Once the U.S. blew it in this past weekend’s Ryder Cup, I was compelled to turn my attention elsewhere, so I looked eastward.
It’s been widely reported that student protests started breaking out in Hong Kong over the weekend, with some calling it the “umbrella revolution” — protesters having used umbrellas to shield themselves from pepper spray.
On the technology front, things get more interesting in China. There have been reports of Instagram being blocked amid the protests (remembering that Facebook owns Instagram), and foreign internet services more broadly have seen tighter restrictions.
And yet against this backdrop of tightening control of the Internet, Jack Ma’s Alibaba went public last Friday and, for a time, had a market value of U.S. $214 billion. That’s more than Facebook, or Intel, or Amazon.
If you don’t know anything about Alibaba, you should. It’s a technology company that controls 80 percent of the Chinese e-commerce market, and reaches over 500 million customers across China.
Earlier this year, well before the Alibaba IPO, Forbes’ recently put this piece together entitled “10 Reasons Why Alibaba Blows Away Amazon and EBay.”
Alibaba’s 2014 sales are estimated at U.S. $420 billion, compared to Amazon’s $74.4 and Ebay’s $16 billion. Those sales numbers are estimated against Alibaba’s current 500 million customers. Double that number and…well, you do the math.
Another point of comparison Forbes’ makes is between China’s “Singles Day” promotion (November 11) and the U.S.’ Cyber Monday (usually the Monday after Thanksgiving weekend). In 2013, Alibaba saw $5.6 billion in sales on that single day, compared to $1.7 billion in China.
But what’s interesting to me is the company’s diversification. Its Taobao division allows sales to small businesses and individuals, its Tmall is analogous to Amazon, and its “Alipay” is akin to EBay’s PayPal (which Ebay is allegedly going to soon spin off).
“60 Minutes” recently conducted a lengthy interview Jack Ma, which I’m linking to here. It’s well worth watching, but the most intriguing part of the interview for me was the cultural challenges that Ma faced to instill confidence for making payments in the virtual world in China:
Jack Ma: When we started the e-commerce nobody believed that China would have e-commerce because people believed in ‘guang-shi,’ face-to-face, and all kinds of network in traditional ways. There’s no trust system in China.
He had to overcome centuries of tradition by showing Chinese buyers and sellers that they could trust Alibaba with their money in this new virtual world. He did it by guaranteeing the transactions and creating his own payment system, an escrow account where Alibaba holds the buyers’ money until the goods are delivered.
Judging from the “60 Minutes” interview, Ma and Alibaba are only just getting started.
Oh yeah, I almost forgot: He started the company from a garage.
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