history-of-alibaba

History of Alibaba

Alibaba is a Chinese multinational company with a focus on eCommerce, retail, Internet, and technology services across C2C, B2C, and B2B contexts. It was founded in 1999 by Chinese business magnate, investor, and philanthropist Jack Ma.

Alibaba Founding Story

Today, Alibaba boasts an impressive list of accolades.

The company is one of the largest eCommerce and retail companies in the world and was ranked the sixth most valuable brand in 2020 among the likes of Amazon and Tencent.

Let’s now go back in time and explain the early history of Alibaba and how it came to be.

The idea for Alibaba was laid out in a small apartment in Hangzhou, China, by former English teacher Jack Ma and 17 of his friends and students.

The team wanted to build a Chinese B2B marketplace that would enable small and medium enterprises to benefit from technology and connect with buyers in overseas markets.

The company was founded on April 4, 1999, and named after the character Ali Baba from a collection of Middle Eastern folk tales called One Thousand and One Nights.

Ma chose the name because it was easy to spell and had global appeal.

The Alibaba platform was launched in late 1999 as Alibaba.com (B2B) and 1688.com (B2C) at a time when the consumer internet boom had barely arrived in China.

As a result, the Chinese market was also less affected by the dot-com crash that would plague similar new ventures in the United States and elsewhere.

Investment

Ma was soon approached by investors who shared his vision to create a dominant Chinese eCommerce company.

Alibaba attracted a $20 million investment from Softbank in January 2000, with Ma noting that:

We didn’t talk about revenues; we didn’t even talk about a business model. We just talked about a shared vision.”

Commenting on the deal and Softbank’s track record of early investment in tech firms, President Masayoshi Son said that:

We would like to make Alibaba the next Yahoo in the world.

Growth in the early 2000s

Alibaba grew quickly in the early 2000s thanks to the Softbank investment and the platform’s popularity with so-called “mom and pop” stores.

The company became profitable in 2002, with the C2C Taobao Marketplace launched the year after. 

eBay also made a foray into China in 2003 but was ultimately forced out two years later after Taobao eliminated its merchants’ fees. 

To improve the company’s eCommerce ecosystem, Ma also launched the online payments platform Alipay, the digital marketing platform Alimama, and the instant messaging tool Aliwangwang. 

The combination of Taobao, Alipay, and Aliwangwang in particular would later become the “iron triangle” of eCommerce, finance, and logistics upon which Alibaba Group would be built.

Additional investment and Yahoo stake

Softbank led another round of investment funding in February 2004 worth $82 million.

Ma said the funds would be used to compete with American rivals such as Yahoo which had plans to found a Chinese online auction site in partnership with Sina.com.

Sensing that Alibaba was winning the battle to dominate China’s online auction space, however, Yahoo took a 40 percent stake in Alibaba in August 2005 for $1 billion in cash.

The deal was also seen as a way for Yahoo to establish a presence within China, with it and other American companies severely impacted by the censorship policies developed by the Chinese government known as the “Great Firewall”.

IPO

From around 2013, Alibaba started on an investment spree that remains unmatched to this day.

The company’s diverse portfolio includes investments in Haier, Lyft, Singapore Post, Momo, and Tango. It also acquired a Chinese web browser and film company around this time.

Alibaba held a colossal $25 billion IPO in September 2014 which remains the largest IPO in US history.

The IPO made headlines around the world because of its size and the fact that Jack Ma’s creation was still mostly unknown outside of China.

Key takeaways:

  • Alibaba is a Chinese multinational company with a focus on eCommerce, retail, Internet, and technology services across C2C, B2C, and B2B contexts.
  • Founder Jack Ma started Alibaba out of an apartment in Hangzhou, China, with 17 of his friends and students. The platform was launched in late 1999 as Alibaba.com (B2B) and 1688.com (B2C) at a time when most Chinese users were not online.
  • In the 2000s and 2010s, Alibaba benefited from increased popularity among smaller “mom and pop” businesses and pro-Chinese governmental policies. The company was also able to secure investment funding at key times which culminated in a colossal $25 billion IPO in 2014.

Read Next: Alibaba Business Model, Amazon Business Model.

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