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.
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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.
“We didn’t talk about revenues; we didn’t even talk about a businessmodel. 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 digitalmarketingplatform 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.
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.
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.
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.
Alibaba is an e-commerce platform that generated over $134 billion in revenues in 2022 and over $7.4 billion in net income. Alibaba has six main segments: core commerce (revenues generated in China), international commerce, local consumer services, cloud services, Cainiao (logistics), digital media, and other innovation initiatives.
Amazon has a diversified business model. In 2021 Amazon posted over $469 billion in revenues and over $33 billion in net profits. Online stores contributed to over 47% of Amazon revenues, Third-party Seller Services, Amazon AWS, Subscription Services, Advertising revenues, and Physical Stores.
Amazon’s mission statement is to “serve consumers through online and physical stores and focus on selection, price, and convenience.” Amazon’s vision statement is “to be Earth’s most customer-centric company, where customers can find and discover anything they might want to buy online, and endeavors to offer its customers the lowest possible prices.”
In the Amazon Shareholders’ Letter for 2018, Jeff Bezos analyzed the Amazon business model, and it also focused on a few key lessons that Amazon as a company has learned over the years. These lessons are fundamental for any entrepreneur, of small or large organization to understand the pitfalls to avoid to run a successful company!
Amazon has a business model with many moving parts. With the e-commerce platform which generated over $222 billion in 2021, followed by third-party stores services which generated over $103 billion, Amazon AWS, which generated over $62 billion, Amazon advertising which generated over $31 billion and Amazon Prime which also generated over $31 billion, and physical stores which generated over $17 billion.
The Amazon Working Backwards Method is a product development methodology that advocates building a product based on customer needs. The Amazon Working Backwards Method gained traction after notable Amazon employee Ian McAllister shared the company’s product development approach on Quora. McAllister noted that the method seeks “to work backwards from the customer, rather than starting with an idea for a product and trying to bolt customers onto it.”
The Amazon Flywheel or Amazon Virtuous Cycle is a strategy that leverages on customer experience to drive traffic to the platform and third-party sellers. That improves the selections of goods, and Amazon further improves its cost structure so it can decrease prices which spins the flywheel.
In the letter to shareholders in 2016, Jeff Bezos addressed a topic he had been thinking quite profoundly in the last decades as he led Amazon: Day 1. As Jeff Bezos put it “Day 2 is stasis. Followed by irrelevance. Followed by excruciating, painful decline. Followed by death. And that is why it is always Day 1.”
Gennaro is the creator of FourWeekMBA, which reached about four million business people, comprising C-level executives, investors, analysts, product managers, and aspiring digital entrepreneurs in 2022 alone | He is also Director of Sales for a high-tech scaleup in the AI Industry | In 2012, Gennaro earned an International MBA with emphasis on Corporate Finance and Business Strategy.
