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Why Alibaba’s Future Looks Bright

jack-ma-singing

Alibaba Chairman Jack Ma singing at Taobao’s 10th anniversary celebration

With founder Jack Ma stepping down from the role of CEO, skeptics will doubt whether Alibaba can continue to grow strongly without its founder’s leadership. It’s perhaps normal to have such a reaction given that the founders are usually the most important people in a company.

Ma has been an inspirational figure for folks inside and outside of the company. Alibaba without him in the CEO’s seat just doesn’t feel complete. But is it going to have a major impact on Alibaba? I don’t think so. In fact, I believe Alibaba’s future is brighter than before. Here are four reasons why that’s true:

China hasn’t reached its full potential

With over 1.3 billion in population and 564 million internet users (about 42 percent penetration) China’s internet is still considered young. Alibaba has grown with China’s internet boom and will continue to grow because there’s still so much room for growth in China. Though the annual growth rate for e-commerce market size in China is expected to slow year by year, Alibaba should experience healthy growth over the next two to three years. Emarketer forecasts that by the end of 2013, there will be 271 million Chinese spending $265.1 billion on B2C e-commerce platforms and by 2016 there will be 423 million online shoppers in China spending a total of $457.6 billion on B2C platforms. Note that this doesn’t count C2C platforms like Taobao. The Economist also wrote that “by 2020 China’s e-commerce market is forecast to be bigger than the existing markets in America, Britain, Japan, Germany and France combined.” I think you get the point; China is big now and it will only get bigger.

State-owned news agency Xinhua said recently that the growth of other e-commerce giants like eBay and Amazon has plateaued and thus implied that Alibaba could face the same problem. But both companies originate from the US, which already has a matured internet ecosystem with a 78.2 percent online penetration rate back in 2011, according to World Bank data. Even though eBay and Amazon have already expanded outside of the US, their combined sales still can’t match Alibaba’s.

Alibaba’s Taobao has only just started thinking international so the potential is surely there. Plus, the local Chinese market remains lucrative as more internet users jump on board and become more affluent. The market conditions seem great for strong growth for Alibaba.

Forward thinking, international ambition

Alibaba has invested in some high-potential companies that could fuse well with its e-commerce business. In recent months, Alibaba has invested in China’s popular microblog Sina Weibo and also mapping service company Autonavi. Surely, Alibaba must have thought about how to bring e-commerce to the next level, be it social commerce or location-based commerce. My colleague Charlie has penned his opinions here and here on why the deal makes sense and I encourage you to give them a read.

As a PC first company, Alibaba has had to adapt to mobile, and has done so fairly early and well. Taobao, for example, is extremely dominant not only on PC-based shopping but also on mobile. Plus, the company is extremely data driven and continues to invest and make decisions based on data. A lot of people perhaps don’t know that Alibaba is sort of like a combination of services of Amazon + eBay + Kakaku, which is Japan’s most popular price comparison search engine. It runs a series of e-commerce and online services including Alibaba.com (B2B), Tmall (B2B2C), Taobao (C2C), Alipay (e-payment), Aliyun (cloud computing), and eTao (price search). That covers a lot of bases, and they all translate easily to mobile.

While fighting to stay at the frontline in China e-commerce, Alibaba also has ambitions of going international. Its initial strategy to bring Taobao abroad is clear: target Chinese users outside mainland China. Naturally, Hong Kong and Taiwan are the markets that it has started to expand into without facing too much of a language barrier. Malaysia and Singapore are next with the latter serving as a testbed for how it will deal with an English audience. Many Chinese in Southeast Asia are excited to be able to buy things on Taobao.

The company mission, values, and culture

I have been following Alibaba’s progress closely for the last two years. The company mission is “To make it easy to do business anywhere.” One of its values puts the customers first. However, I was initially a little skeptical.

But watching the company long enough I came to realize that its actions reflect its message. I was mostly convinced after watching Porter Erisman’s documentary film Crocodile in the Yangtze, a movie documentary on Alibaba through Porter’s lens during his eight-year stint at the company. The mission that Jack Ma set in 1995 in his failed China Pages venture remains consistent up to today. Ma wanted to build a company to help China’s internet industry grow. Today, as internet becomes more mainstream, Alibaba wants to be the online platform to make doing business easy for people.

That culture seems to be sticking. Jonathan Lu, who took over from Ma as CEO this month, communicated the same idea in his first speech as CEO: to make customers the company’s number one priority. I have had the chance to visit the company several times myself and I’m fairly confident that without Ma, the company will still be guided by the same mission, values, and culture.

Jack Ma isn’t going anywhere, yet

Even if Alibaba were to go off course, Ma will be there to steer the course right as chairman. I’m not sure how involved Ma will be, but I’m betting that he will be very active to ensure that the company he founded is safe and sound under Lu’s leadership. At least in the short term, I suspect Ma will still be sticking around to help make strategic decisions.

Admittedly, Lu didn’t give a convincing speech during the closing part of Taobao’s 10th anniversary celebration earlier this month. I’m not sure how Alibaba’s employees felt after his speech, but I do know that people were leaving a couple of minutes into it, with many deciding to leave after Ma’s speech. Lu’s oratory skills pale in comparison to Ma’s. But then again, Ma personally picked Lu as Alibaba’s CEO. He may not be a great speaker, but he probably can lead and execute well. The future will tell.

Conclusion

All in all, I believe that the market conditions are right for growth and Alibaba has an admirable mission and set of values that has guided the company to success over the last 14 years. It should continue to do well, even without Ma as CEO.

That said, what I suspect might be poisonous to its culture is the eventual IPO that Alibaba Group is probably preparing. With Wall Street pressure on higher margins and profits, I don’t have total confidence that the company can truly stick to its values by putting its customers first.

Nonetheless, it will be great to witness Alibaba, a made-in-China internet company, publicly listed – in a massive offering that might value it as high as over $100 billion – as it marks another milestone for China and the company. It will also provide the long-awaited returns for its investors and employees who have put in so much trust and perspiration to make Alibaba the great company it is today.


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