‘We’re going to war’: The inside story of how Jack Ma took on eBay with Taobao

The following is an edited excerpt from Alibaba’s World: How a Remarkable Chinese Company Is Changing the Face of Global Business by Porter Erisman. The excerpt was provided by St. Martin’s Press. You can buy a copy of the book here.

Jack strolled into my office, once again flashing his mischievous grin. He shut the door behind him. “Porter, you know how I told you that we’d made a big decision about a month ago? Well, I’m ready to tell you now. And I’m going to need your help.” He looked around to make sure nobody was listening, and after pausing for dramatic effect he let me in on his secret: “We’re going to war with eBay.”

Wow. eBay. We’d faced down large Internet companies before, but eBay was the largest ecommerce company in the world. Not only that, but eBay had invested in a Chinese company, Eachnet, which already had a dominant market share of China’s online auction market.

“Okay,” I said. “How do we plan to do this?” Jack told me: “I started looking at the market and realized that, pretty soon, eBay was going to try to get aggressive with its business in China. They’d start with consumers, but over time they will start coming after Alibaba’s wholesalers. Competition was inevitable. So I decided the only way we can slow them down is to launch a site to compete directly with their Chinese language site.

“So last month, I pulled together six people in my office. I told them that I had a secret project for them. If they were interested in finding out what the job was, they would have to first resign from Alibaba and then move to work from a secret location. They couldn’t tell their friends or family what they were working on. They couldn’t even tell anyone at Alibaba what they were working on. I gave them a few minutes to think about it and told them that if they weren’t interested, they didn’t have to take the job. They could simply return to their position in Alibaba – there would be no hard feelings. A few minutes later they all came back to the room and said, ‘Jack, we’ll do it!’”

I smiled to myself as Jack related the story to me. Clearly it was an offer they wouldn’t refuse. But rather than simply assigning them to the new project, Jack had to make the whole process dramatic and exciting, as if shaping actual events for maximum drama ten years later. It might have been a bit over the top, but it was part of what made working at Alibaba fun.

“So after they signed the agreement,” Jack said, picking up his story, “I told them what the project was – to develop a consumer auction site to compete directly with Eachnet in China. And to build the site they had to go back to Alibaba’s roots – my apartment in Hupan Gardens. They worked on the site while everyone was in quarantine. They launched it a few weeks ago, and it’s really taking off.”

He leaned over my computer and said, “Here, you can see it. It’s called Taobao. It means, ‘search for treasure.’ Pull up Taobao.com.” I typed it in and up popped a shopping website that felt like a cross between Alibaba.com and eBay. It was pretty basic and didn’t quite look like it was at the level of Eachnet.

But I’d learned not to judge a work in progress, and for a website that had been up for only a few weeks, it was not bad. “It’s going really well,” Jack continued. “The first users seem to love the site so far. And it’s funny, there are people coming up to me at Alibaba saying, ‘Jack, we should be really careful. There’s a new site called Taobao that really looks and feels like Alibaba. These guys could be really good competition someday.’ They have no idea `it’s our own site. This is going to be huge someday.”

Had it been three years earlier, I would have been a skeptic. But after seeing Jack’s predictions come true in our battle against our large B2B competitors, I’d come to believe that if Jack said it was possible, he was probably right. His intuition had carried us this far. It was better to just suspend disbelief and go along with it.

“So what help do you need from me?” I asked. “We’re ready to launch Taobao. And when we do, we are going to declare war on eBay. The launch has to be a really big bomb to generate a lot of buzz in the media. I don’t want this to be a war between Taobao and Eachnet. It has to be about Taobao versus eBay. This is about Alibaba’s taking on Goliath.”

It was trademark Jack. Just as Alibaba had finally become stable and profitable, he wanted to bet the whole company on yet another huge dream. There was no challenge too big for this guy.

“So get ready, Porter. I know you are focused on Alibaba. com right now, but I’m going to need your help to make a big announcement soon. It’s really important that we get the foreign media to start writing about this to build some momentum. We need to engage eBay in a war of words, and the only way to do that is to get them to take notice of us back in the US.”

Searching for treasure

After Jack left my office I decided to head over to see the Taobao team for myself. It was the middle of the afternoon but the apartment was nearly empty, with the exception of two programmers sleeping on the floor next to a couple computers with black screens. An engineer walked in from the kitchen, slurping from a bowl of noodles. “Where is everyone?” I asked. “The power’s off again in the apartment complex. They all went home to rest.”

He went back into the kitchen, leaving me in the room with the two sleeping engineers. I imagined eBay’s team, far away in Silicon Valley, probably working away in slick, air-conditioned headquarters with rows of servers buzzing. Meanwhile we couldn’t even manage electricity. I couldn’t help but wonder whether this team was going to beat the most powerful Internet company in the world.

How Taobao won