360° Coverage : Throwback Thursday: Forbes Discovered Alibaba When It Had Less...

2 Updates

Throwback Thursday: Forbes Discovered Alibaba When It Had Less Than $1 Million In Sales

May 8 2014, 6:02pm CDT | by

Back during the last dotcom bubble, my team created a magazine and Web site for Forbes called Forbes.com Best Of The Web. It focused mostly on demystifying the Internet and finding useful Web sites...

Filed under: news

 
 
 

23 weeks ago

Throwback Thursday: Forbes Discovered Alibaba When It Had Less Than $1 Million In Sales

May 8 2014, 6:02pm CDT | by

Back during the last dotcom bubble, my team created a magazine and Web site for Forbes called Forbes.com Best Of The Web. It focused mostly on demystifying the Internet and finding useful Web sites for our readers, but it also covered then sizzling hot world of B2B ecommerce. We wrote about many flame-outs, companies  like Ariba, Internet Capital Group and VerticalNet, but we also covered some big winners and to my knowledge we were the first to shed light on a fledgling web trading site called Alibaba. At the time the tiny company was mostly just a series of informational web pages with links connecting buyers and sellers who had to strike their deals either offline or via email.  Alibaba grossed less than$1 million when former Forbes writer Justin Doebele wrote the piece in July 2000. Its sales for the most recent nine months were reported to be $6.5 billion. Why did Alibaba flourish while once exciting B2B competitors like MeetChina.com disappear? For the answer read Paul McWilliam’s story on why Alibaba’s Long Tail Makes Amazon’s Look Like A Bobcat’s. 
/>

by Justin Doebele  (July 17, 2000)

We are in a dance hall of a lakeside resort a two-hour drive from Shanghai. It is 11: 00 p.m. The room, done in red velvet drapes and blinking disco lights, is packed with 120 men and women, mostly under 30, all employees of Alibaba.com. They’ve been waiting an hour to hear their leader, Jack Ma. Suddenly the room erupts in applause. A tiny figure with sunken cheekbones, tussled hair and a mischievous grin grabs the microphone. He’s five feet tall and weighs just over 100 pounds.

This imp of a man brought the commercial use of the Internet to China. Although Alibaba.com is legally based in Hong Kong, its roots and most of its operations are in China, and Ma is a Mainland citizen. In March 1995, the same year that Jeff Bezos started Amazon.com, Ma registered China’s first Internet company:  Hangzhou Hope Networks Consulting. It offered to host Web pages for Chinese companies. Today Alibaba links together importers and exporters from around the world and grosses under $1 million a year.

For Ma that’s just a start. Now he has global ambitions. He aims at nothing less than Webifying the  $6.8 trillion worth of world trade (retail value). Click on to the Alibaba.com site. It lets buyers and sellers find each other, matching, say, a supplier in Tibet with a buyer in Patagonia.

An American looking to buy 1,000 tennis rackets searches among dozens of potential suppliers and learns their terms of trade. Alibaba claims more than 200,000 registered members from 194 countries, though 70% are Chinese right now. You can buy fishmeal from Ghana or wiper blades from Italy; there are more than 700 different products broken down by category and country. The site is published in Chinese and English, and it recently launched a separate Korean version of Alibaba.

Listing is free, but you can’t actually make trades through the site. Alibaba helps you make a connection and deals are struck offline or via e-mail. Alibaba hopes to derive its revenue and ultimately its profits from add-on features. Shipping, trade financing, on-site inspections, quality control services and insurance are a few of the services that could earn money for the site. Ma also hopes to make money by offering a premium service to members and through advertising and promotions.

Except for some advertising, Alibaba.com doesn’t yet offer any of these services, but Ma says he expects to have them on the site soon.

Alibaba already has satisfied customers. One is Robert Guo, of tiny textile and light industrial trading company Wuhu Wanlong Trading in Wuhu, China. “I have gotten three contracts worth  $100,000 over the past three months from the site. These are just the big buyers. We also have gotten many smaller deals off the site,” says Guo.

Nelson Dy of Van Gils Garments in the Philippines makes T shirts and other garments in Del Monte Quezon City. He gets an average of ten queries a day or more on Alibaba. “Two potential buyers [from Alibaba.com] are coming soon to meet me in the Philippines,” says Dy.

“Alibaba has made a big step forward in how business is done in Asia,” says Hong Kong-based IDC Internet analyst Matthew McGarvey. “Sites like Alibaba are injecting transparency into the trading process.”

Elsewhere, however, it faces lots of competition. Ma isn’t the only one targeting this stupendous market. Some are trying to aggregate big buyers across industries, mostly in the U.S. and Europe, as Commerce One and Ariba are doing. Others are verticals for a single industry, such as E-Steel for the metals industry and Covisint for autos.

Alibaba has grander ambitions. Ma wants the site to be both global and horizontal across all products. But he may well have picked the best starting point:  Asia, by some estimates, is home to about 70% of all the world’s exporting companies. There are about 400,000 exporters in China alone and more on the way.

Not surprisingly, two of Ma’s three biggest rivals are Asian outfits, the Hong Kong-based Global Sources and the San Francisco-based MeetChina.com. Though MeetChina is based in the U.S., it is focused on building an electronic marketplace for Chinese exporters. China Resources, a public company backed by the Chinese government, holds a minority stake in the Web site.

MeetChina.com says it plans to compete more directly with Alibaba.com by expanding to other Asian markets within a year. “We want to make buying 1,000 bicycles from China as easy as buying a book from Amazon.com,” says American Thomas Rosenthal, cofounder of the site.

The third rival, Boston, Mass.-based Industry to Industry, Inc., is backed by a private investment arm of a foundation headed by Klaus Schwab, the founder of the World Economic Forum. It started in late 1998 and has focused on four industries:  chemical, energy, retail goods, and engineering and construction./>/>

Ma compares Alibaba.com’s free-for-all approach to a Middle Eastern bazaar, where anyone can lay out their wares and haggle with potential buyers. Alibaba.com’s rivals claim this difference is a disadvantage since, like a Mideast bazaar, Ma doesn’t do any screening of either his buyers or sellers. Though MeetChina.com also has a free-for-all approach, all three rival sites offer some kind of screening of its member companies.

Ma shrugs. “Let the others go after the whales,” says Ma. “We want to catch the shrimp.” Since most of Alibaba.com’s staff are Chinese and living in China, Ma’s personnel and operating costs are relatively low. His biggest office space, in Hangzhou, is 200,000 square feet in size and rents for just  $80,000 a year. A Chinese computer engineer with three years of experience can be hired for just $18,000 a year, versus $100,000 in Silicon Valley.

Though the business is chiefly in China, most of Ma’s backing is international. His first round of  $5 million in funding came from Goldman Sachs, Fidelity Investments, Sweden’s Investor AB, Singapore’s TDF fund and Hong Kong’s Transpac. His second round of financing, at $20 million, came in January 2000 from a group of investors lead by Japan’s Softbank. “This company has the potential to be big, as big as Yahoo,” says chief technology officer John Wu. He should know. Before joining Alibaba in May, Wu was the chief architect of Yahoo’s widely used search engine.

Certainly the potential market is enormous. FORBES figures that about $470 billion a year is spent just servicing world trade–phone bills, invoicing, sales calls, overseas travel. If Web sites like Alibaba can cut that bill by even 20% –and that may be conservative–there is a potential savings pool of nearly  $100 billion from which it can draw revenues as profits.

Say this for Ma:  He understands his business is one where the future is seemingly unlimited, but the present is a period of red ink and teeming competition. “One must run as fast as a rabbit,” he says, “but be as patient as a turtle.”

 
Update
2

7 weeks ago

Khazanah throws MAS RM6b lifeline

Aug 29 2014 5:01pm CDT | Source: Business Times Singapore

August 30, 2014 1:15 AMKHAZANAH Nasional will inject RM6 billion (SS$2.4 billion) over three years to resuscitate loss-making Malaysia Airlines (MAS) under a recovery plan that includes even an Act of Parliament. Other key moves are migrating its operations, assets and liabilities to a new company (NewCo) and slashing the workforce of 20,000 by 30 ...
Source: Business Times Singapore   Full article at: Business Times Singapore
 

 
Update
1

7 weeks ago

MAS posts loss of RM307m for Q2

Aug 28 2014 5:00pm CDT | Source: Business Times Singapore

August 29, 2014 1:13 AMMALAYSIA Airlines (MAS) registered a loss of RM307 million (S$122 million) for the second quarter to end-June, but warned of worse to come in the second half when the "full financial impact of the double tragedies ...
Source: Business Times Singapore   Full article at: Business Times Singapore
 

 

Don't miss ...

 

<a href="/latest_stories/all/all/30" rel="author">Forbes</a>
Forbes is among the most trusted resources for the world's business and investment leaders, providing them the uncompromising commentary, concise analysis, relevant tools and real-time reporting they need to succeed at work, profit from investing and have fun with the rewards of winning.

 

blog comments powered by Disqus

Latest stories

Twitter declares war on passwords
San Francisco, Oct 24 (IANS/EFE) Twitter formally declared war on passwords during a developers' conference in San Francisco, unveiling a new system that allows users to log-in to mobile apps with a phone number.
 
 
Ebola not to upset Africa's overall growth: IMF
Harare, Oct 23 (IANS) The Ebola outbreak in West Africa, which has claimed 4,500 lives, will have minimum impact on continent's overall growth, a top International Monetary Fund (IMF) official said Thursday.
 
 
Second MERS case reported in Qatar
Doha, Oct 23 (IANS) A 43-year-old man in Qatar has tested positive for Middle East Respiratory Syndrome (MERS) in the second confirmed case of the deadly virus in 10 days, media reported Thursday.
 
 
OPEC daily basket price falls again
Vienna, Oct 23 (IANS/WAM) The basket of 12 crude oils of the Organization of Petroleum Exporting Countries (OPEC) closed at $81.94 a barrel Wednesday compared to $82.09 Tuesday, the OPEC Secretariat said.
 
 
 

Latest from the Network

Second MERS case reported in Qatar
Doha, Oct 23 (IANS) A 43-year-old man in Qatar has tested positive for Middle East Respiratory Syndrome (MERS) in the second confirmed case of the deadly virus in 10 days, media reported Thursday. The patient had...
Read more on Business Balla
 
Two people die in Pakistan bomb blast
Islamabad, Oct 23 (IANS) At least two people were killed and 12 others injured in an explosion that took place in Pakistan's Balochistan province Thursday, media reported. The bomb was planted on a motorcycle, Dawn...
Read more on Politics Balla
 
Trott extends contract with Warwickshire till 2017
London, Oct 23 (IANS) England batsman Jonathan Trott, whose mental issues led to his abrupt departure from last winter's Ashes tour, has confirmed his successful comeback to competitive cricket by signing a new three-...
Read more on Sport Balla
 
Srikanth, Kashyap big movers in BWF rankings
Kuala Lumpur, Oct 23 (IANS) Indian men shuttlers Kidambi Srikanth and Parupalli Kashyap jumped seven places each in the latest Badminton World Federation (BWF) rankings released Thursday while Olympic bronze medallist...
Read more on Sport Balla
 
Alvin Stardust dead
London, Oct 23 (IANS) English singer Alvin Stardust died after a short illness. He was 72. Stardust's manager confirmed the news about his demise Thursday, reports mirror.co.uk. He was recently diagnosed with...
Read more on Celebrity Balla
 
Indian man reunited with family after 40 years
Dubai, Oct 23 (IANS) An Indian man, who had disappeared from his hometown in Kerala nearly 40 years ago, has been found by his family at a hospital in Dubai in the UAE, a newspaper report said. Now in his 60s, Abdulla...
Read more on Politics Balla
 
Srikanth, Kashyap, Saina rise in world rankings
Kala Lumpur, Oct 23 (IANS) Indian men shuttlers Kidambi Srikanth and Parupalli Kashyap jumped seven places each in the latest released Badminton World Federation (BWF) rankings Thursday while Olympic bronze medallist...
Read more on Sport Balla
 
Flintoff signs for Big Bash side Brisbane Heat
Brisbane, Oct 23 (IANS) Former England captain and all-rounder Andrew Flintoff, who retired from international cricket in 2009, Wednesday confirmed that he will play for Brisbane Heat in the Big Bash League (BBL) this...
Read more on Sport Balla
 
OPEC daily basket price falls again
Vienna, Oct 23 (IANS/WAM) The basket of 12 crude oils of the Organization of Petroleum Exporting Countries (OPEC) closed at $81.94 a barrel Wednesday compared to $82.09 Tuesday, the OPEC Secretariat said. The new OPEC...
Read more on Business Balla
 
Lopez to sign multi-million dollar deal?
Los Angeles, Oct 23 (IANS) Singer-actress Jennifer Lopez is reportedly in the final stages of securing a multi-million dollar deal to perform in Las Vegas. The 45-year-old is being offered $350,000 per show at The...
Read more on Celebrity Balla