Alibaba Could Be the Biggest IPO Ever -- But What the Heck Is It?
For many Americans, the name Ali Baba conjures images of Arabian Nights -- as well as those two timelessly magical words: ‘Open sesame!’ Until yesterday, that is, when Chinese internet conglomerate Alibaba announced plans to file for what may become one of the largest U.S.-based IPOs of all time.
While the news swirled over the weekend, many questions about Alibaba’s identity still linger. Here, we provide a glimpse into the diverse businesses operated by the Chinese web giant -- which has been called, alternately, the eBay, Amazon and PayPal of China -- on the heels of its stateside foray:
1. It was founded by a former English professor. Alibaba was founded by a group of 18 people in 1999 led by Jack Ma, a former English teacher from Hangzhou, China. Today, the company employs more than 20,000 people and operates more than 70 offices across the globe.
2. It operates China’s largest consumer-to-consumer digital marketplace. The Alibaba-owned Taobao.com has been called the eBay of China, where millions of product listings have accounted for billions of dollars in sales since its founding in 2003. According to alexa.com, Taobao is the third most-visited site in China and the eighth most-visited site in the world. While Taoboa is free to use, merchants can pay to advertise their wares.
3. It has a thriving business-to-consumer arm. If Taobao is the eBay of China, Tmall.com is its Amazon. “Sophisticated” Chinese consumers can purchase popular brands vended on the site, Alibaba said, including UNIQLO, L’Oréal, adidas, P&G, Unilever, Gap, Ray-Ban, Nike and Levi's. A total of 70,000 companies sell their wares on Tmall, which was launched as a component to Taobao in 2008, but became its own entity in 2011.
While Alibaba facilitates various kinds of sales, it does not sell products -- like Amazon, notes The Wall Street Journal, which buys goods from suppliers and then sells them to shoppers. Therefore, while its transaction volume dwarfs that of Amazon and eBay combined, Alibaba boasts far smaller revenues.
4. It’s China’s PayPal, too. Launched in 2004 to insure the security of transactions occurring via Taobao and Tmall, Alipay.com is now the most widely used third-party digital payment provider in China. Alipay provides an escrow service whereby funds aren’t released to sellers until shoppers have verified their satisfaction with the purchase. Last November, it processed a record-breaking 171.3 million payments in 24 hours.
5. It represents one of Yahoo’s largest success stories. In 2005, Alibaba forged a strategic partnership with Yahoo under the tutelage of the company’s former chief, Jerry Yang. Alibaba also took over the operations of China Yahoo. Today, Yahoo owns a 24 percent stake in Alibaba, worth an estimated $37 billion, reports Bloomberg. However, as a result of an earlier agreement, Yahoo must sell 10 percent of its shares as soon as the company goes public, said its chief financial officer, Kenneth Goldman.