Chapter 6 〇5. Break the curse of Alibaba

On February 20, 1999, 35-year-old Ma Yun described the future of his new company to 18 employees at his home in Hangzhou: Alibaba wants to become a century-old store and rank among the top ten websites in the world.At this time, Alibaba had only been established for a few months, with a registered capital of 500,000 yuan. The 140-square-meter residence where he gave a speech was also the company's office. "Everyone's eyes were confused, and only Ma Yun believed what he said." Jin Jianhang, who recorded the scene with a camera that day, recalled.Jin Jianhang is now the senior vice president of Alibaba.

In less than ten years, the small Jack Ma has become one of the most internationally renowned and influential figures in China's Internet industry. The Alibaba Group he founded is also expected to become the Internet company with the highest market value in China. On October 4, Alibaba.com (hereinafter referred to as Alibaba), the B2B business of Alibaba Group, passed the listing hearing on the Hong Kong Stock Exchange.According to sources close to the listing process, Alibaba will launch a road show on October 15, open to retail investors on October 22, and list in early November. Under the huge halo of Jack Ma and Alibaba, there are still various doubts about Alibaba: the founder Jack Ma’s personal influence in this company is too great, which may not be a good thing at all.After completing the public listing of its B2B business, how will this self-proclaimed value-based Internet company maintain its existing practices?Can it continue to hold its head high in the capital market?

At the end of July 2007, at the largest indoor gymnasium in Hangzhou, Jack Ma announced the news of the upcoming IPO to all Alibaba employees, and the audience was immediately ebullient.Once the listing is successful, most of the people present will become millionaires or multi-millionaires immediately, and the number may be the largest among listed companies in China. Goldman Sachs and Morgan Stanley will serve as lead underwriters for the Alibaba listing.According to Dow Jones Newswires, Alibaba Group will sell 858.9 million Alibaba shares in the IPO, accounting for 17% of Alibaba's enlarged share capital.About 26.5% of them are new shares, and the remaining 73.5% are old shares sold by Alibaba Group.This means that Alibaba's B2B subsidiary can get about more than 200 million US dollars.The group company can get about more than 700 million US dollars, which can be used for group development.In September this year, Ma Yun revealed at the Hangzhou Internet Business Conference that Alibaba will invest 10 billion yuan in e-commerce in the next five years.

The listing was escorted by Yahoo, which has confirmed that it will spend US$100 million to subscribe for 10% of Alibaba's proposed shares. Before this listing, in August 2005, the stock exchange transaction between Alibaba and Yahoo was the largest capital market action before Alibaba went public.According to the agreement, Yahoo will replace approximately 40% of the common shares of Alibaba Group with US$1 billion in cash and Yahoo China business. Ma Yun said that this is a strategic attempt: first, to quickly obtain search technology through the acquisition of Yahoo China; second, to gain experience in mergers and acquisitions to lay the foundation for future globalization; third, to find a powerful ally for himself - Yahoo.

In 2006, the acquisition and integration work of Yahoo China came to an initial conclusion, and the listing of Alibaba's B2B business was put on the agenda. The first step was to change the original business department system into a group holding subsidiary. In this regard, Ma Yun’s explanation is that each of the five companies is based on an industry, with different development directions and different maturity levels. For example, B2B companies have matured, while Yahoo China (Yahoo China was renamed China Yahoo at the end of 2006) is still adjusting, while Alibaba software has just been born. "It is difficult to fight a war together, it is better to separate."

Another effect of the spin-off is that the binding force of overseas shareholders on Jack Ma and the company's business is further weakened.Before the spin-off was completed, Yahoo was the largest shareholder of Alibaba Group, with 40% of the shares and 35% of the voting rights, and Japan's SoftBank Group had 26% of the shares.The four seats on the board of directors of Alibaba Group are occupied by Yahoo founder Jerry Yang, Softbank founder Masayoshi Son, Alibaba CFO Tsai Chongxin and Ma Yun.Although Ma Yun and Cai Chongxin occupy half of the board of directors, after all, Yahoo is the largest shareholder, and SoftBank also has a veto power on major issues such as group strategy, so the board lacks effective checks and balances.

"If (the board of directors) has only one head, if it is broken, all will be broken." Ma Yun said, "The five subsidiaries each set up an independent board of directors, which can spread the risk." This is Ma Yun's explanation. At the end of 2006, it took Alibaba three months to separate its five business divisions into five subsidiaries, which are Alibaba, Taobao, Alisoft, Alipay and China Yahoo, which are engaged in B2B business. "Five Fingers of Dharma".Each of the five subsidiaries has a separate board of directors, all of which are chaired by Jack Ma.According to Zeng Ming, president of Yahoo China, Jerry Yang and Masayoshi Son do not hold seats on the boards of directors of these subsidiaries.Under this model, the boards of directors of the five subsidiaries kept their distance from Jerry Yang and Masayoshi Son.

Alibaba, which is listed this time, is considered by the industry to be in a leading position in both China and the global B2B market. Its competitors, Huicong.com, Meishang.com, Global Sources, and Netsun Technology in the vertical field are far away from it.According to a research report by Morgan Stanley, more than half of the sales revenue in China's B2B market comes from Alibaba. In 2006, Alibaba's revenue was 1.364 billion yuan and its profit was 357 million yuan. Echoing the listing financing, Alibaba has also shown a trend of rapid expansion recently.Ma Yun's vision for the next five years is to upgrade from "Meet at Alibaba" (meet in Alibaba) to "Work at Alibaba" (work in Alibaba).In the stage of Meet at Alibaba, buyers and sellers only search for information online, and the specific transaction process, such as negotiation and payment, is realized offline; Work at Alibaba moves as many transaction processes as possible online, This involves the convenience of logistics and capital flow.Wei Zhe, president of Alibaba, said that logistics and capital flow will be done using existing platforms.

"Work at Alibaba not only solves the trade problems of small and medium-sized enterprises, but also allows them to solve other management problems on Alibaba's platform." Wei Zhe said. For example, Alibaba is trying to solve the problem of financing difficulties for SMEs.The transaction and credit records of small and medium-sized enterprises in Alibaba better reflect the company's previous and current order status, delivery rate and customer satisfaction. Alibaba hopes that this will become the main basis for bank loans. In July 2007, the China Construction Bank and the Industrial and Commercial Bank of China have launched a pilot project, and issued a total of 1.2 million yuan in loans to four online merchants in the first batch.

Wei Zhe also revealed that it is difficult for SMEs to recruit, so it is not ruled out to introduce third-party service providers to launch SME recruitment services in the future. In addition, Alibaba also plans to build a risk pool, which will be funded by online merchants and used as a guarantee for online merchant loans.A further idea is network joint guarantee. For example, upstream and downstream enterprises that are also Alibaba users share a large loan together, and each household only guarantees a part of it. As Alibaba further deepens into second-tier and inland cities, Alibaba began to increase customer and enterprise service centers to get closer to customers.Wei Zhe revealed that the number of customer and enterprise service centers will be increased to ten this year.In addition, the "TrustPass" product, which was originally only sold by telephone, has also started to have dozens of agents across the country in order to get closer to customers.

Globalization is a strategic direction of Alibaba.At present, Alibaba's customers are mainly Chinese sellers and international buyers. Alibaba plans to serve international sellers and international buyers in the future, and make Alibaba a global B2B trading platform, providing low-cost services for small and medium-sized suppliers in Southeast Asia. marketing techniques.Alibaba entered Hong Kong in April this year, will enter Japan in the second half of the year, and may enter Taiwan next year. It will also expand its investment in the United States and Europe in the future. Wei Zhe also said that Alibaba's previous services were biased towards suppliers, and this year it proposed to put buyers and sellers on an equal footing.To this end, Alibaba established a buyer service department, and in April this year launched a purchasing tool with a search function, Smatching, to buyers in order to attract American and Japanese manufacturers.Alibaba has established buyer service centers in the United States and Switzerland, and will also set up a buyer service center in Japan in the future. Alibaba's sister companies Taobao, Alipay, Alisoft and China's Yahoo are still losing money. Although Taobao is currently losing money, it is the most promising business in the future.Contrary to the charging policy adopted by its competitor eBay EachNet, Taobao has adopted a strategy of waiving product registration fees, transaction fees and store fees from the beginning.This strategy severely hit its rival eBay EachNet, which eventually led to the latter being acquired by TOM Online in 2006. At the end of 2006, Taobao had more than 30 million registered users, and the per capita online shopping consumption was 563 yuan. The total transaction volume exceeded 16.9 billion yuan, surpassing the 10 billion yuan of Yichu Lotus and the 9.93 billion yuan of Wal-Mart's annual turnover in China. It is a domestic retail giant. 2.6 times the annual sales of Beijing Wangfujing Department Store Group. In the first half of this year, Taobao has completed a transaction volume of 15.8 billion yuan.Sun Tongyu, president of Taobao, revealed that the annual target is at least 40 billion yuan in total transactions. If Taobao wants to make a profit, sooner or later it must charge its customers.Taobao once tried to launch a fee-based "recruiting wealth and treasure" plan in May 2006, but it ended in failure after being resisted. On October 25, 2006, Alibaba invested an additional 1 billion yuan in Taobao and announced that the "free policy" would continue for another three years. Sun Tongyu, president of Taobao, is very confident about future charges. He believes that the key is pricing. "If the price is right, it's fine. Someone earns 5,000 yuan a month on Taobao and pays 500 yuan to Taobao. Is that an exaggeration?" Sun Tongyu said. The outside world is also optimistic about the prospect of Taobao charges.Xie Wen, who once served as the president of Yahoo China, estimates that once Taobao charges fees, it can easily generate an annual income of 1 billion yuan.Internet expert Lu Bowang believes that Taobao can definitely charge transaction fees. First, Taobao has become a platform for shopping with confidence. After forming a buying and selling habit, sellers must pay, otherwise they will lose business.The second is that Taobao’s funds flow through Alipay, which is controlled by Alibaba, so receiving money is not a problem. From 2006 to 2008, Taobao's goal was still market share. "In the past, we looked at Taobao's market share in e-commerce, but now we look at Taobao's proportion of total social consumption." Sun Tongyu said. After Alibaba is spun off separately, Taobao's funding source may be a problem.In this regard, Sun Tongyu said that Alibaba Group has ample cash, enough to support Taobao to do anything. This time, Alibaba Group will sell some of its old shares when its B2B subsidiary goes public, earning about US$700 million.In addition, Alibaba Group received US$250 million when it took a stake in Yahoo, so it has sufficient cash reserves. Alipay, established in October 2003, aims to solve the trust relationship between online buyers and sellers, and has contributed a lot to the development of Taobao. Since 2006, Alipay has been independent. In addition to serving customers on Taobao, it also cooperates with merchants outside Taobao. Lu Zhaoxi, president of Alipay, revealed that Alipay has more than 500,000 customers on Taobao and more than 300,000 external members.The original Taobao business accounted for 100% of Alipay, has now dropped to 70%. According to the data from Analysys International, as of the first quarter of 2007, the scale of China's third-party Internet payment market has reached 13.931 billion yuan, of which Alipay ranked first with a 50.3% share. Lu Zhaoxi firmly believes that Alipay can make money. "Just like eBay's PayPal charges handling fees, customers should also be willing to pay for Alipay." Lu Zhaoxi said that non-Taobao Alipay customers have already adopted the fee policy, and the transaction volume continues to grow after the fee. Alisoft, established in January 2007, aims to provide online software services to small and medium-sized enterprises, that is, the SAAS model (Software as a Service).Wang Tao, president of Alisoft, said that Alisoft will become a "data bank". Small and medium-sized enterprises will store their data in Alisoft, and Alisoft will provide various services, and small and medium-sized enterprises will only need to pay the rent. Wang Tao said that the establishment of Alibaba Software is to hope that small and medium-sized enterprises will also put the post-marketing links such as customer management, inventory management, and financial management in the Alibaba Group.This is an important part of Alibaba Group's next five-year strategy - "Work at Alibaba". Two years after Alibaba took over Yahoo China, the situation is not optimistic. In October 2006, Jack Ma hired Xie Wen as the president of Yahoo China, but Xie Wen left after 40 days.Subsequently, Zeng Ming, a professor at Cheung Kong Graduate School of Business, became the president of Yahoo China, and Yahoo China changed its name to China Yahoo.In an interview, Zeng Ming said that it will take three to five years to slowly change Yahoo China. Although Alibaba Group claims that China Yahoo is now on the right track, the fact is that it is still suffering serious losses, and its market share has declined sharply in the past year. In September 2007, a survey released by Beijing Zhengwang Consulting Co., Ltd. showed that in the search engine market, China's Yahoo currently only accounted for 2.3% of the market share, a decrease of 2.9 percentage points from 5.2% a year ago; Yahoo's market share fell by 0.9%, showing that the situation remains dire. Sources revealed that in 2006, Alibaba Group invested 700 million yuan in China's Yahoo, with a loss of 400 million yuan. This year, Alibaba's investment in China's Yahoo is said to be as high as 1 billion yuan.A senior person familiar with Yahoo China even said that Yahoo China is a "terrible textbook failure" with no business model at all and a huge financial hole. But Ma Yun said that China Yahoo is not in a hurry to make money, and it will take three years to slowly recuperate.The attitude of the industry is still skeptical about this statement. In fact, in September this year, Alibaba Group created a new company, Alimama, which is mainly an online advertising trading platform, helping small and medium-sized enterprises find promotion channels on the website, and also helping the website department find sources of advertising revenue. On August 3, at 9 am, in a classroom called "Donglin College" in Alibaba's Hangzhou headquarters, the graduation ceremony of Alibaba's new sales students in the "68 Top 100" class was being held.The so-called "68 100th", "68" refers to the 68th issue, "100th" means a century-old plan, that is, Alibaba will be a century-old enterprise. The six values ​​of Alibaba stand beside the podium in the classroom: Integrity, Passion, Dedication, Embracing Change, Teamwork, and Customer First.These six principles are known as the "Six Meridians Sword" in Alibaba, and they come from Guan Mingsheng, the chief operating officer. In 2001, Guan Mingsheng, who had worked for General Electric (GE) in the United States for 15 years, was recruited by Jack Ma into Alibaba as COO. These values ​​were originally nine and later refined to six. "Integrity, passion and dedication" are the basic requirements for individual employees, which are at the bottom; on this basis, employees should be able to form a team to "embrace change and teamwork", and finally realize customer service and achieve "customer first" — a pyramid. Similar to the induction training mentioned above, every new Alibaba employee will go through it.The time is usually two weeks, during which the trainees have to systematically study Alibaba's corporate values ​​and culture, and the sales staff also need to learn product knowledge, the training time is four weeks.Ma Yun will give a speech at the end of each training session. "Values ​​and culture are the genes inherited by a company, and the real reason for a company to survive for a hundred years, which cannot be copied by other companies." Jack Ma said. However, in China's Internet circles, Alibaba is regarded as an outlier.External criticism trumps appreciation for Alibaba's values ​​and culture.More than one colleague believes that Alibaba's values ​​and culture are nothing more than a mind control technique. A senior person in the Internet industry in China criticized even more fiercely that Alibaba is similar to Daqiuzhuang, which is a pathological structure under the rule of strongmen; It doesn't work. For example, Alibaba's evaluation system is top-down, and managers above the director level can be exempted from being evaluated, which is different from the internationally accepted 360-degree evaluation. corruption. Jin Jianhang also admitted that Alibaba is an "absolutely different" Internet company.Alibaba has now revised its assessment system, and the management below Jack Ma is now also subject to assessment, while Jack Ma is assessed by the board of directors. He also said that Alibaba actually does not require employees to do much, only six, and does not interfere with other employees' ideas at all. Zeng Ming, president of Yahoo China, once served as a management professor at Cheung Kong Graduate School of Business, said that Alibaba introduced venture capital from the very beginning, which is a transparent culture based on the modern enterprise system. Zeng Ming also said that if any culture is good enough, it will be strong, exclusive, and quasi-religious. "This point has been mentioned in the book "Built to Last" and the management guru Drucker. Alibaba's culture is more idealistic." Zeng Ming said that theoretically speaking, any system will eventually become rigid and dead, and the key lies in the self-renewal ability of this system and culture. Today's Alibaba Group has a scale of 7,000 people and is constantly introducing new people. Maintaining the company's values ​​and culture has become an increasing challenge. According to a Morgan Stanley research report, Alibaba has slowed down the opening of its new offices to reduce the impact of rapid expansion on the company's culture, and has increased the assessment of new employees - only 30% of sales employees' income is fixed Income, more than 50% is determined by evaluating employees based on the company's six values.In addition, Alibaba Group has also adopted a stock exchange plan, so that Alibaba employees in non-B2B business departments can also hold stocks of listed companies, thereby reducing the imbalance among employees.