This e-commerce business built itself into an empire from a small apartment in China and now controls around 80% of online sales in the country.
Feb. 3, 2020
The wholesale online marketplace, Alibaba Group (NYSE: BABA) was created by a group of 18 people, spearheaded by Jack Ma in 1999. It was toward the end of the dot-com crash and it showcased Ma’s vision of a China-based e-commerce company that could efficiently deliver to more than 700 million Internet users in the country. Since Alibaba’s inception, it has evolved into one of the most diverse and valuable corporations in the world — competing with huge U.S. companies such as Google (NASDAQ: GOOGL), Amazon (NASDAQ: AMZN), PayPal (NASDAQ: PYPL), and eBay (NASDAQ: EBAY).
How influential was founder, Jack Ma?
Following in the footsteps of Apple (NASDAQ: AAPL) founder Steve Jobs, Ma started Alibaba in his Hangzhou home. After failed ventures in China and the U.S., Ma spotted a gap in Chinese e-commerce engagement, and launched ‘China Pages’. Not long after, the Alibaba Group was formed, and it was only a number of years before it rolled out Taobao, its consumer e-commerce site, and Alipay, its online payment system.
Ma soon became the richest man in China, worth $38.4 billion and the company was listed on the New York stock exchange in 2014, posting the largest IPO to date at $68. In 2013, Ma stepped down as CEO of the company and hand picked his successor, Jonathon Lu; remaining as Chairman until his retirement in 2019. In an open letter he wrote, “I still have lots of dreams to pursue. Those who know me know that I do not like to sit idle. The world is big, and I am still young, so I want to try new things.”
How does Alibaba make money?
Alibaba already controls around 80% of all online retail sales in China. The company’s revenue grew by 144% between 2017-2019 to $56 billion and this is expected to increase by 78% to almost $100 billion by 2021. It generated $5.4 billion from its core commerce in 2019, an increase of 29% year-on-year. This part of the business model is made up of 13 e-commerce platforms that allow manufacturers, retailers, and customers to conduct a number of different kinds of transactions without leaving Alibaba’s platform.
Meanwhile, Alibaba’s cloud revenue grew 64% year-on-year to $1,300 million during the September 2019 quarter, which was mainly driven by an increase in revenue per customer. Its Youku online video platform’s average daily subscribers increased 47% from the previous year. In addition, the company is experimenting with ventures like its own computer operating system DingDing, and a company called Amap that deals in ride-hailing and congestion reduction. Overall, the company posted revenue of $16.7 million in the quarter, an increase of 40% year-over-year.
What are Alibaba’s future plans?
So far, most of Alibaba’s investments have been in Chinese companies, specifically e-commerce and logistics. However, this doesn’t mean it’s not looking to invest in U.S businesses, such as the Seattle-based virtual reality company Magic Leap, and India-based digital wallet company Paytm. So far, Alibaba has invested in 163 different companies and is one of the most powerful investment firms in China — rivaled only by Tencent Holdings. As long as Alibaba keeps growing its core business and expanding its media streaming and movie-making business, its stock should continue to rise in the coming years.
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Written by Alsha Coppolina