Jack [Ma] 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 e-commerce 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?”...
“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!’”...
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.”
“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.”...
“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. …
After Jack left my office I decided to head over to see the Taobao team for myself. I’d always slightly regretted not having been a part of Alibaba in its apartment days, so I decided not to miss the chance again. …
I knocked on the apartment door, expecting to see a hive of activity as engineers, product developers, and website designers furiously prepared for the big launch. But it was just the opposite. 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 of 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.
A week later Taobao was ready for its official debut. At a packed press conference in Hangzhou, we announced that we’d build a consumer marketplace cutomized for China. It would be free for three years.
Jack argued that China needed its own model for e-commerce and that with the market still in its infancy, it was too soon to charge customers. …
Making Taobao free was a key way to differentiate it from eBay, which collected fees from its users. We gambled that eBay would not match our move, since doing so would expose it to intense pressure from Wall Street investors who expected eBay to quickly capitalize on the $180 million it had already invested in the market.
Sure enough, immediately after our press conference, journalists contacted eBay to ask if it, too, would offer free services.
Caught off guard, eBay’s local PR head responded by saying eBay would remain a website that charged, since charging for product listings and commissions was an important part of maintaining a healthy online marketplace.
By the end of the day we had achieved our goal — we had backed eBay into a position that would be hard for it to change. ...
From day one, we recognized that making Taobao free was not enough. Sure, it would get people in the door. But we’d also have to keep them. Jack’s message to the team was to forget everything about eBay’s business model in the United States.
It was more important, he argued, to focus on Chinese consumers and develop what they needed rather than what had worked in the United States.
The first step was recognizing that the consumer e-commerce model for China would not be an auction model, as at eBay.
While eBay had gotten its start with people posting Fez dispensers and other consumer collectibles they had pulled out of their basements and put online for auction, China’s consumer culture was entirely new.
The Chinese did not have a hundred years of consumer products lying around in basements. After the poverty of the Cultural Revolution, no one had anything to collect, except for a few of Mao’s little red books.
Excerpted with permission from Alibaba’s World: How A Remarkable Chinese Company Is Changing The Face Of Global Business
ALIBABA’S WORLD HOW A REMARKABLE CHINESE COMPANY IS CHANGING THE FACE OF GLOBAL BUSINESS
Author: Porter Erisman
Publisher: Pan Macmillan
Pages: 242
Price: Rs 499
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