Lessons from Alibaba.com
Last week, Alibaba.com finally went public when it listed on the Hong Kong stock exchange after almost a couple of years of speculation and tantalising prospective investors. It was an IPO that didn't disappoint investors; it turned out to be the second biggest public offering after Google's.
Now, I have a greater interest & stake in the success of a key competitor to Alibaba.com in the B2B space, Global Sources, a company that I worked with for quite a few years, loved and learnt a lot from. My wife, who I met when at Global Sources, continues to work with the organization and owns a piece of the company [every employee and shareholder should feel that way, irrespective of the 'size of the ownership', shouldn't they?]. Though my personal preferences and sense of gratitude to Global Sources could cloud my objectivity a bit, it doesn't stop me from admiring Alibaba.com for doing more than a few things right and offering some valuable and inter-related lessons to others in the process.
a) Thinking big: The founder of Alibaba.com, Jack Ma, has talked about Alibaba.com being among the world's top 3 Internet properties in several interviews. The line between thinking big and being a visionary on the one hand and sounding pompous, arrogant and even silly on the other may be thin. Yet, as most successful Internet businesses show, there is a direct correlation between the "scale of success" and the "size of the vision". eBay is "The World's Online Marketplace", Amazon.com is the earth's largest store, Google wants to organize the world's information and so on.
b) Volume / Size: In the Internet business, volume is critical. Get very large numbers into the system. Getting 10,000 prospects to spend $10 with you is typically a much easier, viable and sustainable option than trying to get 10 people to spend $10,000 with you. Once you have the critical mass of "community", the options of what you can do to monetize it just multiply. Just look at Google, eBay, Amazon, YouTube, Facebook.....
c) Speed: Move fast. A slightly longish pit-stop is all it takes for somebody to race miles ahead.
d) Investing in visibility: Several years ago, when Alibaba.com was just a tiny start-up, I remember seeing and hearing about the company on CNBC / CNN. They were there at some of the biggest trade shows around the world. The company paid for that visibility with advertising and some smart PR and invested in market creation as much as market acquisition. Don't underestimate the value of "presence"--- whether it be attracting prospective customers, the best people to work with you or the big strategic investors [Yahoo pumped in billions of dollars into Alibaba for a stake in the group last year]. From what little I've seen & understand of investments by strategic investors, most institutional investors bet their money on projected future returns, not on past performance. So, be a bit liberal with investing in visibility [no, I am not advocating being silly and throwing away money without an eye on return on investment]--- if done well, the investment will pay off, though not in the quarterly/ half-yearly timeframe you would want it to.
There may be several arguments against the point above, ie. spending money to create visibility and waiting (what may seem ages) for the returns to come in. The biggest example that folks cite everytime there is a discussion along these lines is Google--- "Google didn't spend a penny on advertising to get where they are today", I hear. Fair enough. But Google did something else--- they invested quite a bit in product innovation to vastly differentiate their offering from the others. Product innovation/ differentiation doesn't come cheap, and it is a much harder thing to achieve than creating visibility and loyalty for a 'decent' product.
How successful Alibaba.com will be in sustaining and growing its business going forward remains to be seen. It must be said though that flush with money, they have all the key ingredients to deliver on the promise displayed thus far.
At a personal level though, I will be hopeful of my former employer taking some giant steps forward and realizing its enormous potential.
Now, I have a greater interest & stake in the success of a key competitor to Alibaba.com in the B2B space, Global Sources, a company that I worked with for quite a few years, loved and learnt a lot from. My wife, who I met when at Global Sources, continues to work with the organization and owns a piece of the company [every employee and shareholder should feel that way, irrespective of the 'size of the ownership', shouldn't they?]. Though my personal preferences and sense of gratitude to Global Sources could cloud my objectivity a bit, it doesn't stop me from admiring Alibaba.com for doing more than a few things right and offering some valuable and inter-related lessons to others in the process.
a) Thinking big: The founder of Alibaba.com, Jack Ma, has talked about Alibaba.com being among the world's top 3 Internet properties in several interviews. The line between thinking big and being a visionary on the one hand and sounding pompous, arrogant and even silly on the other may be thin. Yet, as most successful Internet businesses show, there is a direct correlation between the "scale of success" and the "size of the vision". eBay is "The World's Online Marketplace", Amazon.com is the earth's largest store, Google wants to organize the world's information and so on.
b) Volume / Size: In the Internet business, volume is critical. Get very large numbers into the system. Getting 10,000 prospects to spend $10 with you is typically a much easier, viable and sustainable option than trying to get 10 people to spend $10,000 with you. Once you have the critical mass of "community", the options of what you can do to monetize it just multiply. Just look at Google, eBay, Amazon, YouTube, Facebook.....
c) Speed: Move fast. A slightly longish pit-stop is all it takes for somebody to race miles ahead.
d) Investing in visibility: Several years ago, when Alibaba.com was just a tiny start-up, I remember seeing and hearing about the company on CNBC / CNN. They were there at some of the biggest trade shows around the world. The company paid for that visibility with advertising and some smart PR and invested in market creation as much as market acquisition. Don't underestimate the value of "presence"--- whether it be attracting prospective customers, the best people to work with you or the big strategic investors [Yahoo pumped in billions of dollars into Alibaba for a stake in the group last year]. From what little I've seen & understand of investments by strategic investors, most institutional investors bet their money on projected future returns, not on past performance. So, be a bit liberal with investing in visibility [no, I am not advocating being silly and throwing away money without an eye on return on investment]--- if done well, the investment will pay off, though not in the quarterly/ half-yearly timeframe you would want it to.
There may be several arguments against the point above, ie. spending money to create visibility and waiting (what may seem ages) for the returns to come in. The biggest example that folks cite everytime there is a discussion along these lines is Google--- "Google didn't spend a penny on advertising to get where they are today", I hear. Fair enough. But Google did something else--- they invested quite a bit in product innovation to vastly differentiate their offering from the others. Product innovation/ differentiation doesn't come cheap, and it is a much harder thing to achieve than creating visibility and loyalty for a 'decent' product.
How successful Alibaba.com will be in sustaining and growing its business going forward remains to be seen. It must be said though that flush with money, they have all the key ingredients to deliver on the promise displayed thus far.
At a personal level though, I will be hopeful of my former employer taking some giant steps forward and realizing its enormous potential.
Labels: Asian Internet Business, B2B Marketing, Internet Business
posted by Manoj at 10:12 AM
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