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Authors: Porter Erisman

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Alibaba's World

BOOK: Alibaba's World
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For Mom and Dad

CONTENTS

1 The Right Person: @ the Right Place @ the Right Time

2 Boom!

3 Bust

4 The Foreign Experts

5 Alibaba’s Cave

6 Around the World with Jack

7 Alibaba’s Falling Carpet

8 Back to China

9 Last Man Standing

10 Lock Up

11 War on eBay

12 The Google Guys

13 Crocodile in the Yangtze

14 The eBay-Alibaba Hotline

15 Yahoo!

16 The Deal Heard ’Round the World

17 The China Search Wars

18 Free Is Not a Business Model

19 AliMania

20 Leaving Alibaba

21 Winter

22 Spring

23 Alibaba’s World

24 Alibaba and the Forty Lessons

AUTHOR’S NOTE

M
Y GOAL WITH
Alibaba’s World
is both to educate and inspire. I hope that entrepreneurs and others chasing a dream can read the book to learn from Alibaba’s
successes and mistakes. And I hope that others can learn from Alibaba’s story to better understand what it was like on the ground during a transformative time when the Internet brought China
face-to-face with the West. In pursuit of this goal I’ve made every effort to present an accurate and authentic reflection of my experiences.

Fortunately much of Alibaba’s history was captured in the 200 hours of video archives that I gathered in preparing my documentary,
Crocodile in the Yangtze.
This, and detailed
notes I took during my time at Alibaba, provided a valuable reference for this book.

All the dialogue is based on actual conversations, but at times I combine two separate conversations with one person into one conversation. The same is true of some of Jack Ma’s early
speeches where I have sometimes combined public comments he made separately at the time into one speech. I also
paraphrase Jack Ma’s English occasionally to account
for the fact that it is not his native language and sometimes includes small grammatical errors. In all cases I have made every effort to preserve the accuracy and authenticity of what was said by
all parties.

In a few instances, when discussing confrontations or conflicts with former colleagues, I have left some minor characters unnamed. In a fast-growing start-up, there are always bumps and bruises,
internal disagreements. However, my goal here is to use issues or conflicts as illustrations from which others may learn, not settle scores with individual colleagues. In the spirit of fairness, I
also do my best to point out the times when I myself made mistakes or held the wrong assumptions.

This book was written independent of Alibaba, with no involvement by the company. Whether readers agree or disagree with my take on events, the opinions are entirely my own. It’s my hope
that sharing the story, in the most candid way possible, of how a schoolteacher rose from obscurity to build the world’s largest e-commerce company can serve as a great case study for
students, entrepreneurs, and anyone else setting out on a journey of their own.

INTRODUCTION
THE GREAT LEAPFROG FORWARD

N
OVEMBER 7, 2006
, was the day I realized that Alibaba had finally arrived. As I stood at the back of a packed auditorium at the Web 2.0 conference in San Francisco, my boss,
Jack Ma, took the stage. With a typically entertaining speech he captivated the high-level audience, a who’s who of the Internet world.

“I’m 100 percent ‘made in China.’ I learned English myself, and I know nothing about technology,” Jack explained. “One of the reasons why Alibaba survived is
because I know nothing about computers. I’m like a blind man riding on the back of a blind tiger.”

As the audience laughed, I noticed someone crouched down in the back of the auditorium, scribbling down every word Jack said. Curious, I leaned over to see who was so intent on transcribing
Jack’s speech. I was shocked to find it was Jeff Bezos, the founder and CEO of Amazon.

Bezos—the father of e-commerce—eager to learn from Alibaba? This was the man who had pioneered e-commerce and grown Amazon.com into an Internet behemoth.
This was the entrepreneur named
Time
magazine’s Person of the Year back in 1999 when Alibaba was still an obscure start-up in Jack Ma’s apartment. Bezos was a business leader
we had always looked up to and admired—not to mention borrowed ideas from. And now he was borrowing ours!

Jeff continued taking notes as Jack spoke to the rapt group.

“Believe in your dreams, find good people, and make sure the customer is happy. I see a lot of US companies sending professional managers to China. They are making their boss in the US
happy but not the Chinese customer.”

Jack had always wanted to meet Jeff Bezos, so I leaned over, introduced myself, and gave Jeff my card. Jeff said he’d love to meet Jack as well. After Jack’s speech the two of us met
with Jeff in the convention center lobby. With his trademark laugh and infectious enthusiasm, Jeff commended Jack on his speech: “You made some great points up there, Jack! I’d love for
you to visit us in Seattle someday.” As Jeff walked away, Jack and I beamed like two starstruck groupies in a garage band who’d just been validated by their favorite rock star.

Seven months later I picked up the
Wall Street Journal
to find an interview with Jeff, who was announcing an expansion in China. He described how he was determined to avoid the problems
other foreign Internet companies had encountered in China, explaining that the reason they struggled was “because the Chinese management team is busy trying to keep their American bosses
happy, instead of trying to keep their Chinese
customers happy. And that’s a mistake we will not make.” Yes—it seemed Jeff had learned something from
Jack.

Little did Jack and I know that in just a few years, Alibaba’s sales volume would surpass those of both our idols—Amazon
and
eBay. Combined. Not just in China.
Everywhere.

When Alibaba got started in Jack Ma’s apartment, it seemed far-fetched to think that Western Internet companies would someday be learning from China’s e-commerce founders. With only
two million Internet users in China, less than 1 percent of the country’s population was online. And of that 1 percent, even fewer would consider purchasing something online. The barriers
were simply too great. Consumer purchasing power was too low. Credit card penetration was negligible. Logistics infrastructure was primitive. It was unclear whether the government would embrace or
reject the Internet. And e-commerce seemed impossible in the context of China’s Wild West capitalism, where scammers were all too common and where buyers and sellers who had never met in
person simply didn’t trust each other enough to do transactions online.

Fast-forward 15 years, and the difference in the numbers is astounding. Alibaba now has approximately 300 million customers and executes about 80 percent of China’s e-commerce
transactions. More than half of all packages shipped in China are from deals that originated on Alibaba’s websites. And during its 2014 Singles’ Day promotion—a shopping holiday
that Alibaba invented—Alibaba’s consumer shopping websites handled $9.3 billion in transactions on just one day—more than the total US online sales on Black Friday and Cyber
Monday combined. All this in a country where the per capita income is
just $6,800 per year and only about 25 percent of the population has ever shopped online. Compared to
the United States, China’s e-commerce boom is just beginning.

Alibaba’s experience has shown that, although e-commerce was slower to take off in China than in the West, when it did take root, it was far more important to the overall economy. In just
15 years China’s e-commerce infrastructure has leapfrogged its Western counterparts’ and is introducing entirely new ways of doing business. China has become a dynamic laboratory for
e-commerce innovations, with important lessons for businesses everywhere.

Alibaba is also branching out into a number of entirely new frontiers, well beyond traditional e-commerce. Within a year of launching its first money market fund, Alibaba’s finance unit
was operating one of China’s top funds, with over $90 billion under management. It has started a movie studio to produce original content. Will Alibaba someday realize its goal of becoming
China’s largest bank? Will it give Fox and Disney a run for their money in film production?

The scale of Alibaba’s growth grabbed the business world’s attention when it went public on September 19, 2014. Alibaba’s was the largest IPO (initial public offering) in
history, dominated global business headlines, and made Alibaba the most valuable e-commerce company in the world. And Jack, who began his career making less than $20 per month, was suddenly worth
$19.5 billion soon after the IPO.

This book is the inside story of how all this happened. How a schoolteacher and 17 of his friends rose from obscurity and overcame immense obstacles to build an e-commerce powerhouse that is
transforming global business.

The founding of Alibaba was really the birth of e-commerce in China. From 2000 to 2008, I worked at Alibaba as a vice president in a variety of roles as the company grew
from a small apartment into the behemoth it is today. I’ll chronicle both the successes and missteps the company made on the road to riches. In the process I hope to explain how Chinese
e-commerce got to where it is today, where things are headed, and what it means for the global marketplace.

After leaving Alibaba in 2008, I produced and directed
Crocodile in the Yangtze,
an independent documentary film about my experience. The film premiered at the Sonoma International Film
Festival in April 2012, and I subsequently spent two years traveling the world to show the film to festival audiences, students, and entrepreneurs. The journey took me to more than 50 cities on six
continents—from Silicon Valley to Bangalore to Nigeria and just about everywhere in between. It taught me that the Alibaba story, so multifaceted, has universal appeal, and from each Q&A
session I got a greater sense of which aspects people in different places were interested in. The plucky start-up spirit that challenged eBay and Amazon when they ruled the e-commerce roost? The
rise of a schoolteacher from the far-flung provinces to economic royalty in what is still a Communist country? Or the seismic shifting of the world’s attention from West to East?

My time at Alibaba challenged a number of my assumptions about business and life. My experience was a positive one overall, and this memoir reflects that. I saw a company grow from a small
apartment into China’s first global Internet company, battling—and beating—eBay in China along the way. And I saw a team of ordinary people come together to build a company
that has fundamentally reshaped the way people do business in China and beyond. But the goal of this book is not simply to say that Alibaba is great or that Jack Ma is a
hero. It is simply to answer this question: What made Alibaba so successful where so many of its competitors failed?

After 15 years the Alibaba story is, in many ways, still just beginning. And how it ends is up to Jack and a new team of colleagues—and how well they adhere to the values that have carried
them this far. Alibaba is no longer a David. It is a Goliath. And as a Goliath it will face an entirely new set of challenges. But whether Alibaba ultimately succeeds or fails, its rise remains one
of the most fascinating and instructive business stories of our time. By sharing my experience at the company as candidly as possible, I hope that entrepreneurs or others setting out on a similar
journey may gain some inspiration and avoid some mistakes. It is my sincere belief that the spread of e-commerce, and the grassroots economic opportunities it provides, can transform the lives of
millions, if not billions, of people around the world.

THE RIGHT PERSON
@ THE RIGHT PLACE
@ THE RIGHT TIME

I
SLID INTO
the backseat of the taxi as the driver dropped the meter’s flag and turned to me. “So where you headed?”

“Wensan road. Alibaba headquarters.”

We bumped along the Hangzhou streets for a bit, past construction sites, shops, and Hangzhou’s West Lake. Then the driver struck up a conversation.

“Do you work at Alibaba?”

“Yes, I joined the company in 2000. I’ve worked there for about six years now,” I said.

“Oh, really? I didn’t know Alibaba had foreigners. So why did you decide to work in a Chinese company?”

“I thought it would be more fun to help a Chinese company go global than to help a foreign company enter China. It’s an exciting challenge.”

BOOK: Alibaba's World
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