Tag Archives: Baidu

I have been dealing with Alibaba for many years now, but for many other people, Alibaba is an unknown company. Alibaba is the unmatched e-commerce market leader in China. It holds about 95% of China`s C2C market (Taobao division) and more than 50% of the B2C market (Tmall division).

Alibaba is set to trade under the new ticker symbol on NYSE; BABA, on friday, September 19th. I think that many will be shocked by Alibaba`s entrence in the West, because only a few investors have heard of the company.

Alibaba`s business is more profitable than Amazon and eBay put together, and the U.S`s dominance in the e-commerce sector is poised to fall with the air apparent to Amazon set to IPO. Alibaba`s IPO may herald the end of U.S E-commerce dominance.

When Alibaba enters the market in the West, the competition will increase and standardize prices around the world, which means Apple Inc can`t sell their iPhone 6 for one price in Europe and another in the U.S.

Ebay didn`t have chance to compete with Alibaba, so the decided to stop their business in China. Jack Ma said it was primarily because they wasn`t effective enough and couldn`t deliver so fast as Alibaba does.

Jack Ma is a great business man. In a letter to his shareholders he said in it, this single sentence about Alibaba`s culture, may revolutionize the way other companies do business. «I have said on numerous occasions that we will put customers first, employees second, and shareholders third».

Don`t forget those words by William Feater: The primary asset of any business is its organization, but as you already know; the customer is the God. Without any customers, you are completely dead. So, what will happen to Amazon and eBay`s customers is the big question now. Price and service are key factors now.

For every dollar in sales, Alibaba makes $0,43 in gross profit. In contrast, Amazon only manage to squeeze just $0,01 gross profit for every dollar in sales. Operating income in the three months ended June, was 42% more than the combined profit of Amazon and eBay for the same period.

Many people talk about bubbles, but this is not like what we saw in the dot-com boom in the late 90`s. Take a look at these Chinese companies which is not revenue-starved; Alibaba founded in 1999, Q2 2014: $2,54 billion in revenue. Up 46% Y/Y. Valuation; $155 billion.

Tencent founded in 1998, Q2 2014; $3,21 billion in revenue. Up 37% Y/Y, and last but not least; Baidu which is founded in 2000. Q2 2014: $1,93 billion in revenue. Up 58,8% Y/Y. This the best tech companies in China and all those three founders are the three richest in China, with Jack Ma on the top.

Ebay is out of the market in China along with Google, which was very profitable for Baidu. Of course the Chinese government is supporting their own companies, so it is not easy for the companies in the West to penetrate the Asian markets. It`s hard to say how well Baidu would be doing if Google hadn`t pulled out of China in 2010.

A report from China Internet Network Information Center said in June that China had 632 million Internet users and 527 million mobile Internet users. This is about the numbers of China`s middle class.

It is expected that this number of middle class in China will grow by 500 million over the next decade, and reach a whopping three billion by 2030, which mean a huge market for many start-ups in the west, but the big question is the Chinese government.

They have a habit of favoring state-owned or state-connected companies. An Internet startup with total potential revenues of $10 million in the U.S might achieve revenues of ten times more in Asia. It can be lucrative to expand in Asia, but sometimes not so easy.

WhatsApp is popular in Hong Kong, but WeChat dominates in China. Kakao Talk is the big thing in Korea, while the most popular chat app in Japan is Line. As you may know; Asia is not only China. What might work in China can be a flop in Korea, Japan, Singapore or Hong Kong.

Alibaba will change the Chinese corporate giant`s diverse range of business lines, from e-commerce marketplaces to logistics to financial services. A overseas IPO could prompt the firm to reassess its strategy for these business categories as well as the countries where it operates.

The West are protecting their companies just like the Chinese government. It was not so easy for Baidu, VIPShop or Youku Tudou in the overseas markets like the U.S, as they all are focused on the Chinese market. But Baidu is a search engine, while Alibaba is something different. Peope want to buy things cheap and Alibaba can fix that.

As Jack Ma said; «China is the main course, while developed markets like the U.S are merely dessert».

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