Alibaba and the elephant in the room

Alibaba peopleAlibaba, Alibaba: it’s a word that’s increasingly on people’s lips. Certainly, it’s a pleasing name: playful to pronounce and universally recognisable, evoking something at once known and foreign.

But, beyond talking about the Chinese e-commerce giant’s IPO (which claimed the title of largest global IPO ever) and how successful the start-up from southern China has been, we hear far less said about why.

The company’s 6 May release of its quarterly revenues for the period ending March 2015 beat most expectations, which – despite several bold forecasts – doesn’t come as much of a surprise. Analysts had predicted a jump of 40 percent year-on-year in revenues and were instead shown a 45 percent rise, from RMB12.2 billion (approximately US$1.9 billion) to RMB17.4 billion (approximately US$2.8 billion). The company’s net income, however, decreased by 49 percent, which Alibaba attributes to share-based compensations resulting from its IPO.

Alibaba continues to dominate mobile e-commerce in China, with the company’s mobile gross merchandise volume (GMV) making up 51 percent of the company’s total GMV, up from 42 percent last quarter.

“Alibaba had a strong quarter with significant growth across our key operating metrics,” said Jonathan Lu, Chief Executive Officer of Alibaba Group in the release. “We grew revenue, gross merchandise volume and annual active buyers, and we expanded our unrivaled leadership position in mobile.”

But when the man behind it all, Jack Ma, founder and Executive Chairman of the Alibaba Group, describes the company’s employees – including himself – as “kind of dumb”, you’ve got to wonder if there is something more than customary Chinese modesty to his remarks. This, and a handful of other comments, comes from a translation of selected excerpts from the recently published book, Jack Ma’s Internal Speeches: Trust in Tomorrow.

After we listed, I held a meeting with all the Alibaba employees who’d been there for five years or more. I asked them a question: how does Alibaba have so many millionaires? In other people’s eyes, we are very successful. Why are we successful? Is it because we’re more hard-working? I don’t see it; we do work hard but there are a lot of people more hard-working than us in the world. Is it because we’re smarter? Not necessarily. Five years ago it was hard for us to hire people, but now we can just hire anyone off the street. We’re not hard-working or smart, but we’ve become wealthy, why?

Because we had good luck. Actually, we’re kind of dumb. Seven or eight years ago, lots of people joined Alibaba. But the smart ones felt the company didn’t offer enough opportunity, so they were poached by other companies or left to do start-ups, and their incomes went up. Those of us left weren’t smart, so no one was poaching us. But in the end, looking back from five years later, we somehow became rich.

“Somehow.” Could it have anything to do with the handful of fraud allegations that the company faces? Alibaba does precious little – even by the Chinese government’s standards – to crack down on merchants selling fake goods on Taobao, its biggest online selling platform, a practice that is perhaps as stereotypical as it is unsurprising.

Reports on Alibaba vendors paying people to buy products and give positive feedback on the site – known as “brushing” – were called overblown by MKM Partners’ Rob Anderson, who told investors to “give Alibaba a break”, and said of fraud, “This is not a China problem.” But “brushing” is illegal in both the US and China and, in the same way that Anderson’s comment generally does more to get people’s hackles up than to pacify them, Jack Ma’s pseudo modest “I wonder how we made all this money” attitude only draws more attention to the elephant in the room.


Featured image by ibtimes

This post was originally published on The Future’s Muse.


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