Alibaba Group
Alibaba Group Holding Limited is a Chinese multinational technology company specialising in e-commerce, retail, internet services and technology. Founded on 28 June 1999 in Hangzhou, Zhejiang, it provides consumer-to-consumer, business-to-consumer and business-to-business sales through Chinese and international marketplaces, together with local consumer services, digital media and entertainment, logistics and cloud computing.
| Alibaba Group Holding Limited | |
|---|---|
| Type | Public |
| Traded as | NYSE: BABA, SEHK: 9988 |
| Industry | E-commerce, retail, cloud computing, technology |
| Founded | 28 June 1999, Hangzhou, Zhejiang, China |
| Founder | Jack Ma and 17 associates |
| Headquarters | Hangzhou, Zhejiang, China |
| Area served | Worldwide |
| Key people | Joseph Tsai (chairman), Eddie Wu (CEO), Daniel Zhang (CEO 2015 to 2023) |
| Products | Taobao, Tmall, Alibaba.com, AliExpress, 1688 |
| Services | Alibaba Cloud, Cainiao logistics, digital media |
| Subsidiaries | Taobao, Tmall, Alibaba Cloud, Cainiao, Lazada |
| Website | alibabagroup.com |
Alibaba's initial public offering on the New York Stock Exchange on 19 September 2014 raised 25 billion dollars, valuing the company at 231 billion dollars and constituting the largest flotation in history at that time, larger than those of Google, Facebook and Twitter combined. In January 2018 it became the second Asian company to exceed a 500 billion dollar valuation, after Tencent.
The company hosts the largest business-to-business marketplace in the world in Alibaba.com, the largest consumer-to-consumer marketplace in Taobao, and the largest business-to-consumer marketplace in Tmall. Its trajectory changed sharply in late 2020, when a regulatory campaign by the Chinese authorities halted the flotation of its financial affiliate, imposed a record antitrust penalty and removed its founder from public life for an extended period.
Name
The company took its name from Ali Baba, the character in the collection of Middle Eastern folk tales One Thousand and One Nights, chosen for its universal recognition across languages and cultures.
History
Founding
On 28 June 1999 Jack Ma, with 17 friends and students, founded Alibaba.com, a business-to-business marketplace, in his Hangzhou apartment. In October 1999 the company received a 25 million dollar investment from Investor AB, Goldman Sachs and SoftBank, with Investor AB holding six per cent of the shares. Alibaba.com became profitable in 2002.
Taobao and the defeat of eBay
When eBay announced its expansion into China in 2003, Ma treated the American company as a foreign competitor and created Taobao to contest the domestic market.
Taobao's strategy was to build consumer trust in a market where it barely existed, through third-party verification and by offering most services free while earning revenue from additional services. The approach worked: Taobao surpassed eBay in 2007, and eBay subsequently closed its unprofitable Chinese operation. The episode became the standard example of a Western internet company failing to adapt to Chinese market conditions.
Pre-flotation expansion
In 2005 Yahoo! invested in Alibaba through a variable interest entity structure, buying a 40 per cent stake for one billion dollars. In 2012 China Investment Corporation led a group of Chinese investors in buying out that holding along with Alibaba shares traded in Hong Kong.
In 2013 the company planned to open physical retail outlets in partnership with the property company Wanda Group, and in early 2014 it bought 25 per cent of the Hong Kong-listed department store chain Intime Retail for 692 million dollars. In early 2017 Alibaba and Intime's founder Shen Guojun agreed to pay 19.8 billion Hong Kong dollars to take the chain private, raising Alibaba's stake to about 74 per cent.
In April 2014 Alibaba joined Coatue Management and Andreessen Horowitz in leading a 250 million dollar Series D round for Lyft. On 5 June 2014 it bought 50 per cent of Guangzhou Evergrande football club from Evergrande Real Estate for 1.2 billion yuan.
Initial public offering
On 5 September 2014 Alibaba set a price range of 60 to 66 dollars a share. The offering priced at 68 dollars on 18 September, raising 25 billion dollars. On 22 September the underwriters confirmed that they had exercised a greenshoe option to sell 15 per cent more shares than originally planned.
Alibaba and its underwriters were sued in a California superior court in a consolidated class action filed in October 2015 on behalf of investors who had purchased American depositary shares, alleging violations of the Securities Act. The company agreed in December 2018 to pay 75 million dollars to settle, subject to court approval.
International investments
From 2015 Alibaba invested in Paytm, the Indian mobile payments platform, and formed Ali Literature to enter internet publishing. It committed approximately 320 million dollars to an e-commerce digital hub in Thailand's Eastern Economic Corridor, opened in 2018. In January 2017 it agreed an 800 million dollar sponsorship of the Olympic Games with the International Olympic Committee, running to 2028.
Leadership changes
In September 2018 Jack Ma announced that he would step down as chairman within a year to concentrate on philanthropy. He did so on 10 September 2019 and was succeeded by Daniel Zhang.
On 10 September 2023 Zhang stepped down as chairman and chief executive. Eddie Wu became chief executive and Joseph Tsai, a co-founder, became chairman. Zhang was expected to lead the Cloud Intelligence unit but left that role two months later, ending a sixteen-year period in the company's leadership, and Wu took charge of the cloud business.
The change followed a restructuring announced in March 2023 that divided the group into six units, each intended to be capable of raising capital and listing independently, the most significant reorganisation in the company's history. Several elements of the plan were subsequently scaled back.
Operations
Alibaba operates Taobao for consumer-to-consumer trade, Tmall for branded business-to-consumer retail, Alibaba.com and 1688 for wholesale trade, AliExpress for cross-border retail and Lazada in Southeast Asia. Alibaba Cloud is the largest cloud computing provider in China and a substantial regional competitor to Amazon Web Services. Cainiao provides logistics coordination.
Alipay, rebranded as Ant Financial Services and later Ant Group on 16 October 2014, is a separately controlled affiliate rather than a subsidiary, an arrangement that was itself the subject of controversy when the payments business was transferred out of the listed structure.
The company set a record on the 2018 edition of Singles' Day, the largest online and offline shopping event in the world. In 2020 it was rated the fifth largest artificial intelligence company.
Kuo Zhang has been president of Alibaba.com since July 2017, overseeing the global business-to-business marketplace including agentic commerce tools. He succeeded Trudy Shan Dai, a co-founder who had led Alibaba.com and 1688 from January 2017 before moving to the core domestic e-commerce businesses in 2023.
Controversies
Regulatory crackdown and the Ant Group flotation
In October 2020 Jack Ma delivered a speech in Shanghai criticising Chinese financial regulation and describing the banking system as operating with a pawnshop mentality. In November 2020 the flotation of Ant Group, which would have been the largest in history, was blocked. The economist Bo Zhuang described the intervention as part of increased scrutiny of finance and technology companies by the Chinese Communist Party.
In December 2020 the State Administration for Market Regulation opened an investigation into Alibaba over monopolistic practices, and the central bank and three other regulators summoned Ant Group for discussions on competition and consumer rights, instructing it to return its focus to digital payments. People's Daily endorsed the investigation as an important step in strengthening antimonopoly oversight in the internet sphere.
Alibaba shares fell to their lowest close in six months, and the company lost almost all of its 2020 market gains, falling from 859 billion dollars to 586 billion dollars by the end of December. In April 2021 the regulator imposed a fine of 18.2 billion yuan, approximately 2.8 billion dollars, for requiring merchants to sell exclusively on its platforms, the largest antitrust penalty in Chinese history at the time.
Jack Ma disappeared from public view when the Ant flotation was suspended in early November 2020, resurfacing in January 2021 in a 50-second video appearance at a rural teaching initiative, which caused Alibaba stock to rise seven per cent. He made a public appearance in Hangzhou in March 2023, meeting students and teachers at the Alibaba-funded Yungu School.
The episode is widely regarded as marking the end of a period of relative regulatory freedom for Chinese internet companies, and it substantially altered the willingness of international investors to hold Chinese technology equities.
996 working hours
In April 2019 a public debate developed in China over the 996 working system, under which employees work from nine in the morning to nine at night, six days a week. Opinion was largely hostile to the practice, which exceeds the limits set by Chinese labour law.
On 11 April 2019 Jack Ma discussed the subject at an internal company event, and a transcript circulated online. He was reported as saying that being able to work 996 was a great blessing, that many companies and individuals did not have the opportunity, and that the ability of major Chinese technology companies to work in this way was a reward earned by their people. The remarks drew strong criticism from commentators who described them as a public disregard of labour law and as evidence that beneficiaries of the system did not consider the position of ordinary employees, though some agreed with him.
Counterfeit goods
Taobao has been repeatedly listed by the Office of the United States Trade Representative among notorious markets for counterfeit and pirated goods, and brand owners have brought litigation alleging that Alibaba did not act adequately against counterfeit listings. The company has invested substantially in detection systems and has cooperated with rights holders and Chinese enforcement authorities, and the platform was removed from and later returned to the list at various points.
In May 2017 Alibaba signed a memorandum with the Anti-Corruption Bureau of the Supreme People's Procuratorate to create what the parties described as a clean, credible and rule-of-law market environment. Under it the bureau provides Alibaba and Ant Group with access to criminal records from bribery cases, used in verifying Taobao sellers and in anti-money laundering and financial risk controls, an arrangement that has attracted comment regarding the exchange of state criminal data with a private company.
Xinjiang surveillance software
In December 2020 reporting revealed that Alibaba Cloud had offered facial recognition software capable of identifying members of the Uyghur minority, with documentation describing ethnicity as a detection attribute. Alibaba stated that the reference had been used in a testing environment, that it had been eliminated, and that the company did not permit its technology to be used to target specific ethnic groups.
Variable interest entity structure
Like other Chinese companies listed overseas, Alibaba is held by foreign investors through a variable interest entity, a contractual arrangement rather than direct equity ownership, because Chinese law restricts foreign ownership in certain sectors. The structure has never been fully tested in Chinese courts, and its uncertainty has been a persistent concern for investors, raised repeatedly by the U.S. Securities and Exchange Commission.
Delisting risk
Under the Holding Foreign Companies Accountable Act, American-listed Chinese companies faced delisting if their auditors could not be inspected by United States regulators. Alibaba was among the companies identified, and its shares fell substantially before an inspection agreement was reached in 2022.
See also
References