Unless you’re living under a rock, you know that Alibaba started trading on the NYSE earlier today. The company priced its IPO at $68/share and closed today at $93.89, up 38%, during its first day of trading. GGV Capital invested in Alibaba in 2003. During the ensuing 11+ years, we’ve watched Alibaba grow tremendously within China, and, more recently, outside of China as well. I was privileged to join the conversation on CNBC this morning as Alibaba was opening for trading. Below is the video clip from that interview:
Given that time is short on live TV, I didn’t have ample time to get to a few topics that are worth mentioning on Alibaba’s incredible history to date:
- China’s Emergence as the Dominant Mobile Market Globally. One of the core growth drivers for Alibaba going forward will be the emergence of mobile commerce. The GMV on Alibaba’s platforms over the past 12 months was nearly $300Bn, with 279M people ordering on average 52 times per year. Alibaba is not a fad, it’s a way of life in China. As staggering as the growth has been for Alibaba, the component of its growth represented by mobile is even more awe inspiring. From nearly a standing start a few years ago, Alibaba has grown mobile GMV to $71Bn, approximately 1/3rd of their total. Future growth in China will rely on further mobile expansion. With 522 million smartphone users in China (vs 164 million in the US) and this total still expanding, the environment appears very receptive to Alibaba and other Chinese players to continue mobile growth.
- Alibaba’s Culture of Innovation. One of the most underrated aspects of Alibaba is its culture of innovation. For example, Jack should be credited with inventing the now popular “freemium” business model. I vividly recall a conversation with an eBay executive in ’06. He argued that eBay, who had recently entered the Chinese market, was going to kill Taobao (Alibaba’s ecommerce marketplace). Completing underestimating Alibaba, this exec ridiculed Jack for making buyer and seller participation on Taobao completely free, rather than adopting eBay’s model of transaction fees. Jack’s stratagem was to recognize the importance of market leadership in a network effect business like SMB to consumer e-commerce. Removing the friction of transaction fees, buyers and sellers came to Taobao in droves. Liquidity surged on Taobao and dried up elsewhere. Once Taobao became dominant, Alibaba began to offer services to sellers, such as marketing and logitics, and revenue has grown faster than GMV, today representing over 3% of GMV.
- What This Means for Silicon Valley Entrepreneurs. As I predicted in late ’13, Chinese internet giants, in particular Alibaba and Tencent, are getting increasingly active in the US. Now, with its near $15Bn in new cash, expect Alibaba to continue to invest in and acquire mobile companies in the US at a rapid rate. Gaming, messaging, social networking, mobile commerce and logistics are all on their radar screen. If you’re a founder in one of these segments, focus on Alibaba, Tencent and other Chinese giants such as Baidu, Xiaomi and Qihoo. Playing your cards correctly can mean turning a potentially strong competitor into a great partner or acquirer.