The story of Jack Ma, Founder of Alibaba
How Jack Ma became the richest person in China
At the age of 30, he was working as an English teacher for just $ 12 a month at a university in his hometown. 20 years later, he had become the richest person in China and one of the most successful entrepreneurs in the world, after leading an unprecedented digital revolution in his country… How did he do it?
The protagonist of this story is Ma Yun, better known internationally as Jack Ma, who was born on September 10, 1964, in a humble family in the Hangzhou region, capital of the Zhejiang province in China.
Ma Yun was raised without comforts or luxuries, under the strict Marxist rules of the Chinese communist regime. He grew up alongside his older brother and younger sister.
At that time, Hangzhou was a city that was extremely remote and devastated, practically isolated from the world, so the opportunities for advancement there were very limited. However, everything would change in 1972, when Richard Nixon, the then president of the United States, was visiting the city. After that official visit, tourism in the region increased considerably, allowing many of its inhabitants to improve economically thanks to the money left by visitors.
At school, Ma was never an outstanding student and constantly got into fights with her peers.
Mathematics was always the subject that gave him the most problems; He has even recognized in several interviews that numbers are not his thing. However, the boy did stand out for being extremely curious, which would lead him to arouse interest in learning English when he saw the growing arrival of English-speaking tourists to his city.
At the age of 12, every morning for more than eight years, he rode his bicycle for approximately 60 minutes from his home to the Hangzhou International Hotel, where he volunteered as a tour guide with visitors to practice English.
It was precisely in his work as a guide that he received the nickname “Jack” by a tourist, this being an easier name for foreigners to pronounce than his real name.
During his youth, like many ordinary people, he had trouble getting into college. In higher education institutions in China, the exams were academically demanding and held only once a year.
During his academic stay, he met Zhang Ying, who would become his lifelong wife and with whom he would have two children. They both graduated in 1988.
After obtaining his degree, Ma tried to find work in various places but was rejected in every one of them.
“I applied for jobs thirty times… and was rejected. I went to apply to the police and they said, ‘No, you’re not good.’ I even went to KFC when it came to my city; 24 people applied for the job and 23 were accepted; I was the only one who was rejected. ” -Commented
Eventually, he got a job together with his wife as a professor at Hangzhou Dianzi University.
The first Chinese Internet company
In 1994, he founded “Hangzhou Haibo Translation Agency”, a small business where he translated from Mandarin to English. A year later, one of his clients, who was the owner of an international company, asked Ma to accompany him as a translator on a business trip to
When he got there, he was impressed by all the industrial and technological development of the North American country, which was in stark contrast to the limitations of the region in which he grew up. But, without a doubt, what surprised him the most was interacting with the Internet for the first time.
A friend of his who lived in Seattle sat him down and said, “Jack, this is the Internet. Whatever it is, you can find it on the Internet ”. Full of curiosity, he wrote the word “beer”
Upon returning from his trip, Ma secured a $ 2,000 loan with his friends and created the first Chinese Internet company, “China Pages,” a class of online yellow pages that featured information in English on Chinese companies.
With the site online, he began to contact companies to propose that they advertise on it; However, the work was more complicated than I thought, as even the country’s companies were very skeptical about the Internet. He decided then that he would seek government support to advance his goal, so he traveled to Beijing in hopes of partnering with the governing body responsible for controlling information in the country.
It was 1995 and only two years had passed since the arrival of IP connectivity in China. In addition, the media in the country was strictly controlled by the government, making it a challenge for Jack to gain support for his project.
After several meetings with different government entities in which he tried to show the potential that the Internet had for Chinese commerce, he only managed to crash with the huge bureaucracy that prevailed in the country. They had little interest in partnering with an unknown English teacher, so once again Ma experienced the harshness of the rejection firsthand.
Nevertheless, China Pages was able to achieve significant success, which attracted the attention of Hangzhou Telecom, a government company that had begun offering a service similar to that designed by Jack. Fearful of having to compete with a government-backed organization, he concluded that the only way to survive was by allying with Hangzhou Telecom. The two companies came together to create a joint venture, but things did not work out and Ma ended up abandoning the project shortly after realizing that his opinions had no bearing on the decisions that were made.
By 1998, the Internet fever was taking over Wall Street. Every day new online companies went public, generating thousands of new millionaires. The “.com” companies became market favorites. Meanwhile, in Beijing-China Jack Ma was working in the e-commerce division of the government ministry helping small businesses to connect to the Internet and decided that it was time to try again …
The origin of Alibaba
In 1999, already with the experience gained with China Pages and in his work with the government, Ma gathered a group of 17 friends in his apartment in Hangzhou and convinced them to invest capital and time in his business proposal and his vision of the online market. , which he called “Alibaba” after the character of “Alibaba and the 40 thieves”; stating that people believed that this was a thief, but that in reality he did not see the character that way, but as someone who helped the people of his village.
“I did not know anything about technology or management, but you do not have to know, but to find people smarter than you. When hiring, I look for people smarter than me; who five years later could be my boss. I like positive people And they never give up. Then my job is to make sure they work as a team. ” –Commented the businessman.
His idea was to build a marketplace that would connect small and medium-sized Chinese companies involved in global trade, that is, those manufacturers, trading companies, and wholesalers that were already part of the global supply chain; so they could sell to customers around the world over the Internet. In his own words, Alibaba would be the “open sesame” of small businesses to global markets.
With a clear idea, a great vision, and a lot of determination, Jack and his team began to work day and night on the development of the project. They spent 7 months isolated from the world, locked in the department focused on their objective so that the platform was ready as soon as possible.
In October 1999, Alibaba finally emerged from its lair and was officially unveiled at a press conference in Hong Kong, in which Ma also announced a $ 5 million investment round in the company, led by Goldman Sachs. The news began to spread everywhere, putting Jack and Alibaba in the center of media attention. In January 2000, Alibaba received an additional $ 20 million investment from SoftBank, a Japanese Internet, and telecommunications corporation.
Thanks to these investments and media coverage, the platform began to grow, massively attracting both Chinese exporters and wholesale buyers from around the world, who could now easily find suppliers from Asian countries. However, Alibaba, in the beginning, did not produce any profit, since the objective of its founder was to expand and position itself internationally quickly, so he did not hesitate to sacrifice profitability in the short term to achieve it.
By March 2000, Alibaba’s team had grown significantly, forcing the company to leave the department in which it began operations to move too much larger offices.
Internet crisis hits Alibaba
Despite the constant growth of the company, Jack Ma’s dreams would be radically affected by what was happening in the West. While the furor unleashed by the potential of the Internet began to be felt in China and Alibaba concentrated its efforts on expanding internationally, in Europe and North America the so-called “.com bubble” exploded. After the disastrous fall of the Nasdaq stock index, thousands of Internet companies went bankrupt and millions of investors went bankrupt, generating distrust in the markets towards the digital industry. However, Ma would be persistent enough to stay on his feet during the most difficult moments of the crisis.
In order to organize the international management of the company a bit, Jack decided to move the English operations center from Alibaba to Silicon Valley. This decision favored the image of the company before the world but ended up deepening the operational and management problems that they already faced. In a matter of months, the decision was overturned, leading to a series of massive layoffs at US offices. This was a strong emotional blow for Jack, who felt guilty for what happened and began to show a lack of confidence in front of his colleagues.
By 2001, the Internet crisis was deepening in the world and Alibaba was no escaping it. The company was still not generating profits and the press was falling on it predicting its demise, thus worrying investors and managers. To save money, they had to lay off almost the entire international team, cut advertising budgets, and go back to a business entirely in China. Even so, the financial situation of the company remained unsustainable.
The priority for the company at that time was to achieve stability and be able to survive, so they put in place an operational plan to organize the operation of the company. This plan made it possible to strengthen the corporate culture and optimize processes, laying solid foundations to support the accelerated growth they faced. Now the next challenge was to be profitable, so they began to evaluate sources of income for the platform.
After analyzing facts and figures and talking with registered users, they realized that entrepreneurs might be interested in paying to appear at the top of the results lists on Alibaba; So they launched a paid service that allowed exporters to have a premium presence on the site. This new service was well received by users, but the income it generated was still insufficient to cover the company’s expenses.
With no other choice, they cut the marketing budget to zero and cut senior executives’ salaries to help the company withstand the crisis it was going through.
The strict measures taken took effect, and by the end of 2002, Jack Ma was gathering his team to deliver the good news: for the first time in its history, Alibaba had managed to become profitable. That year, the company made a profit of more than $ 60,000, showing that it was not only surviving the Internet bubble but was also beginning to establish itself in the industry.
The company looked stronger than ever and seemed to finally have a clear growth path, but life would once again test the tenacity of Ma and his team …
In early 2003, news broke that a SARS outbreak, caused by a type of coronavirus, had broken out weeks ago in southern China and was rapidly spreading across the country. One of the Alibaba workers contracted the virus, forcing the entire team into quarantine. They were forced to close their base of operations and had to go to great lengths to adapt to the situation and keep the platform running. 400 employees brought their computers home and operated virtually. The team accepted the challenge and remained optimistic about this situation.
When the quarantine ended for part of the team, Jack contacted Porter Erisman, the then vice president of Alibaba, to tell him to get ready because they were about to face the company’s biggest challenge yet, one that would define their destiny forever…
In the United States, the digital industry was recovering and growing at an unstoppable rate. The companies that had managed to survive the Internet bubble consolidated themselves as true empires, moving billions of dollars in transactions around the world. One of these companies was eBay, which was already positioned as the most valuable Internet company in the world, with a presence in more than 150 countries… including China.
The eBay vs Taobao war
It was this presence in China that worried Jack. Three years earlier, eBay had bought a large part of Eachnet, a Chinese clone of eBay, so indirectly it already had part of the China market in its possession, and it would only be a matter of time before the platform would enter into direct competition with Alibaba, putting your business at risk.
To avoid this, he secretly met with part of his team in the department where the company was born to design the strategy with which they would face the war against eBay.
“eBay is a shark in the ocean; we are a crocodile in the Yangtze River. If we fight in the ocean, we will lose; but if we fight in the river, we will win.”
-They were the words with which Jack Ma prepared his team for battle.
While the rest of the staff remained in quarantine, this secret little team worked tirelessly on a new project for several months. Finally, in May 2003 its creation was launched: “Taobao”, which means “treasure hunt”, a C2C platform with which the company would seek to gain ground from eBay before its arrival.
The following month, Jack’s fears came true: eBay announced the purchase of the rest of Eachnet and the investment of $ 150 million in the business…
With eBay set to dominate the Chinese market, Alibaba started moving its chips. He organized an event to make the official presentation of Taobao in front of the media and announced that the platform would be free for all users for three years. But that was not all; The company also introduced the public to Alipay, a new payment platform that allowed transactions to be made from a virtual account and that kept the money in the customer’s account until the customer received their order.
Jack’s strategy focused on 2 key points: first, the site was built with a total focus on the Chinese consumer, since up to that point similar platforms operating in the country were nothing more than copies of the American model; and, secondly, offering the service for free was something that eBay did not contemplate, because its business model was based precisely on charging users.
For its part, eBay would seek to integrate Eachnet, which already had more than 10 million users, with its global platform, keeping only a few features that were very popular with Chinese users.
With the chips played, the war between these two ambitious rivals started …
The weeks passed and Taobao began to become very popular among young Chinese thanks to the focus and characteristics of the site; while eBay, with its almost unlimited resources, deployed expensive advertising campaigns to be dominant in the market. The media perceived this war as a battle between David and Goliath.
Understanding the local market was undoubtedly the great determining factor in this battle. The functions that Taobao had developed with the Chinese consumer in mind made the platform grow much faster than its rival. Furthermore, it was a matter of time before Chinese eBay users began to leave the platform and migrate to Taobao.
By 2005, the battle had escalated. eBay decided to double down on its efforts, announcing an additional investment of $ 100 million. and declaring that they were on their way to becoming the undisputed winners in China; But in the United States, investors were concerned about the difficulties that the company was facing in the Asian country market.
Days passed and eBay’s results in China deteriorated, so Meg Whitman, who served as CEO of the company, decided to meet with Jack Ma to discuss a possible partnership that could lead to a “cease-fire.”
Not feeling aligned with Whitman’s vision, who was more concerned with pleasing Wall Street than contributing to the development of e-commerce in China, the CEO of Alibaba rejected the partnership proposal, causing the battle to reach its peak of tension.
As eBay prepared to take its next hit, Alibaba pulled out an “ace up its sleeve” that surprised its rival and the entire world …
The Chinese company received a $ 1 billion investment from Yahoo! in exchange for 40% of their shares. In addition, with this deal, Alibaba would take over the operations of Yahoo! China to compete directly with Google and Baidu. This was one of the biggest deals in internet history and it sparked a media frenzy, but it also posed organizational and political problems for Jack Ma and Alibaba.
With Yahoo! As the main shareholder and heavily invested in its portfolio, Alibaba was poised to finally defeat its North American rival.
In 2006, Taobao’s numbers outnumbered eBay’s for the first time, but the war didn’t end there. Alibaba had one last attack planned. With the eyes of Wall Street and the media on, the company announced that Taobao would be free for three more years, and invited eBay to do the same.
The blow was devastating.
Following the announcement, eBay shares fell 5% and the news echoed in both China and the United States.
Over the next year, Taobao continued to gain market share from eBay, which eventually relented by eliminating its fees to attract new users, but the decision came a bit late.
By the end of 2006, eBay announced the closure of its website in China, leaving Taobao the absolute market leader and ending a war that had been fought for years.
Fuente: “Why Amazon and eBay Lost in China” www.marketplacepulse.com
Alibaba goes public in Hong Kong
No longer under pressure from eBay, Jack and his team were ready to take a big step in their entrepreneurial career: the Alibaba public offering.
At the end of 2007, the company made its debut on the Hong Kong Stock Exchange, managing to almost triple the value of its shares on its first day of listing. It was a fact: that small digital business that was born in an apartment in Hangzhou, had become one of the most important technology companies in the world … But, Ma’s ambition would not stop here.
As Alibaba grew, it began to identify new business opportunities.
In 2008, the company launched its new platform: TMall, a kind of online shopping center whose main purpose is to connect large Chinese brands directly with their consumers.
In 2010, they launched AliExpress, a platform oriented to the international market in which both companies and individuals can buy and sell almost all kinds of products.
In 2012, the conflicts between Alibaba and Yahoo! sharpened, so Alibaba chose to buy back much of the stake that Yahoo! had acquired. This would be the beginning of the definitive end of the relationship between both companies.
That same year, Jack Ma announced that he would step down as CEO of Alibaba, but would remain in office as president, focusing on the company’s strategic vision, developing talent to grow the internal leadership team, and directing social responsibility efforts. corporate
“I am 48 years old. I am no longer young enough to run such a fast growing business. When I was 35 I was very energetic and fresh. I had nothing to worry about. The next generation of Alibaba people are better equipped to manage an Internet ecosystem like ours. ”
–Said the Chinese businessman in an interview.
By 2013, the Alibaba business group already dominated about 80% of e-commerce in China and handled transactions worth more than $ 248 billion through its three main online marketplaces, surpassing eBay and Amazon combined.
Jack Ma becomes China’s richest businessman
In 2014, due to a failed deal with Hong Kong stock regulators, Alibaba decided to migrate to Wall Street for a new public offering for sale. The IPO was carried out in September of that same year on the New York Stock Exchange and became the largest IPO in history up to that moment, achieving a capitalization of 25 billion dollars and making Jack Ma the richest person in China.
Over the next several years, Alibaba Group would launch a wide range of services, such as Alibaba Cloud, cloud solutions and artificial intelligence company; Alisports, a platform that seeks to promote the sports industry as a whole; Hema Supermarket, a new omnichannel supermarket concept; and Alibaba Entrepreneurs Fund, an organization dedicated to financially and strategically supporting entrepreneurial projects. Also, it would buy important companies, such as Youku, the largest streaming platform in China; and Lazada, the largest e-commerce company in South Asia.
In September 2019, Ma turned 55 and resigned from the Alibaba presidency, according to him, “to make way for other younger minds”; however, it maintains a stake in the company’s administrative group, without being directly linked to the decisions of the board of directors. The end of an era and the beginning of a new one had arrived. The person in charge of replacing him was Daniel Zhang, who until then served as CEO of the company.
Currently, Alibaba is consolidated as one of the largest business groups in the world, investing in sectors such as cloud computing, artificial intelligence, streaming, homes, social networks, finance, marketing, sports, supermarkets, and, of course, electronic commerce. Its services compete directly with companies such as eBay, Amazon, Google, Facebook, YouTube, and Visa, among many others. The company has a market value of more than $ 480 billion and generates revenue of more than $ 51 billion a year.
Jack Ma, for his part, continues to be recognized as the richest person in China, with a personal fortune of more than $ 39 billion, according to Forbes Magazine. Also, he is considered one of the most innovative and powerful people in the world according to various publications. No longer the burden of running a multi-million dollar company, she has focused on philanthropic efforts through her foundations, supporting causes related to the environment, the empowerment of women, rural education, better health, and economic and social development…
Thus we conclude the inspiring story of Ma Yun (or Jack Ma), a successful businessman who did not give up in the face of the many obstacles he faced throughout his life; and that, with vision, strategy, and determination, he took it upon himself to lead the e-commerce development process in China, building one of the most powerful companies in the world and becoming a billionaire in the process.
In his own words:
“An entrepreneur must have skills that allow him to withstand the blows of fate and overcome the inevitable failures … What does failure really mean? There is no greater failure than to stop fighting for something you want to achieve. “
Sources:
- Documental “Crocodile In The Yangtze” – Porter Erisman (2012)www.crocodileintheyangtze.com
- Book “Alibaba’s world: How a Chinese company is revolutionizing the business world” – Porter Erisman (2018)
- Revista Forbes: “China Rich List 2019” – www.forbes.com/china-billionaires
