When news of Alibaba’s massive IPO hit the internet Friday, there was undoubtedly many questions: why was the Chinese company worth so damn much?!? How was Yahoo involved?? Who is Jack Ma??
Likely, though, the biggest query circling US-based minds was this: WTF is Alibaba?!?
Don’t worry; you’re not alone in feeling clueless. While Alibaba may have just broken the record for largest IPO ever, most people in the United States haven’t the faintest idea what it is. And, since you’ve landed here, you’re likely one of them. So, here’s your “just what is Alibaba?” 101.
Founded by Jack Ma in his apartment in 1999, Alibaba now ranks as the number one e-commerce destination in China; in fact, it is estimated the company accounts for 80% of all online Chinese transactions. Described as similar to “Amazon, eBay, and PayPal“, the company’s IPO on Friday makes it now worth about $231 billion, more than Amazon & eBay combined.
Alibaba owns China’s largest online shopping destination, Taobao, and retail site Tmall.com. According to Reuters, the company earned $3.7 billion in the 12 months prior to March of this year, up a whopping $2 billion from the year before.
Not everyone in the US was unfamiliar with Alibaba before Friday, however. Yahoo was an early investor in Ma’s business, and was rewarded handsomely for their foresight– the company sold $8 billion worth of shares in Alibaba Friday, which still leaves them with just over a 16% stake.
So, why are they so valuable??
Well, consider this: there are about 1.5 billion people in China. Sure, not all of them are buying goods online; but, according to an article in The Next Web, 618 million of them do, in fact, have Internet access. Do a little math on that: if Alibaba controls 80% of e-commerce in China, and there are 618 million people that can access the Internet, the potential consumer base for the company is still almost 500 million (which is still almost 200 million more than live in the US, total).
As you can see, there’s a damn good reason Alibaba is worth so much.
It will be interesting to see if Alibaba can sustain the kind of recent growth it has experienced; but, one thing’s for certain: they won’t be going away anytime soon.