How Alibaba Could Underprice Amazon, and Other Things You Should Know; Alibaba Earnings More Than Double on Surging E-Commerce; Alibaba Becomes Most Profitable Internet Company in China, Surpassing Tencent

How Alibaba Could Underprice Amazon, and Other Things You Should Know

By Danielle Kucera – Oct 14, 2013

Here’s an SAT analogy test for you: Alibaba is to China as [blank] is to the U.S. 

Possible answers: Amazon, EBay or Rackspace.

The correct one? Amazon, EBay and Rackspace. And PayPal. And Yahoo. If you’re not yet familiar with Alibaba, get ready. China’s largest e-commerce company will likely go public in 2014. Investment banks have given the company a valuation of as much as $120 billion, a market cap that would make it the third-biggest Internet company behind Google and Amazon. That position may eventually put it in a spot hordes of companies pine for: a significant competitor to Amazon in the U.S. In addition, Alibaba recently led a $206 million investment in retail website ShopRunner, widening its presence in the country, and is moving toward a U.S. stock sale after talks with Hong Kong’s exchange broke down, a person familiar with the matter said last month. Even so, few U.S. consumers are well-acquainted with Alibaba. Here are a few things you should know about the company.It’s Obsessed With Marketplaces

Alibaba’s e-commerce properties lean heavily toward marketplaces, putting the company head-to-head with Amazon and EBay. Key ones include a set of English-language stores called Alibaba.com and AliExpress (where you can buy a really cute dress for $14.42). The former lets merchants exchange goods with each other, while the latter gives Chinese businesses a place to sell to a global audience. The models are similar to EBay’s but more global, with buyers and sellers exchanging goods on the sites in more than 220 countries and regions.

In China, Alibaba has Tmall, a business-to-consumer marketplace, and Taobao, its consumer-to-consumer marketplace that competes with EBay. However, Taobao gets revenue from advertising rather than taking a commission from sellers.

It Could Beat Amazon on Pricing

As China’s largest e-commerce company, Alibaba has ready access to its sellers’ supply chain of cheap Chinese goods. As Martin Pyykkonen, an analyst at Wedge Partners, notes: “It’s hard to find it cheaper than on Amazon. If Alibaba could come in and, at least for Chinese-made goods, offer a cheaper price, that’s interesting. That might be their edge.”

Ty Rogers, a spokesman for Amazon, declined to comment.

It’s an Umbrella for About 25 Business Units

Alibaba’s subsidiaries include eTao, its own shopping search engine; and Alibaba Cloud Computing, its data-centric cloud platform that compares with Amazon Web Services and Rackspace. It’s also affiliated with Alipay, a Chinese online payments service akin to PayPal.

It Has a Liberal Approach to Data

Alibaba calls its business units “repositories of massive amounts of market information and statistical data” — and it wants to share. The company is working to be the first to make all of its market data available for free to its users, giving them the ability to create smarter strategies and move with ever-changing market conditions. That would be like Amazon sharing purchasing data with third-party sellers on its site.

It Wants to Live Long and Prosper

The company, founded in 1999, wants to “flourish” for at least 102 years, spanning three centuries. The goal is indicative of the company’s long-term approach to business, said John Spelich, a spokesman for Alibaba.

Or in other words, get used to having them around.

Alibaba Earnings More Than Double on Surging E-Commerce

Alibaba Group Holding Ltd., China’s largest e-commerce company, more than doubled its second-quarter profit as customers flock to the online marketplace for everything from Fuji apples to Boeing 737s.

Net income attributable to ordinary shareholders rose to $707 million in the three months ended June from $273 million a year earlier, according to a presentation by Yahoo! Inc. (YHOO), which owns a stake in Alibaba. Revenue increased to $1.73 billion from $1.08 billion a year earlier.

Alibaba is adding instant messaging, making acquisitions and expanding into TVs that connect to the Internet to win a greater slice of China’s Web users and shoppers. Alibaba is heading toward what may be the largest initial public offering since Facebook Inc. (FB), with investment banks valuing the Hangzhou-based company at as much as $120 billion.

Related: How Alibaba Could Underprice Amazon

“The e-commerce momentum was quite strong, especially on the business-to-business market,” said Billy Leung, an analyst at RHB Research Institute Sdn. in Hong Kong. “The advertisement market has done really well.”

Alibaba, formed by Jack Ma and partners in 1999 as an online marketplace for Chinese companies, has grown as the wave of economic liberalization spurred a boom in manufacturing and trade. Ma has an estimated net worth of $3.5 billion, according to the Bloomberg Billionaires Index.

Alibaba doesn’t sell merchandise itself. Instead, it runs platforms including Taobao Marketplace and Tmall.com that connect retail brands with consumers, a cross between Amazon.com Inc. and EBay Inc. It makes most of its sales from commissions and advertising.

IPO Talks

The company is moving toward an IPO in the U.S. after talks for a Hong Kong listing broke down following management’s proposal to keep control in a share sale, two people familiar with the matter said in September.

Alibaba is seeking U.S. law firms to help with an IPO and hasn’t hired banks yet, said one of the people, who asked not to be identified because the process is private.

Alibaba will go public in 2014, people with knowledge of the matter said this month.

Talks for a U.S. listing come as Alibaba increases its footprint in North America. The company last week led a $206 million investment in retail website ShopRunner, which is run by former Yahoo CEO Scott Thompson.

Ma and partners wanted to maintain control in a Hong Kong listing through a partnership that could nominate a majority of board members. To protect the interests of ordinary shareholders, Hong Kong’s exchange prohibits IPOs with different classes of shares, a structure that has been used by companies from Facebook to Manchester United Plc (MANU) in their U.S. initial offerings.

Exchange Talks

For weeks, Alibaba and the Hong Kong exchange discussed the proposal that would let Ma, a former English teacher who owns 7.4 percent of the stock, and his managers run the company without worrying about being pushed out by an activist investor with a different strategy, a person familiar with the matter said in September.

The company had 28 partners as of Sept. 10, Ma said in an e-mail to employees. They include co-founder Joseph Tsai and Chief Executive Officer Jonathan Lu.

Japan’s SoftBank Corp. owns about 37 percent of Alibaba and Yahoo about 24 percent, the companies said separately in July.

Evercore Group LLC analysts, including New York-based Andrew McNellis, raised their valuation of Alibaba to $120 billion from $90 billion, according to a July 17 note.

Facebook, the biggest technology IPO of 2012, was valued at $104 billion prior to its listing.

Package Deliveries

Alibaba accounted for 70 percent of package deliveries in China last year, Ma said in a letter published in February in a newspaper owned by the State Post Bureau. Sales on its two main platforms reached 1 trillion yuan ($163 billion) in 2012 — a figure equivalent to almost 2 percent of China’s gross domestic product.

The company has expanded lending and secured financing and made acquisitions since Ma flagged the potential IPO last year.

Alibaba closed the general syndication of an $8 billion loan in June, three people familiar with the matter said. In April, the company agreed to pay $586 million for about 18 percent of Sina Corp. (SINA)’s Weibo, China’s largest Twitter-like service.

To contact the reporter on this story: Lulu Yilun Chen in Hong Kong at ychen447@bloomberg.net

Alibaba Becomes Most Profitable Internet Company in China, Surpassing Tencent

10-16 14:17 Caijing

Net profits of Alibaba Group more than doubled to 717 million U.S. dollars in the second quarter dated to June 30

Two of China’s largest Internet companies, Alibaba and Tencent, are rivaling each other in the world’s biggest market, with ups and downs on each side. Latest financial figures showed that Alibaba had the upper hand in the second quarter in terms of profits.

Net profits of Alibaba Group more than doubled to 717 million U.S. dollars in the second quarter dated to June 30, according to financial results released by U.S. Yahoo who had a stake in Alibaba.

The company posted a net margin of as high as 41.3 percent, and an operating margin of 49.3 percent in the second quarter. Total revenue in the three months stood at 1.74 billion U.S. dollars, up 61 percent from the same period a year ago.

In comparison, Tencent posted a net profit of 4.15 billion yuan, or roughly 680 million U.S. dollars, representing a year-on-year increase of 22.6 percent.

Yahoo also announced that it had reached an agreement with Alibaba, cutting the stake it planned to sell to up to 208 million shares, from a previously agreed maximum of 261.5 million, as it expressed optimism over “the long-term potential and value” of Alibaba.