Alibaba’s Ma: Company Faces Unprecedented Challenges

Jan 21, 2014

Alibaba’s Ma: Company Faces Unprecedented Challenges

PAUL MOZUR

As Wall Street looks forward to big windfalls from Alibaba Group Holding’s anticipated initial public offering this year, the Chinese e-commerce company’s founder and chairman Jack Ma told employees the company is facing “unprecedented challenges.”In a letter to employees dated Monday, which was obtained by The Wall Street Journal,  Ma praised employees for a banner year, but also warned of difficulties to come as the company seeks to compete for the more than 500 million people in China who connect to the Internet using smartphones.

“To be honest, we have achieved great results in 2013, but overall this has not exceeded my expectations. I believe we all feel that in 2013, there were many things we could have accomplished or done better,” Ma wrote in the letter.

The tone is typical of tech executives everywhere, who often warn of the perils of failing to adapt to rapid industry changes that have the potential to turn world-beaters into also-rans, as has happened to AOL  and YahooYHOO -1.22%

.  Samsung Electronics Chairman Lee Kun-hee also warned earlier this year that the company must invest in research & development around the clock and boost its software capabilities.

Despite this, Ma’s letter does identify one real concern for Alibaba: how it will compete to woo smartphone users in the face of the wild success of WeChat, a smartphone messaging application created by rival Tencent HoldingsTCEHY -1.94%.

Name checking WeChat,  Ma said that among 2013’s biggest accomplishments for the company, was the way in which Alibaba employees took to its own chat application, Laiwang, to fight back against WeChat. In an October memo,  Ma said each employee had to find 100 new Laiwang users outside the company by the end of November or not receive their bonuses.

Following up on that mandate, Ma said the spirit of Alibaba employees who helped recruit users to Laiwang was “heart stirring,” but he reiterated that those who had not recruited 100 users by the appointed time would not receive their bonuses.

“Of course, any colleague who failed to recruit 100 Laiwang friends from outside the company by November 30, 2013 will not receive a red packet,” he said. In China, bonuses are distributed in red envelopes during Chinese New Year.

With Tencent now adding commercial features that allow users to buy featured products like smartphones through WeChat, the service already competes with Alibaba. And with 272 million users as of the end of September, it could become a growing channel for Chinese to shop online, funneling off customers who would otherwise use Alibaba’s e-commerce smartphone apps.

One employee at Alibaba said she thought most employees had hit their targets and that though some were not happy about it, there was a level of acceptance about the new policy.

“I haven’t heard of anyone around me who didn’t hit their target. Everyone came up with a way to have friends, and friends of friends, register for Laiwang,” she said, declining to give her name.

“Above there are policies, below there are countermeasures. Since the boss said we needed to hit the target or lose our bonuses, we found a way to get our bonuses.”