While the social network’s ad revenue grew 63% year over year in the second quarter, it only added 8 million new users. Interim CEO ...
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Zhu doubts Alibaba presents an immediate threat to U.S. e-retailers, and says it would have a hard time competing with the likes of Amazon, given the differences in consumer preferences in the U.S. versus China and Alibaba’s lack of a supply chain built to bring goods to the U.S. But the IPO could have some effect, she adds. “It perhaps will help Alibaba to build trust and partnership with brands here in the U.S. and thus better serve its goal of bridging the gap between the needs of Chinese buyers and foreign vendors.”
A Chinese e-commerce analyst says that the fact the IPO will take place in the U.S. is the most important part of the weekend’s announcement. Mo Daiqing of the China E-Commerce Research Center notes that Alibaba is not technically a Chinese company because it’s registered in the Cayman Islands. Since China does not allow foreign companies to sell shares in China, Hong Kong and the U.S. were the main options.
She says the Hong Kong deal fell through because that stock exchange does not permit different classes of shareholders, a setup that allows Alibaba chairman Jack Ma and other key insiders to control the company. She notes that after the IPO Alibaba will have the right to buy back the 24% of the company’s stock that’s owned by Yahoo, which could give Ma and his co-founders even greater control. Japanese technology company SoftBank Corp. also owns 3% of Alibaba.
Despite its dominant position, Mo notes that Alibaba is coming under greater pressure from competitors. In particular, JD.com, the No. 1 retailer in the China 500, has recently formed an alliance with Tencent, a major provider of online games and messaging services in China, and those two companies represent a real threat to Alibaba. JD.com booked 2013 web sales of $18.2 billion and Tencent’s Yixun.com another $2.5 billion. Alibaba is not ranked in the China 500 because it does not sell merchandise itself, rather providing other merchants online shopping portals in Taobao and Tmall. Yixun.com is No. 5 in the China 500.