Alibaba, an e-commerce giant in China, wants to make new friends in the U.S. Especially friends with money.
The firm is expected to begin offering shares Friday for $68 a pop on
the New York Stock Exchange, in one of the biggest IPOs ever. At that
price, the company could raise almost $22 billion, on par with the
Agricultural Bank of China's record-setting $22 billion 2010 offering,
and handsomely beating Facebook's $16 billion in 2012.
Outside of the investor community, Alibaba is also making nice with a
growing number of U.S. consumers and tech companies, as part of an
international expansion that could accelerate following its listing.
Don't expect any consumer-facing store ready to steal Amazon's or eBay's thunder. At least not yet.
The Chinese company
certainly has its eyes on becoming a global Internet player, according
to industry analysts and close observers. The path to its goal, however,
may not depend only on e-commerce, but also on carving different niches
in countries including but not limited to the U.S.
"The IPO claims Alibaba's stake as a global company," said Kelland
Willis, an analyst at research firm Forrester who studies e-commerce.
"So much of the world's transactions take place in the U.S.," echoed
Scott Strawn, an analyst with research firm IDC. "If you want to compete
on a global stage you need to be competing in the U.S."
Earlier this week, the company's founder and executive chairman, Jack
Ma, told reporters in Hong Kong that Alibaba plans to "strongly expand"
in the U.S. and European markets after its U.S. listing.
Despite its international ambitions, Alibaba's short-term plans will
probably target the low-hanging fruit -- growing its existing e-commerce
websites in its home market by attracting more foreign merchants and
overseas Chinese to them.
Two of Alibaba's biggest consumer-facing sites are Tmall and Taobao,
which although dominant in the Chinese market, still have plenty of room
to grow and must fend off competition from local e-commerce firms.
"I don't think they have a global plan yet," said Bryan Wang, an analyst
with Forrester, adding, "Alibaba's marketplace model may not work in
every single country, especially the U.S."
The U.S. has its own entrenched e-commerce companies in Amazon and eBay,
and analysts don't envision Alibaba competing with them head-on. The
probability of success is low, and meanwhile the Chinese market is still
teeming with business opportunities.
Nevertheless, Alibaba has been active in the U.S. Most recently, it
launched 11Main, an invitation-only marketplace offering specialty goods, that went online as a beta this past June.
In 2010, it founded AliExpress, an English e-commerce site designed for
foreign customers who want to buy retail goods from Chinese merchants.
The site is growing, especially in Russia, Brazil and the U.S., the
company said in a
recent securities filing.
AliExpress and 11Main aren't exactly designed for mainstream American
consumers. But Alibaba also has been investing in U.S. tech companies,
and not just in the e-commerce sector. It's funded ShopRunner, an online
retail site with free two-day shipping, as well as messaging app Tango
and ride-sharing service Lyft, among several others.
That activity drives speculation that Alibaba is ready to buy its way
into the U.S. market. But Alibaba's recent investments suggest that it
is more interested, at least for the time being, in learning how things
are done in the U.S. tech sector, rather than outright buying companies,
said Michael Clendenin, managing director for consulting firm RedTech
Advisors.
"I think they want to take those experiences and apply it back to the
home market," he said, pointing to Alibaba's recent investment in U.S.
mobile gaming company Kabam as an example. "They are looking at how they
can be more competitive in their own domestic gaming market."
Alibaba is already generating more sales in gross merchandise volume
than Amazon and eBay combined. And in its 2014 fiscal year ended in
March, the company posted sales of $8.46 billion, up more than 50
percent from the previous year.
Sales are expected to grow, even though Alibaba's business is still largely focused on China. The country itself has
632 million Internet users, who are increasingly relying on the Web to make purchases, even as half of China's population still remains offline.
But the country only offers so much growth, and inevitably Alibaba will
have to tap foreign markets to keep earnings strong, analysts say.
In the short term, the IPO will undoubtedly help the Chinese company
generate international public awareness among consumers, businesses and
investors. Funds raised may also let Alibaba make capital investments
globally in the areas of infrastructure, data centers and cloud
computing.
Further out, Alibaba may be looking to compete more with Google than
with Amazon or eBay. As the firm attracts new users and businesses to
its sites, and becomes active in more areas outside of e-commerce, the
real gold for the company could be consumer data. It's already been
trying to expand in China, by launching its own
mobile operating system, search engines and messaging app, although they've all struggled to take off among the country's users.
"If you provide people with more reasons to come and visit your sites,
then you're able to collect more information about who they are and what
their interests are, and you can direct their activities toward things
that will drive transactions," said IDC's Strawn.
Analysts are also not ruling out the possibility that Alibaba could use
the IPO dollars to make an acquisition or two, but it's not clear what
those might be.
Alibaba, like Google or Facebook, is broadening its scope, "branching
out into all aspects of the Internet," said Strawn. The Silicon Valley
giants want to own people's time online, and now Alibaba's trying to get
into the mix.
source : http://www.computerworld.com/article/2686194/alibabas-ipo-could-be-open-sesame-for-global-expansion.html 
