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The Most Important Global Company You Have Never Heard Of

Posted by: Cameron Cushman on April 6, 2011 Source: Policy Dialogue on Entrepreneurship

Headquarters of Alibaba.com in Hangzhou China

                     Headquarters of Alibaba.com in Hangzhou, China

They are larger than amazon and have more users than ebay. Yet, most Americans have never heard of them. But this company’s implications for the global economy and the increase of human welfare to the world’s poor hold vast potential.

The company is Taobao, an internet platform company that connects buyers and sellers of products and services, mainly in China. You can think of it as the eBay of China. In fact, it was created in 2003 partly to counter eBay’s entrance into the Chinese market. One of its distinctive features is the embedded proprietary instant chat program, called AliWangWang that allows users to “chat” with sellers or their customers prior to making a transaction.

According to its own website, Taobao is the largest online retail website in China, if not the world. It currently boasts over 800 million product listings coming from more than 550 million registered users. It claims that it receives more than 50 million unique visitors each day and that it is one of the world’s top 20 most visited websites. In the last few years, the company has consistently increased its share of all retail transactions and this year it expects to account for 5 percent of all retail sales in China.

One of the reasons that Taobao is poised for continued success is because its parent company is the Alibaba Group, a conglomerate of several high-tech companies based in Hangzhou and Hong Kong in China. Its most popular company is Alibaba.com, a trade facilitation platform who’s core business connects global companies to Chinese manufacturing. The group also includes Alipay, the paypal of China and Alibaba Cloud Computing. Its founder, Jack Ma, might be the most famous entrepreneur in the People’s Republic.

Taobao’s potential influence goes well beyond its ability to make profits through advertising. (According to Goldman Sachs, Taobao has earned an estimated $36 million on $640 million in sales in 2010.) It has the capability to provide access to the global economy for hundreds of millions of Chinese by lowering the cost of entry for small companies. In fact, according to Chinese government data, Taobao accounted for nearly half of all parcels shipped within China last year.

And it can provide the experience of entrepreneurship and owning one’s own business in a country where this has only recently been possible. Market reforms could lead to political reforms which could lead to increases in human rights, more individual freedom and the reduction of households living below the poverty line.

Finally, because Taobao is a privately held Chinese company, it will likely face less government intervention than U.S.-based companies have faced when they have tried to compete in the Chinese market. Google, Wal-Mart, Home Depot and Best Buy have all infamously tried to break into China, but have so far not been successful. Facebook is blocked altogether in China. The Chinese government seems much more inclined to provide more freedom to homegrown companies, so its chances of intervening in Taobao’s affairs seems less likely. Plus, Ma is personal friends with many of the party leaders in Beijing, including President Hu Jintao.

But Taobao’s biggest days may be yet to come. First, it is still privately held, so if the company would decide to go public, it could create tremendous value. Along with a long-rumored IPO by Facebook, Taobao could be one of the largest offerings to look for in the near future. Second, Taobao has been collecting massive amounts of data on all of its transactions. This data set could provide a gold mine of information on the shopping habits of its customers. Taobao has yet to monetize this information, but its easy to imagine the hordes of advertisers that would kill for this kind of consumer data.

But maybe Jack Ma and Taobao have something else up their sleeve. Ma hopes to help 10 million small companies get a boost online, create 100 million new jobs and serve a billion consumers worldwide. He believes that through his companies, maybe he can change the way China does business—and maybe politics as well.

Category:  Global  Digesting DC  Tags:  global economy, China

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