"Just how dominant is Alibaba in China’s booming e-commerce market? In 2012, the homegrown Amazon/EBay mashup accounted for 70 percent of the country’s package deliveries. On one day last year, itlogged $5.75 billion in transactions, and the business done over its sites accounted for the equivalent of almost 2 percent of China’s GDP in 2012. (Wal-Mart‘s sales in 2013, by contrast, are equal to about 0.03 percent of the U.S. GDP.) There are lots of attention-grabbing Internet companies that hope to make money off of trend-hopping teens; Alibaba is building an empire on the spending power ofChinese farmers, laborers and white-collar workers. That could add up: By next year, more than 850 million Chinese are expected to be online — more than the population of any other country except India.
In March, Alibaba announced plans to go public, and settled on New York as the venue for its IPO after Hong Kong regulators refused to approve its proposed governance structure, which would allow its partners to nominate a majority of its board. The company generated $3.06 billion in revenue in the three months ended in December — a 66 percent increase from a year earlier — and profit more than doubled to $1.35 billion. Figures like that have led to estimates of its worth that have run as high as $245 billion. Alibaba, which faces competition from other Chinese companies like Tencent and Baidu, is investing heavily in reaching customers through smartphones and tablets. It owns stakes in messaging application TangoMe and ride-sharing program Lyft (now expanding to serve 60 U.S. cities), has its own mobile operating system and is leasing spectrum from state-owned phone companies to offer mobile voice and data packages. However fast Alibaba’s sales grow, e-commerce transactions in China are growing faster — the government projects that they will reach 18 trillion yuan ($2.9 trillion) next year — an 80 percent increase from 2013.
The gigantic values analysts place on Alibaba speak for the bullish view of its growth potential. Yet some investors may be wary that Alibaba will suffer as China’s economic growth cools. The economy is forecast to expand 7.4 percent this year, which would be the slowest pace since 1990. Some investors have reservations about Alibaba’s management in light of its proposed board structure. Listing in the U.S. may bring more scrutiny for potential infringements of intellectual property, although Alibaba has made an effort to crack down on sellers of counterfeit goods. And increasing competition on Taobao and Tmall is squeezing profit margins for merchants like yarn-seller Liu. If newcomers find it harder to make money on Alibaba’s platforms, the giant might start to grow more slowly".
In March, Alibaba announced plans to go public, and settled on New York as the venue for its IPO after Hong Kong regulators refused to approve its proposed governance structure, which would allow its partners to nominate a majority of its board. The company generated $3.06 billion in revenue in the three months ended in December — a 66 percent increase from a year earlier — and profit more than doubled to $1.35 billion. Figures like that have led to estimates of its worth that have run as high as $245 billion. Alibaba, which faces competition from other Chinese companies like Tencent and Baidu, is investing heavily in reaching customers through smartphones and tablets. It owns stakes in messaging application TangoMe and ride-sharing program Lyft (now expanding to serve 60 U.S. cities), has its own mobile operating system and is leasing spectrum from state-owned phone companies to offer mobile voice and data packages. However fast Alibaba’s sales grow, e-commerce transactions in China are growing faster — the government projects that they will reach 18 trillion yuan ($2.9 trillion) next year — an 80 percent increase from 2013.
The gigantic values analysts place on Alibaba speak for the bullish view of its growth potential. Yet some investors may be wary that Alibaba will suffer as China’s economic growth cools. The economy is forecast to expand 7.4 percent this year, which would be the slowest pace since 1990. Some investors have reservations about Alibaba’s management in light of its proposed board structure. Listing in the U.S. may bring more scrutiny for potential infringements of intellectual property, although Alibaba has made an effort to crack down on sellers of counterfeit goods. And increasing competition on Taobao and Tmall is squeezing profit margins for merchants like yarn-seller Liu. If newcomers find it harder to make money on Alibaba’s platforms, the giant might start to grow more slowly".
