This week's buzz on Wall Street and Silicon Valley is not over a familiar tech giant -- Facebook, Amazon or Google -- or even an up-and-coming American startup. The tittering of anticipation is being generated by an unfamiliar name: Chinese e-commerce giant Alibaba. Yesterday, the company filed a 277 page prospectus for an initial public offering (IPO) of $1 billion.
I've heard the name, but what is Alibaba anyhow?
Alibaba is a Chinese e-commerce company. The best comparison would be to call it the Amazon.com of the world's second largest economy. According to Reuters, Alibaba Group Holding Ltd, is used in 80 percent of all Chinese online commerce.
Alibaba was founded 15 years ago, and it is comprised of a 28-member partnership. The company has three main marketplaces, Taobao, Tmall and Juhuasuan, and in 2013 the company had around 231 million active users. In terms of transactions, according to Reuters, it handled more money than Amazon and eBay combined: $248 billion or 1.5 trillion yuan. It also has a cloud computing division and an online messaging system, but the bulk (80 percent) of its revenue comes from e-commerce.
One fifth of its sales last year came from mobile devices, and that seems to be the future of where Alibaba can expand. The company also plans to open a U.S. marketplace called 11 Main. Alibaba already has stake in U.S. tech companies such as Lyft, ShopRunner and 1stdibs.
OK, so it's another tech company. Why does this IPO matter?
Some tech companies that have gone public -- namely Twitter -- have done less than stellar in the eyes of Wall Street. However, they're juiced up because Alibaba's IPO has the potential to be bigger than Facebook's initial public offering. The company is initially planning to raise $1 billion, but the number is expected to rise.
"The IPO is widely expected to surpass that of Facebook, which raised $16.4 billion in 2012, and could be nearly as big as the 2008 offering by credit card giant Visa, which raised about $17.9 billion," USA Today is reporting.
It will become the largest Chinese company listed on the NASDAQ or New York Stock Exchange, according to Reuters.
How does this affect other businesses?
The big news is that when Alibaba goes public it means Yahoo will pick up a huge chunk of dough. Yahoo owns a 22.6 percent stake in the company, but after a deal in 2012 it is required to sell 9 percent of its share when Alibaba goes public. "Depending on the price of the deal, Yahoo most likely will receive $10 billion to $15 billion," reports the New York Times. That is no small number, especially for a company that is fighting to stay relevant.
Alibaba's IPO may have the biggest impact on Yahoo CEO Marissa Mayer. Not only will she and the company leadership have to decide what to do with the new billions (acquisitions, investments, etc.), but now the company will stand less on Alibaba's performance and more on its own. As the New York Times put it, Mayer's "honeymoon" period as CEO is over.
Under Mayer, Yahoo purchased the blog platform Tumblr, is revamping its video platform and announced that it would get in the game of original TV-like programming. Now it also has to be profitable.
Alibaba's IPO also poses a slight threat to Amazon. If the e-commerce company can find success out of China, it could become the world leader of online commerce.
What is Alibaba's company culture like?
Fast Company did a fascinating in-depth look at Alibaba's unique company culture, which describes it as "Silicon Valley company refracted through his unique Chinese lens." A section about Jack Ma, Alibaba's CEO, explains that Ma had the idea after visiting the U.S. for the first time.
Ma was a school teacher, who never lived abroad, and as lore has it didn't use a computer until 1995 when he visited the U.S. After the company was founded, the leaders went on a tour of successful companies. According to Fast Company Ma "organized Alibaba around six core values: customers come first; the embrace of change; integrity; passion; commitment to your job; and teamwork and cooperation."