US tech giants are often known for its innovation, whereas Chinese tech giants generally feed on the success of those widely profitable companies by introducing a Chinese version of popular websites that we love in the western world. Take Twitter for example, Twitter was launched in March 2006. It wasn't until early 2009 that Twitter went viral and featured on the Oprah show. Chinese tech giant, Sina, sees the massive success of the platform, produced a nearly identical platform to capture the mass Chinese market. Of course, this is a common practice in the industry, Sina came from Yahoo, WeChat derived from Talkbox and Whatsapp, Renren came from Facebook etc.
Among those giants, Alibaba is much different from the rest. I am so often amazed by the platform and services they implement and how much different they are from the western counterparts. Amid to the long waited Alibaba IPO, below are 4 innovative businesses that not only sharply changed e-commerce business, but also disrupted other industries that no one thought possible.
1. Taobao （淘宝网）
Taobao did not follow the eBay model for easy success. Rather, Taobao scraped the transaction fee model, and the main source of revenue comes from Taobao Shop managers and their bargains for advertisement space. It made a lot more sense this way because seller is the receiver of wealth, thus they are more willing to pay. Additionally, Taobao is probably the biggest, widespread, most contagious C2C e-commerce platform that I have ever come across. I come across over 20 Taobao advertisements via Weibo and WeChat per day (as the result of my friends posting about their shops), and I was often asked to help friends advertise for their Taobao shop. That’s not all, people often make managing a Taobao shop their primary career. Featuring both high end and low end items, and operated by people that you know of, Taobao is truly a place for personalized shopping experiences.
2. Alipay （支付宝）
The by-product of Taobao’s success comes in a form of another widely success business line. Alipay is an escrow service that helps to protect payments for both buyers and sellers, thus eliminate the trust barrier for all transaction that takes place on Taobao. Alipay was extremely successful in inducing purchases and shift consumers away from credit cards. It attracted over 230 million users, but it didn’t stop there. Alipay tapped into the payment industry and directly competed with banks, Mastercard and Visa card with its massive user base by allowing users to pay for their utility bills with Alipay. As of 2012, Alipay account for 45.8% of the online payment. [1]
3. Yu’e Bao （余额宝）
The disruption of Alipay aided the rise and success of Yu’e Bao, which is a saving account that grants a 5% risk free interest on their savings. Yu’e Bao is literal translates to the leftover treasure, as the name implies, it keeps people’s money within Alipay account and give them a nice incentive for doing so. Yu’e Bao takes advantage of the big saver mentality and offers a return that’s way above any banks offers. The service is relatively new, but as the famous economist Dr.Lang predicted its TV show, its impact on the banking industry, especially on the big 4 banks, will be far beyond the impact of the local banks.
4. Kungfu （空付）
The next big disrupter, Kungfu, took the Google Wallet concept one-step further. Alibaba made a common modern Chinese impression “Swiping Face Card” possible, and made a piece of hardware that replaces wallets with faces. Planning on launching in June 2014, the system is expected to take place in convenient stores, supermarket and shops, and it aim to eliminate the use of credit card at those locations. With the introduction of Kungfu, consumers can leave their wallet at home, yet still able to pay for goods and services. Kungfu is far more secure than credit card and it also does everything that mobile payment can do, without the downside of running out of battery or losing your phone.
The battle between TomTom, Garmin and Google is a classic example of why you should consider adding Alibaba to your portfolio. When the GPS giants were fiercely fighting for their market share, consumer preference switched towards a easy to carry, simpler version of GPS offered by Google map. Google and Apple have been a leader of consumer preferences, Alibaba has been following the success stories of US tech giants, it innovates and changes people’s preferences in order to grow.
It started out as an e-commerce platform, then it entered payment and banking system, and now it is about to change the way that people use money. Alibaba contains the shopping pattern and preferences of over 230 million people, and processes $157 billion dollars worth of transaction, for a big data guy like me, they can do a lot with the data they have. If Facebook is worth $148 billion dollar at the moment, I would put my dollar towards Alibaba with a much higher valuation.
Let me know what you think about Alibaba on Nvest after the IPO, I would love to hear more about the opinion of the public.
Fred Zhou
Contact me at fred@nvest.me
