The New Internet Economy: A Chat With Alibaba CTO Wang Jian
Don’t compare Chinese e-commerce company Alibaba Group to Amazon, eBay, Google, or other U.S. Internet giants. Think bigger. Think Walmart.
Yet even Walmart doesn’t quite capture the scale or nature of Alibaba’s operations. To CTO Wang Jian, who visited Seattle this week, Alibaba provides such a fundamental, all-encompassing service to the modern economy that it’s competing with electricity—at least figuratively.
In the coming year or two, Alibaba is expected to embark on what could be an epically large U.S. public stock offering, which could value the company somewhere north of $150 billion.
Before joining Alibaba, Wang was assistant managing director at Microsoft Research Asia, and a former psychology professor. Now he and other executives are visiting the U.S. to help Americans learn just what Alibaba is and does.
We were informed in advance of our interview that Wang was not here to talk about the IPO, but he did share his thoughts on a wide range of topics, from cloud computing to innovation, freedom, and the Internet in China.
Today, the business-to-business website that former English teacher Jack Ma and 18 others began in a Hangzhou, China, apartment in 1999 has expanded into an Internet conglomerate. Alibaba is an e-commerce company, a big data company, a technology platform company, and, most crucially, Wang says, an innovation company.
The Chinese giant—in which Sunnyvale, CA-based Yahoo (NASDAQ: YHOO) has a 24 percent ownership stake—is actually made up of some 25 discrete businesses, and provides platforms for virtually every permutation of global e-commerce: Companies looking to have their products manufactured can find producers in China and elsewhere on Alibaba.com, an online marketplace that is one of the original businesses, and now has buyers and sellers in 240 countries and regions. Some 20 percent of the buyers are in the United States, and a growing number of U.S. sellers are also using the platform to showcase their products in China. Washington-state cherry growers, for example, are using the company’s platform and Alibaba logistics services to express-ship their freshest Bings and Rainiers directly to Chinese tables.
Consumers in China shop for products from international brands on Tmall.com, and they “treasure hunt” on Taobao.com, a consumer-to-consumer marketplace. Meanwhile, AliExpress is Alibaba’s nearly four-year-old marketplace geared for buyers outside of China.
Most of these transactions are carried out over Alipay.com, a payment platform with some 800 million accounts. The company is pushing more airlines and hotels to accept payment over Alipay, catering to the growing ranks of Chinese tourists.
It’s all supported by a technology portfolio including a cloud computing and data management business, mobile operating system, logistics services, search engines, and more. That’s what Wang runs.
The potential IPO is just one of many things that could make the sprawling company a household name in the U.S. In our interview, Wang discussed Alibaba’s contemplation of an expanded research and development presence in the U.S.; its interest in investing in U.S. startups; its ambitions to reach English-speaking customers; and the story of how Jack Ma first saw the Internet, right here in Seattle.
What follows has been condensed and edited for clarity.
Xconomy: What’s the main purpose of your visit?
Wang Jian: As the company grows, we thought it would be better to get to know more and more people around the world, instead of just focusing in China. So a year ago, we decided actually we should have some events in the States. So we did our first in Silicon Valley last October, and so this is our second time. It’s a very general purpose, just to make sure we have a kind of technical forum to get people to know more about Alibaba. Also it’s a good opportunity for us to get to know more people.
X: It’s obviously a company with a broad array of activities. In your interactions with people during these forums, what are some of the bigger misconceptions they have when they think about Alibaba that you’re trying to adjust or correct?
WJ: People would like an analogy like, “Alibaba is like Amazon.” It’s not. It’s totally wrong.
The second thing is, because we are so successful in our business, a lot of people know Alibaba because of some of the numbers we have, like what we did for the Nov. 11 events [when more than $5.7 billion of sales occurred on the company’s platforms during what is known as Singles’ Day, a shopping spree that has become something akin to Cyber Monday]. But—the best part of my job—they probably ignore the technology we’ve grown in our company.
X: Seattle is establishing itself as one of the world’s cloud computing capitals, thanks mainly to Microsoft, Amazon, and the research at the University of Washington. That’s a part of the Alibaba business that you led from its inception until last September. What does Alibaba Cloud Computing look like? How does it compete with the big players people might be more familiar with here?
WJ: When we started our cloud computing business, we are not [really doing it] because we know somebody else is doing it. What we are really competing with is Walmart. Actually, it’s not Walmart itself. We view [ourselves] as an Internet economy, and we view Walmart as more like traditional economy. So basically it’s the new economy competing with the old economy.
If you look at Walmart, or the traditional economy, you can see that Walmart changed the manufacturers in a very broad sense. If you think about traditional manufacturing, you really can see that electricity played a very important role in that. You can see that without electricity, as a utility, there’s no such company called Walmart. If we do believe the Internet economy is the future of the world, then we convinced ourselves actually that computing as a utility is really the power for the future Internet economy. So that’s how we view cloud computing.
When we started, we believed that. Actually, when I started the Alibaba Cloud Computing company, I was thinking about whether we should call it cloud computing or not. I don’t think cloud computing is the right word to capture the essence of what I described. I was thinking about whether we could have a name for the company like General Computing, just like General Motors.
I think our competition is not really the direct competition with AWS or Microsoft. The challenge for us is how we can support this Internet economy. Again, we are competing with electricity instead of with the other cloud computing services.
X: Alibaba Group’s businesses are broad and diverse, organized into some 25 business units. How do you manage technology strategy across such a large organization?
WJ: Thinking about electricity, if you want to have an analogy, you can see that electricity in the States is not different from electricity in China. Mainly it’s the same. The only difference is in the voltage, and the plug, but that’s not really the big deal. So, you can see that computing is the same, fundamentally. The only difference is just the plug and some voltage.
That’s good for some businesses. Right now, the different plugs and also converters is a big business. But it’s a waste of resources for the world. So what we need to figure out is, OK, what’s the best way for us to have the general computing supply to support for different businesses, without different plugs and different voltages. That’s basically what I’m doing. What I really push in the company is that we have a shared computing infrastructure. Every software company knows that. It’s just basically whether you are determined to do it.
X: As a data-driven company, how does Alibaba make decisions to move into new business areas?
WJ: In a strategy meeting that we had in 2008, we defined Alibaba as a data company, not just an e-commerce company. It was a long time before big data becomes a buzzword. Before we had this word called data, another buzzword is information. When you’re talking about information, you’re really talking about the second-hand thing. Raw data is more important than something that is digested by somebody else.
The second thing is—why we think we are a data company instead of an information company—we know that actually we just provide a platform and infrastructure for the people to use data. We believe actually that the person who uses the data is smarter than us [and] they can get much more useful information from the data that we have.
The third thing is, we believe data has to be exchanged to get more value from the data, just like the money has to [flow] to get more value from the money.
In terms of the business, we strongly believe that if you just use the data to optimize your existing business, it is not enough. It’s still not big data. The value of data is actually to help you create something new, you never knew before.
X: The company has as one of its top goals “to become the first platform of choice for sharing data.” In the U.S. nowadays, that kind of a goal necessarily brings up a discussion about privacy. How big of a concern is data privacy for your customers in China?
WJ: I think the privacy is always an issue. Even without the big data, it’s an issue. I always say if you move from your village to your apartment, actually you are losing your privacy. Basically, everybody knows you now. Privacy is not just a problem of the Internet, it’s everywhere. But you chose to lose your privacy because of convenience, because of some other benefit. Certainly we need to keep the privacy for our customers. But I would say, even more important, what’s the value you bring to your customers?
X: Which company is a bigger competitor to Alibaba now, Tencent or Amazon?
WJ: I think the company with the most innovation is going to be the most competitive for us. I don’t think that actually, for a company like Alibaba, we are really competing with other companies in terms of the business, but basically we are competing in innovation. Who is the company that actually innovates the most?
X: Alibaba is hiring in some high-demand specialty fields, such as data scientists and machine learning engineers. As you look for that talent, are you planning to open any additional engineering or research centers in the U.S.?
WJ: When I first started our cloud computing company, we did have a very small R&D group in Silicon Valley. So, we [would] definitely consider that. Actually the No. 1 reason to have a team in the U.S. is not just because we want to have a couple people, [but] because we want to bring a different perspective into the company.
The thing that really surprised me, at least from my very short experience in the last three days, I really feel that Seattle is kind of the hub for online innovation. That’s the best way for me to describe it. So I think it might be good [to open an office here focused on R&D]. This is not the purpose of my trip, but after these days, I may change my mind and seriously consider it.
X: How does Alibaba interface with the U.S. startup and innovation community? Are you engaged in anything like seed-stage investing, company or technology incubation, or acquisitions?
WJ: Yes, actually, we just formed a team almost six months ago, a U.S. team that’s very much focused on investments in the United States, in particular startups. Their offices are in downtown San Francisco.
X: What is their mandate?
WJ: For us it’s just a learning experience. We just started that. A few months ago we invested in a company called Quixey. [Alibaba led a $50 million Series C round in the app search engine company based in Mountain View, CA.] I don’t think that we have a specific number or a specific agenda. But it’s how we get to know the innovation here, get to know the people here, get to know the companies here.
X: Do you encourage third-party developers to develop on the broad Alibaba platform? Are there APIs [application programming interfaces] that you publish?
WJ: Yes. Fundamentally, Alibaba is a platform company, for the whole business. Even with our e-commerce platform, we are not like Amazon. We don’t have our own inventory, our own logistics facilities. Basically, we’re a platform. Our platform connects to the logistics companies. For our cloud computing, we had a developer conference last October. About 5,000 people came to our conference. It’s a lot.
By saying that we are a platform company, basically we are an API company. People interface with us through the APIs.
X: With AliExpress now operating in English, do you see an untapped market in English-speaking customers here in the U.S. and elsewhere?
WJ: Really the beauty of the Taobao is the sellers. There are more than 7 million sellers on that, and also all the items in our database. It’s not just the website, Taobao. It’s really the back end of the Taobao is the beauty. We believe that’s not just for China. Right now, actually, we are the biggest e-commerce company in Russia, because these sellers and these products and items come from Taobao. AliExpress is just another way to explore the power of these sellers. Naturally, it’s easy for us to extend to the English-speaking world. I would say that’s just our early effort of that.
X: I understand Jack Ma had one of his earliest experiences with the Internet in Seattle. Do you know that story?
WJ: The true story is that Jack Ma visited Seattle. I’m not sure the exact date. It’s the very early days of Jack Ma. He visited Seattle downtown. I can’t name the building, but I’ve been to that building with Jack Ma [four years ago]. [On his first trip] that was the first time he saw the Internet. He was really inspired by what he saw. He actually met an American couple [from Seattle], and they showed him the Internet. And he decided he would do something in China. But at that time, only a very few people know the Internet. When he started his first business, he had to set up a website in the United States, and nobody in China could access it. He had to ask somebody to print that website, and send it back to China to show the people in China. That was the very early days of thinking about that. But, definitely by visiting Seattle, and first seeing the Internet, he was a true believer of the Internet.
X: The Alibaba story, complete with its iconic founder working out of an apartment for the company’s first five years, sounds like it comes right out of Silicon Valley or Seattle, rather than out of China, at least up until now. What is the climate in China like now for technology entrepreneurship and innovation?
WJ: We have provided a cloud service in China, and every customer you see is a young Jack Ma. Just two years ago, there are young guys that started a company in China called Changba. It’s basically a karaoke program on mobile phones. People could run a karaoke competition with a mobile phone. It’s reached like 30 million users in a year or so, and it’s running on the cloud. All these people, you can see the energy and entrepreneurship. It’s much better. That’s why the cloud is important.
X: There’s commentary that you see in the newspapers here from time to time, this U.S. view that some people hold that China will struggle to become the world leader in innovation if it doesn’t encourage greater freedom of expression and critical thinking. Do you have an opinion on that? Is that a wrong view and have things changed more than people realize?
WJ: I can’t say if it’s a wrong view or not. But I definitely can see that actually, people are really getting more innovative, and you see more innovative companies, and you definitely can see the dynamics of that. It’s just changing. That’s probably more important than anything else.
One of the reasons for us to provide a cloud computing service in China is to give people the raw infrastructure for doing innovation. I think with the Internet, it solves a lot of problems that we had before.
Certainly, it takes time. The world is not that flat right now. It just takes time. The world is getting real flat in terms of innovation.