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Alibaba is not Facebook

China's biggest e-commerce company Alibaba is poised to become one of the biggest technology companies in the world, but don't expect it to replace American household names any time soon.

Little known to consumers outside Asia, Alibaba is like a mash-up of Amazon, eBay, and Google. It operates dozens of websites, or marketplaces, that connect millions of companies doing business in and with China. It employs 20,000 people and has interests in online payment technology, mobile software and internet TV. Like Google, it makes its money mostly from advertising.

Alibaba's part offspring Sina Weibo, known as China's Twitter, has 129 million monthly active users, almost entirely in its home nation, falling short of Twitter's 230 million users worldwide.

Its biggest website Taobao features about 760 million product listings from 7 million small business sellers. Its massive online shopping mall Tmall is where big brands, like Nike and Apple, pay fees and commission to sell products from their own stores, similar to the eBay model.

So it's no surprise the company this week kicked off what could be the biggest US stock listing in two years, planning to raise $US15 billion in New York later this year. At a possible valuation of $US200 billion, it would eclipse Facebook's listing and make it the world's second-biggest internet company, behind Google.

It would also deliver a massive windfall for Yahoo whose balance sheet is being propped up by its 24 per cent stake in Alibaba.


Alibaba's revenue in its most recent quarter was $US1.78 billion, up 51 per cent from last year, generating a net profit of $792 million.

Despite this success, a looming stock listing, and obvious attraction to foreign investors, it still doesn't pose a credible threat to Amazon, Facebook and other players in the US or developed markets, according to Beijing-based technology commentator Bill Bishop.

Winning over Chinese consumers is a completely different proposition to winning over their western counterparts.

"It's the same reason why foreign companies fail in China, there's a very different culture and set of ways you operate a business," said Bishop, who also publishes the Sinocism China Newsletter.

He said it has to still fight off challengers at home, namely WeChat a popular social networking service used by an estimated 300 million mobile users owned by Chinese company Tencent Holdings.

"If I were an investor in the public markets, I would be concerned [Alibaba] it's putting its efforts overseas. Its future dominance at home is not assured, there are huge challenges, especially in mobile. It has a lot of work to do to fend off Tencent."

Forrester analyst Wang Xiaofeng said Tencent represents strong competition to both the Alibaba Group and Weibo, which is fast losing users to WeChat.

"Sina Weibo's commercial value has progressed during the past few quarters, mainly because of the increase in ad revenue after Ali Group's investment. However, Sina Weibo's user activity is not as strong as it was at its peak, partially due to the increasing competition from WeChat."

Bishop had a much more dire prediction.

"Weibo's plans to expand internationally have always been a joke. Alibaba is a world class company, they may be cashing in at their peak but they have brilliant leadership. Weibo, I think, looks much more like ... it's past its peak."


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