How Alibaba overcame Beijing’s crackdown to become an AI giant
On a cold November evening in Shanghai in 2020, the world’s largest IPO was abruptly canceled by Chinese regulators.
The technology giant’s fintech subsidiary was Ant Group Alibaba’s. The company’s founder Jack Ma, one of China’s most famous billionaires, was under scrutiny for comments that appeared to criticize the country’s financial regulators.
Four years of oppression on Ma’s empire followed.
Since the IPO cancellation, more than $400 billion in Alibaba’s value has been wiped out, despite a more recent rally. In the months after the failed IPO, Ma retreated from the public eye and Alibaba, China’s largest e-commerce player, was disparaged as management and structure changes bore little fruit. These moves were not characteristic of the company’s past prowess and were a far cry from its current position of strength.
But those who know Ma know never to take him into account.
“The hallmark of Jack and his personality is that he never gives up,” Brian Wong, former Alibaba executive and author of “The Tao of Alibaba,” told CNBC.
Wong appears in my new show “Built for Billions,” where I explore Alibaba’s most challenging moments and how it became one of the world’s largest tech companies and one of the most advanced AI players.
Understanding Alibaba
I’ve been involved in technology for over a decade, and much of my focus is on China. I lived in the world’s second largest economy for three years, from October 2018 to December 2021, when Alibaba went through this significant change. The company’s reach cannot be overstated since its humble beginnings in 1999 as a business-to-business online marketplace in the early days of the internet.
Now Alibaba’s business touches everything from food distribution to global e-commerce, from cloud computing to artificial intelligence. Nowhere is the company’s brand and scale more evident than on Singles’ Day, an annual shopping event pioneered by Alibaba that sees deep discounts and deals across its platforms. What was once a single-day sale has now become a longer event lasting several weeks.
Alibaba’s Singles’ Day was held in both Shanghai (which hosted a huge gala featuring celebrities and musical acts) and Its headquarters is in Hangzhou. The entire company jumped into action, as billions of dollars were traded on their platform in a short period of time. These experiences gave a real insight into the scale of the company.
Alibaba is sometimes compared to the US tech giant Amazon. But this isn’t an apples-to-apples comparison.
“Alibaba is now seen as a serious player in technology, not just an e-commerce company,” Duncan Clark, one of Alibaba’s early advisors and president of consulting firm BDA China, told CNBC’s “For Billions” program.
Edition and reinvention
Following Ant Group’s IPO cancellation, Alibaba, and indeed China’s entire tech sector, faced a reckoning. Beijing has begun to pressure domestic technology companies by tightening regulations.
One popular view was that Beijing was concerned about the power wielded by entrepreneurs in the country.
Ma’s empire relied on strict regulations and even An antitrust penalty of nearly $3 billion in 2021.
There was a level of soul searching going on at the company, which was now struggling with a tougher domestic market with a weak consumer base and increasing challenges from players like PDD and JD.com. How can Alibaba revive growth? So is Jack Ma completely done?
When I left China in 2021, I realized how fixated international markets were on Ma. It was as if his reemergence was a sign that Alibaba was standing with the Chinese government. For example, if Ma were spotted somewhere, Alibaba’s shares would jump.
This overshadowed what was going on behind the scenes. Alibaba had gone through one of the biggest restructurings in history. But this did not change the fate of the giant. Daniel Zhang, who replaced Ma as CEO several years ago and eventually became chairman, unexpectedly announced plans to resign in 2023. His successors were two respected veterans, current CEO Eddie Wu and President Joe Tsai.
They steady the ship, refocusing the company on its core e-commerce business and also investing in artificial intelligence. The results showed a sharp improvement in business, especially in recent quarters.
Is my mother gone for good? It looked like that. In February, Ma was among a handful of entrepreneurs who met with Chinese President Xi Jinping in a rare meeting.
“He’s in his early 60s now, but he’s still pretty energetic. He’s got houses and yachts and stuff. But one feels he’s not done yet,” Clark said.
Alibaba is quietly turning into an artificial intelligence giant
Amid the turmoil and boom, Alibaba was quietly investing in artificial intelligence behind the scenes. In fact, this has been a priority since 2016.
“Built for Billions,” said Mark Greeven, professor of management innovation at the International Management Development Institute. “The acceleration really happened in the covid years of 2019, 2021, when they started building their own base models and their own chips.”
When OpenAI’s ChatGPT hits the world in late 2022, Just a few months later, Alibaba was ready with its own AI offering.
Alibaba’s approach differed from some of its rivals in the US; instead, it focused on open-source or open-heavy AI models that developers could download and use for free. The company’s models are now among the most popular worldwide available to developers.
CEO Wu reinforced Alibaba’s commitment to restructuring as an AI company. In his first letter to employees after taking the reins, Wu called on Alibaba to return to its startup mindset and set two strategic priorities: “user-first” and “AI-focused.”
The focus on artificial intelligence has benefited the company’s cloud business. This also comes at a time when AI development is being framed as a race between US and Chinese companies, with Alibaba emerging as one of China’s key players.
“Wherever you look, whatever you touch, China is approaching its vision of dominating the AI race by 2030, with Alibaba joining and becoming a major player,” said China digital expert and investor Ashley Dudarenok.
