I Visited Alibaba, The $US100 Billion Chinese Internet Company Where 24,000 People Are Making Marissa Mayer Look Good

Marissa Mayer became the CEO of Yahoo on July 16, 2012. Since then, the stock has exploded from ~$16 to over $US35.

But while Mayer has done a remarkable job improving the working culture at Yahoo, hiring mobile developers, and redesigning the company’s wide array of products, she is not the only reason for Yahoo’s stock turnaround.

In fact, the main reason Yahoo stock is up so much is that, way back in 2005, Yahoo bought 40% of a tiny Chinese e-commerce company called Alibaba for $US1 billion.

Then, over the next six years, Alibaba turned into a massive hit.

In the spring of 2012, Alibaba bought a portion of its stock back from Yahoo for $US7.65 billion. When Mayer took over in the summer of 2012, she agreed to use some of that money to buy back Yahoo stock.

This financial engineering drove Yahoo’s stock price. So did Yahoo’s remaining stake in Alibaba, which continued to grow in value as the Chinese company’s market cap went from ~$50 billion in 2012 to a rumoured $US100 billion now.

Soon, Yahoo will be able to realise that gain. Alibaba is expected to IPO in 2014. When it does, Yahoo will sell all but 10% of its stake in the company, adding another few billion dollars to its bank account — money that will almost certainly fuel more share buybacks.

Despite its prominent role in Yahoo’s turnaround, Alibaba remains a mysterious company in the US. To remedy that, I visited the company during my recent trip to China.

Marissa Mayer took over Yahoo in July 2012.

Since then, the stock has exploded. But, really, much of the credit goes to Alibaba -- a Yahoo investment in China that has performed exceptionally well.

But what's Alibaba?

Alibaba is based in Hangzhou, a two hour flight from my base in Beijing

In China, Hangzhou is best known as a tourist destination, thanks to a beautiful lake called West Lake.

I flew to Hangzhou on a Monday morning.

Hangzhou has three million people, making it a small city for China. On the drive from the airport to the campus, I saw a homes like this one.

After a 25 minute drive, I arrived on campus. Check out the cool parking structures out front.

Just like in Silicon Valley, lots of employees come to work on bikes.

As we entered the campus through a shadowed passageway, I wondered what it would look like…

…it turned out to be a huge, massive complex.

There were little trucks ferrying things about.

There were little trams for moving people around, too.

The place was similar to Yahoo's Sunnyvale campus or the Googleplex in Mountain View, except…

…everything felt new…

…or still under construction.

Clearly, the place is growing fast.

In the middle of the campus, there is an estuary with walking paths through it.

We took this one.

In the middle of November, the temperature was in the 70s.

Just like Google with its Android statues, Alibaba has its own corporate mascots all over campus.

Here's one.

Here's another.

When we finally entered a building, we found this Lambourgini replica, built entirely from parts bought on Taobao.

My guide took me to a top floor to get a view of the whole campus.

24,000 people work for Alibaba -- more than Yahoo and Facebook combined.

We went to a room with this big array of monitors, giving live updates on traffic

Obviously, I don't know what most of the monitors were showing.

Here's a closer look at one, which seemed to show where in China usage was coming from.

These are some of the brands using Tmall to sell goods

We left the building, and walked through this pleasant courtyard.

Then we went into the middle building on this picture.

The floors are so shiny because there was a guy constantly mopping them.

Inside this building, there was a very popular Starbucks

It looked like any Starbucks in the world.

There was also a gift shop…

…and this florist.

Finally, we saw some Alibaba employees at work. The place was quiet.

On the walls, there were photos from company events -- like the annual wedding ceremony held at Alibaba HQ…

…or scenes from the company's annual employee talent show, held at a local stadium.

Big company-wide events are much more common in China than the US.

Here's another shot from the talent show. It's a big deal.

Employees rehearse for weeks.

This is a photo from when Jack Ma stepped down from the CEO job earlier this year.

Finally, I sat with a few executives and learned about the company.

Alibaba's main businesses are Taobao, a site where almost anyone can buy and sell goods…

…and Tmall, where offline brands can set up stores to sell to Chinese consumers.

There are two secrets to its success. The first is that Taobao is entirely free to use. There are no fees for buyers or sellers.

The second is that Alibaba blocks China's most popular search engine, Baidu, from searching Taobao and Tmall

That means if Chinese consumers want to shop, they start with searches on Taobao and Tmall.

Then, Alibaba monetizes those eyeballs, by selling search ads on Taobao and Tmall.

In a way, Taobao/Tmall is more like Google than eBay or Amazon. (Google makes all its money from commercial searches.)

Alibaba's biggest vulnerability is mobile. Until recently, it was developing mostly for the Web. Now it's building its own mobile OS and all products are mobile first.

That was it for my tour of Alibaba. This was my last view of the place.

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