Alibaba: The House That Jack Ma Built pdfdrive com

Back to China
Kwan’s arrival heralded a new management structure that became known
internally as the “Four O’s”: Jack as CEO, Joe Tsai as CFO, John Wu as CTO,
and Savio Kwan as COO. To signal to the company how serious he was about
change, Jack divided his own office in Hangzhou in two, giving the other half to
Kwan.
Kwan slashed monthly expenses by as much as half, stepping up the “Back
to China” retrenchment. A joint venture in South Korea was scrapped and
Alibaba’s Silicon Valley presence drastically scaled back. Many of the higher-
paid foreign employees were let go. Expensive advertising campaigns were
abandoned and replaced with word-of-mouth marketing. Reducing expenses
overseas allowed Alibaba to increase its hiring at home, leveraging Hangzhou’s
deep pool of lower-cost talent. It rapidly expanded its sales team to focus on
promoting fee-paying services such as TrustPass, which provided credit
information and authentication services, and Gold Supplier, which gave
exporters in China their own presence on Alibaba’s English-language website.
For $3,600 they could use this to display their products and prices and be linked
to Alibaba’s search engine. Gold Supplier was explicitly designed to undercut
the $10,000–$12,000 in annual fees that Global Sources charged for its online
listings.
Despite the early promise from these new revenue sources, Alibaba was
taking a beating. Since it was still a private company the negative sentiment
couldn’t be measured in dollars and cents, unlike the three portals, whose shares
had by now been reduced to penny stocks. 
BusinessWeek
ran an article in April
2001 titled “Alibaba’s Magic Carpet Is Losing Altitude,” which concluded that
the “former professor will have to work hard to ensure his company doesn’t
flunk out.” The company had initiated a restructuring that it hoped would turn
things around, but in the years following the dot-com crash Alibaba was
resigned to a very uncertain future. Jack even floated the prospect of quitting, so
he could return to teaching before he turned forty.
In his darker moments, he took to comparing his struggles to those of the
revolutionary Mao Zedong after the Long March, even calling for a
“rectification movement” to set Alibaba on a new course: “Once many well-
known managers in America came to Alibaba to be vice presidents. Each of
them had their own opinions. . . . It was like a zoo at the time. Some were good
at talking while others were quiet. Therefore, we think the most important

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purpose of a rectification movement is to decide a shared purpose of Alibaba,
and determine our value.”
Alibaba’s reversal of fortunes had been dramatic, but it didn’t break the
bond between Jack and Joe Tsai. I asked Joe what kept him at Alibaba when
everything seemed so bleak. “Alibaba,” he explained, “was my fourth job. I
wanted this job to work.” Unlike the three portals, Joe also saw the advantages
for Alibaba of not having had an IPO. “I knew all of this was a bubble, and even
if we had gone public in 2000 we would have to live with the consequences, the
delivery. You would have had to grow into your valuation; it was a quick-buck
kind of thing.”
The dark days of 2001 and 2002 would later become part of Alibaba lore.
Jack later referred to the period in one of his pep talks to the team: “At that time,
my slogan was ‘Be the last man standing.’ Be the last person to fall down. Even
on my knees, I had to be the last man collapsing. I also believed firmly at that
time [that] if I had difficulties, there must be someone who had worse
difficulties; if I had a hard time, my opponents had an even harder time. Those
who can stand and manage will win eventually.”
In the years that followed the dot-com crash, Alibaba slashed costs and
found a way to steadily increase its revenues. Even though the venture capital
market had dried up completely, Alibaba was able to stand on its own two feet.
And thanks to a new business launched in the spring of 2003, it was about to
succeed on a scale that even Jack could never have imagined.

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Chapter Nine