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China Trade News
. Sun was
impressed by China Pages and invited Jack to give a lecture about the Internet to
his colleagues. Afterward he published a front-page article on Jack and his
company.
While Jack was good at gaining publicity, China Pages still wasn’t winning
much business, and its efforts to open doors with the central government came to
naught. In July 1996, China’s national broadcaster, China Central Television,
broadcast a documentary called
Ma Yun the Scholar,
which showed Jack being
rebuffed by a government official. The documentary was produced by Fan
Xinman, married to the famous director Zhang Jizhong, who has brought a
number of Jin Yong novels to the screen. Fan was also from Hangzhou and
sympathetic to Jack’s cause. As she filmed Jack getting shown the cold shoulder,
Fan became increasingly concerned for Jack’s prospects: “He no longer had his
base in Hangzhou, and was crushed in Beijing. He was almost bankrupt.” In the
documentary, through a window to the Beijing streets outside, Jack made a
resolution to himself: “In a few years, you won’t treat me like this; in a few
years, you will all know what I do. And I won’t be in dire straits in Beijing.”
The problem for China Pages was that it really was just a directory. The site
was pretty rudimentary, merely listings of a company’s products for sale. There
was no way for prospective customers to make purchases online, so there was a
limit on what China Pages could charge for its services.
8
Squeezed Out
China Pages was running out of cash to meet its payroll. Switching sales staff to
commission-based pay relieved the pressure for a while, as did a 10,000-yuan
contract from a client in the textile industry. But China Pages was in a
vulnerable state. Yet things were about to get much worse. The company that
had worked with China Pages to build the Zhejiang government website,
Hangzhou Dife Communication, made a bid to take over the company. China
Pages was a small, privately owned company, but Hangzhou Dife was a unit of a
powerful SOE, Zhejiang Telecom. In February 1996 the two entered into a joint-
venture, Dife-Hope. Dife had a 70 percent stake in the venture, investing 1.4
million renminbi ($170,000). Jack would remain the general manager and China
Pages would hold the remaining 30 percent, which was valued at 600,000
renminbi ($70,000). At the time, this seemed like a significant achievement for a
tiny, cash-strapped company. Zhang Xinjian, then an official with Hangzhou
Telecom, termed it the first merger and acquisition transaction in the history of
China’s Internet; local media
9
provided positive coverage of the joint venture.
But the reality was a lot more sinister. Jack had discovered that when
working with China Pages on the Zhejiang government website, Dife had
registered the domain name www.chinesepages.com, very similar to his own
venture’s www.chinapages.com, and a new company called “China Yellow
Pages.” Yet because Dife was a subsidiary of a powerful SOE, Jack couldn’t
fight back. Gritting his teeth he had to give interviews with local media lauding
the new venture: “The establishment of Dife-Haibo will further strengthen China
Pages.” He concluded by saying, “We have every reason to believe, with the
right policies of the Party and the State, and with the tremendous support from
every walk of life in the society, China Pages will surely achieve great success.
China’s information high-speed train will be faster and faster!”
Years later, after Alibaba had become successful, Jack was free to comment
on the experience. China Pages was dwarfed by its new partner, and while Jack
was the general manager, the position turned out to be of little value. “When the
joint venture was formed, disaster followed. They had five votes on the board,
and we had two. Whenever there was a board meeting, whatever ideas I put
forward, if one of them voted against it, the rest of them followed suit. During
five or six board meetings, none of our ideas were passed.”
Jack had lost control of his pioneering venture: “At that time I called myself
a blind man riding on the back of blind tigers. Without knowing anything about
technology or computers, I started the first company. And after years of terrible
experience, we failed.”
The China Pages episode provided him with some important lessons, as
well as good material for his speeches, such as, “It is difficult for an elephant to
trample an ant to death, as long as you can dodge well,” and “With good
strategies, you will definitely survive. To this day, I’ve realized one thing: Don’t
be nervous if you face huge competition in the future.” He would later draw on
his experiences when taking Alibaba into battle against eBay, in the David
versus Goliath struggle that would raise his profile on the global stage.
Jack also points to China Pages as influencing the way he would structure
his subsequent ventures: “From then on, I have held a firm belief: When I start
businesses in future, I will never hold the controlling stake of a company,
making those controlled by me suffer. I will give plenty of understanding and
support to lower levels. I have never once had a controlling stake at Alibaba. I
am proud of this. I am the CEO of the company, because I lead it with [my]
wisdom, courage, and resourcefulness, not capital.”
In November 1997, Jack convened an off-site meeting with the China Pages
team in Tonglu, announcing that he was giving up his stake in China Pages and
moving to Beijing, leaving his partner He Yibing as CEO.
Jack’s invented quote that the Internet would change everything was right.
The problem was he had launched his venture too soon. Jack put his dreams on
hold, taking a job in Beijing at a unit of the Ministry of Foreign Trade and
Economic Cooperation (MOFTEC). There he was like a fish out of water,
counting the days until he could jump back into the entrepreneurial sea of
China’s Internet, which was about to get a whole lot bigger.
Chapter Six
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