Jack Ma

#1In 2003, Jack Ma was preparing to challenge eBay, one of the biggest e-commerce companies in the world.

#2There was an awkward problem. His new marketplace barely had anything for sale.

#3Taobao didn't yet have enough sellers or buyers to feel like a real market. Early employees brought in belongings from home, listed them on the site, and traded with one another. Accounts from the period even describe the team going out to find more things to sell when their own supply ran thin.

#4It was a remarkably small beginning for a fight with a global giant.

#5And the man starting that fight had only encountered the internet for the first time eight years earlier.

#6English had been opening doors for Ma long before the internet did.

#7As a teenager in Hangzhou, he sought out foreign tourists so he could practice speaking with them. He offered free tours of the city and kept doing it for years. Along the way, he formed a lasting relationship with the Australian Morley family.

#8Ma later said those conversations exposed him to ideas that didn't always match what he had learned at school or at home.

#9After college, he became an English teacher. He didn't stay content with that path forever. As he began looking toward business, he collected plenty of rejections, including the famous KFC story that he would later tell repeatedly himself.

#10That chronology matters. Ma didn't become a teacher because nobody else would hire him. He was already teaching when he started looking for another life.

#11In 1994, he opened a translation agency. The following year, work took him to the United States.

#12In Seattle, Ma encountered the internet for the first time. He wasn't comfortable with computers, but he tried a search anyway. One of the words he later remembered typing was `beer`.

#13Plenty of information appeared.

#14What barely appeared was China.

#15Ma put some simple information about China online and received responses from overseas. He hadn't suddenly worked out the future of global e-commerce. He had noticed something much more immediate.

#16China was missing from the internet.

#17He went home and started an internet company.

#18It was called China Pages.

#19The idea sounded straightforward enough. Put Chinese companies online, and customers overseas might be able to find them.

#20Then Ma tried to sell it.

#21Many prospective customers didn't understand the internet in the first place.

#22So Ma and his small team went from business to business. They gathered company information, took photographs, translated material into English, and worked to get it online. At one hotel, Ma proposed creating a homepage for free and getting paid only if guests actually showed up because of it.

#23Months passed without much happening.

#24Spotting an empty market wasn't the same as finding customers ready to pay for it. Before Ma could sell an internet service, he often had to explain what the internet was.

#25And he wasn't building China Pages alone. People such as He Yibing, who taught computing, supplied skills Ma himself didn't have.

#26Eventually, arrangements involving Hangzhou Telecom left Ma with less control over China Pages than he wanted. His first internet venture didn't become the company he had imagined.

#27But the problem that had drawn him into it hadn't disappeared.

#28China was full of small businesses with limited ways to reach buyers abroad.

#29That was the problem Ma came back to.

#30In 1999, Ma gathered a group of people inside his apartment in Hangzhou.

#31Alibaba began there.

#32The scene is sometimes flattened into a legend: Ma gives one electrifying speech, 17 friends abandon secure lives, and a giant company is born.

#33The relationships were messier and more interesting than that.

#34There were 18 founders including Ma. His wife, Zhang Ying, was among them. Others had already worked with him through earlier ventures or during his time in Beijing.

#35They weren't following a man whose every idea had already worked.

#36Some of them had watched the earlier attempts go wrong.

#37And still, they came back.

#38Alibaba wasn't chasing an entirely new problem either. Once again, the idea was to help small Chinese businesses get online and connect with buyers beyond China. It was a much larger attempt at a problem Ma had already tried to solve with China Pages.

#39This time, investors arrived. Alibaba expanded quickly.

#40Then the money created a new kind of trouble.

#41Alibaba pushed overseas, hired abroad, and began behaving like a global company while its business model was still unsettled.

#42Then the dot-com bubble burst.

#43The era when internet companies could attract money simply by promising enormous growth was ending. Alibaba had to retreat. Overseas operations were cut back. Employees lost their jobs. The company that had been racing outward turned its attention back toward China.

#44There was another problem waiting at home.

#45Alibaba had users, but it still didn't have a reliable way to make money from them.

#46A huge free membership base wouldn't keep the company alive forever. Alibaba began building paid services that helped Chinese exporters become more visible to overseas buyers.

#47Ma later described the ambition for 2002 in almost comically modest terms.

#48Make one dollar in profit.

#49Around this period, Alibaba crossed into profitability and found a way to survive.

#50Ma had already lost control of one internet venture. Now Alibaba itself had nearly been undone by expanding too fast. At last, the company was learning how to make money.

#51So the obvious move would have been to protect what it had.

#52Instead, the following year, Ma opened another front.

#53China already had a powerful consumer-to-consumer marketplace: EachNet.

#54Then eBay acquired it.

#55eBay brought money, technology, and a marketplace model that had already worked around the world. Yet it wasn't quite a direct rival to Alibaba at the time.

#56Alibaba's core business connected businesses with other businesses. eBay and EachNet were strongest in a market where individuals sold to other individuals.

#57Ma worried about what could happen next.

#58A casual seller today might become a small business tomorrow. If eBay captured those people first, it could eventually move toward territory Alibaba cared about.

#59So Alibaba decided not to wait.

#60A small team was assembled in secret. One of the people involved was Sun Tongyu, who had been with Ma since the China Pages years.

#61The team didn't move into some impressive new headquarters.

#62They went back to the apartment where Alibaba had started in 1999.

#63The same place that had housed one startup now became the hiding place for another.

#64That project was Taobao.

#65Taobao let sellers list without paying the fees associated with eBay's model.

#66That choice looked strange if you'd watched Alibaba's previous crisis. The company had just learned that attracting free users without making money could be dangerous.

#67But Taobao had a different problem.

#68Alibaba needed to monetize a market it had already built. Taobao first needed a market at all.

#69Free listings helped. They didn't solve everything.

#70Once strangers began meeting online, another question appeared: why should they trust one another?

#71Would a buyer send money to someone they'd never met? Would a seller ship an item without knowing whether payment would arrive?

#72Taobao gave buyers and sellers ways to talk directly before a transaction. They could ask questions, check details, negotiate, and get some sense that a real person was sitting on the other side of the screen.

#73Then came Alipay.

#74Instead of sending money straight to an unknown seller, a buyer could place the payment with an intermediary. The seller received it after the buyer got the goods and confirmed the transaction.

#75Taobao wasn't merely trying to make eBay cheaper.

#76Its team kept asking what was stopping a transaction from happening at all.

#77eBay was hardly passive.

#78It spent heavily in China and struck advertising agreements with major internet portals, including arrangements that restricted competing ads. The biggest online roads were becoming harder for Taobao to use.

#79So Taobao looked elsewhere.

#80It advertised through smaller websites. It used television. When one route was blocked, the team tried another.

#81When users wanted to talk before buying, Taobao leaned into direct communication. When they were afraid to send money, Alipay addressed the trust problem. When major advertising channels were difficult to access, Taobao searched for different channels.

#82That doesn't mean eBay simply ignored China or failed to notice local needs.

#83It had acquired EachNet, already a strong Chinese company. It invested heavily. It employed local people and developed payment tools of its own.

#84But eBay had something Taobao didn't.

#85A global system that was already successful.

#86That was a formidable advantage. It could also make rapid local changes harder. Taobao had far fewer global rules or legacy systems to protect.

#87When the problem changed, the product could change with it.

#88The numbers began to turn.

#89In 2003, eBay and EachNet were far ahead in China's consumer-to-consumer market. Within a few years, Taobao had moved into the lead.

#90Ma later framed the contest with a memorable image: eBay was a shark in the ocean, while Alibaba was a crocodile in the Yangtze River.

#91The point wasn't that the crocodile had to become a better shark. If the fight happened in the river, the company that understood the river had an advantage.

#92There's an important complication, though.

#93Taobao did not remain a penniless underdog throughout the fight.

#94In 2005, Yahoo invested $1 billion in Alibaba. The financial imbalance of 2003 was no longer the same by the later stages of the contest.

#95Still, the market had turned.

#96In 2006, eBay moved away from operating its China business in the same direct form and shifted toward a joint venture with TOM Online.

#97When the fight began, eBay already had the market.

#98Taobao barely had enough merchandise to fill its own pages.

#99A few years later, their positions had reversed.

#100When Jack Ma first saw the internet in 1995, he didn't have Alibaba mapped out in his head.

#101He had noticed one missing thing.

#102There wasn't much Chinese information online.

#103He tried to fill that gap with China Pages, only to discover that many potential customers didn't understand the internet. Alibaba attracted users, then discovered it didn't know how to make money from them. Taobao opened, then discovered it didn't have enough sellers or buyers. People arrived, then discovered they didn't trust one another. The company tried to advertise, then found important channels difficult to access.

#104One gap kept revealing the next.

#105And Ma wasn't filling them alone. He Yibing was there early. Joe Tsai helped bring financial and organizational discipline to Alibaba. Sun Tongyu and the Taobao team built the marketplace. Ma's wife and colleagues from earlier ventures stayed in the story as well.

#106The path from that first internet search in 1995 to the fight with eBay wasn't a straight line drawn by someone who knew the answer in advance.

#107It was a succession of missing pieces.

#108Each time one appeared, Ma and the people around him had to figure out what belonged there next.