The business world has been bustling with excitement over the initial public offering (IPO) for Alibaba, the internet shopping giant of China. The buzz is understandable since the Alibaba stock rose 38 percent in its first day of trading. The sale raised $21.8 billion for the company in what is currently the largest tech IPO ever (though this record gets broken every other year or so). Prior to the IPO, many marketers may never have heard of Alibaba and it may be tempting to think this news is of no value to marketers in America. However, the Alibaba IPO is important to internet marketers and here are four reasons why it’s wise to pay attention to the rise of the company.
Alibaba is Poised for Globalization
Though most Americans know little about Alibaba, the company is huge in China. According to some estimates, nearly 80 percent of online sales in China pass through the site. The company made saw $248 billion in sales last year, which was more than Amazon.com and eBay combined. The company has already made some inroads into the American economy. In the past year Alibaba has invested in American tech start-ups working on ride sharing, messaging, delivery services, sports apparel, antique furniture and video games. Alibaba also launched the invite-only shopping site 11Main.com, aimed at American buyers. It would take a lot to dethrone Amazon, Google and eBay in America, but Alibaba certainly has the size and international clout to become a major player on the global ecommerce scene.
Alibaba Is Involved In Wide Range of Businesses
It’s easy to ignore business news when the company involved doesn’t affect you, but Alibaba is involved in so many things, that marketers needs to keep an eye on what they’re doing, especially as the company expands. One of the reasons investors are so interested in Alibaba is that the company dominates many businesses in China that in many countries, like the US, would be run by individual companies. For example, Alibaba owns the websites Tmall and Taobao, which are similar to Amazon.com and eBay, but are more profitable. The company also earns money from transaction fees related to its various businesses through Alipay, which is like PayPal. There are even ads that users can purchase to make their listings on Alibaba stand out, which is similar to the promoted content on social media or paid search on Google. Since they have their hands in a lot of internet marketing related pies, it’s a good idea to pay attention to Alibaba.
Yahoo Gains A Huge Infusion of Capital
The Alibaba IPO may have positive effects for at least one American company. One of the big winners in the Alibaba IPO deal is Yahoo. Back in 2005 the company invested $1 billion in a stake of Alibaba. Following the IPO, the company is expected to make more than $8 billion for selling just a quarter of their shares in Alibaba. Due to federal regulations requiring a quiet period before the IPO, Yahoo’s plans for the money they make from the sale aren’t publicly known. Yahoo successful gamble on Alibaba has given them a lot of capital to use. But even if they only put half of the proceeds into improving Yahoo, marketers stand to benefit in the form of new technology, better features, and other advancements that would improve the usefulness of Yahoo as a marketing platform.
Yahoo Loses a Stock Advantage
The Alibaba IPO may prove to be a double-edged sword for Yahoo. Even before the IPO, Yahoo benefited from investing in Alibaba. Since American investors couldn’t directly buy stock in Alibaba prior to the IPO, many funds used investing in Yahoo as a proxy for investing in China’s growing middle class. With Alibaba now available on the NYSE, there’s a chance Yahoo may see a stock decline in the future. Of course, with an $8 billion windfall from the stock sale, it’s not a huge concern. This hasn’t stopped renewed talk from some analysts about Yahoo being bought out. It’s difficult to speculate what Yahoo would do in such an event, but it underlines the fact that the Alibaba IPO could affect the landscape of search engines in America.
Although the Alibaba IPO may not have huge immediate benefits or effects for internet marketers, it’s likely that the biggest IPO in American history is the start of something even bigger for the rest of the world. As Alibaba grows, it will have ripple effects on the economy and marketing of the rest of the world. And for more immediate effects, marketers should keep an eye on Yahoo to see how they will use the money they just made to improve their platform.
For more information on Yahoo, read this article with seven reasons to believe that Yahoo is still relevant. Also, for another example of how an IPO can affect the growth of a company, look at this article on the Twitter IPO from last year.