Despite our failure in Berlin, our stops in London and Barcelona went better, and the international media were beginning to take a greater interest. In July 2000 we received a major boost when Forbes put Justin Doebele’s story about Jack Ma on the cover of the magazine’s “Best of the Web: B2B” edition. The coverage helped push Alibaba’s global recognition to a new level and gave us the credibility we needed to attract businesses to the site.
At the same time Alibaba’s website traffic continued to grow, as small businesses decided to try e-commerce. Each day we added thousands of new members as the website’s reach extended globally. Manufacturers posted their product listings on the site. And buyers from around the world were sending inquiries to the sellers. Although the site was little more than a message board for companies to post trade leads, it offered a cost-effective new way for importers and exporters to find each other. The company wasn’t generating any revenues, but the marketplace was growing along with Alibaba’s reputation both inside and outside China.
But while Alibaba’s growing reputation and traffic gave outsiders the impression we were on an upswing, the truth was that the organization faced a dangerous period of disarray. With Jack constantly on the road speaking at conferences and media events, and no chief operating officer to manage the company’s day-to-day functioning, there was a leadership vacuum. The company had grown too quickly, and chaos was beginning to pull it apart.
Routine meetings included as many as 30 people, each shouting louder than the next to get their voices heard. Staff members were free to set their own schedule, making it impossible to coordinate decisions. It was not uncommon for new employees to arrive at the company for their first day of work only to find they had no defined responsibilities or clear reporting lines. This created awkward situations, such as when one new employee sat at a desk for a week pretending to be working, too afraid that asking who his boss was might result in the elimination of his job.
As these operations spun out of control, Alibaba’s strategy was also in disarray. With growing pressure to develop a viable business model, the company launched a new initiative each day, trying to find a product idea that would generate revenues and cover the company’s growing costs. We tried banner ads. Revenue-sharing partnerships. Website development for small businesses. We tried everything, but nothing stuck. It was a race for revenue. And a race we were losing.
After watching the team in Hangzhou fail to find a product that customers would pay for, the international management team in Hong Kong decided we needed to do the next best thing—build what investors were looking for. As the Internet industry’s decline snowballed and Internet companies struggled to attract investors, the overwhelming consensus of the analysts at the leading investment banks was that, if you wanted to build a successful B2B marketplace, you had to build a platform that allowed buyers and sellers around the world to do end-to-end transactions. So, for example, if you were a sporting goods retailer in the United States, you could buy 10,000 tennis racquets from China with just the click of a button. Or, if you were an importer of kitchenware in Uzbekistan, ordering 2,000 coffee mugs from Vietnam would be as easy as ordering a book from Amazon.
In mid-2000 the heads of strategy for the Hong Kong team convinced Jack that, to create this all-encompassing platform for global trade, Alibaba would have to move its website operations from Hangzhou to Silicon Valley. “It’s where all the global Internet companies are located, Jack,” he was told. “If we want to build an English-language website for the whole world, we have to go where the skilled employees are.”
It seemed a valid argument. After all, there was no precedent for a global website to be run out of China. And, looking at his own team in Hangzhou, even Jack must have questioned its ability to compete with Silicon Valley talent. So he announced to the team that he would move Alibaba’s English website from China to California. “That’s the decision we have to make. Maybe it’s the wrong decision. But I always remember one thing: a wrong decision is better than no decision in Internet time.”
Soon thereafter a group of Alibaba’s core management positions were relocated to the United States. John Wu, the recently hired chief technology officer who had come over from Yahoo! US, was to head the US engineering team. Within months Alibaba had hired about 30 new staff members in the US office, working out of Fremont, California. The decision was portrayed to both staff and outsiders as a sign of Alibaba’s increasing globalization, but it ultimately proved to be a disaster, sending the company into a tailspin. Time, distance, and language differences made communication between teams highly inefficient. Just as the China team was waking up, the US staff was leaving the office. And before long Alibaba had grown into a two-headed monster, with each head going in a different direction. With a large advertising budget, growing staff costs to support the Silicon Valley office, and a lack of revenues to make up for it, Alibaba was running out of money. The company was in crisis. Something had to be done.