The US IPO of China’s e-retail giant Alibaba – set to be the largest in history - is likely to avoid the fate that saw Facebook lose half its stock price in its first four months as a publicly traded company.
A key reason for that crash was the US company’s self-confessed lack of confidence about its mobile monetization strategy. By contrast, Alibaba has a strong mobile presence, with plans to expand its offerings in that area, and a clear idea of how to turn all that into revenue.
This is partly because, as Amazon knows, mobile access can drive increased shopping, whereas it has the opposite effect on Facebook’s main revenue stream, advertising. Alibaba’s current model of high-volume low-margin transactions could be poised on the edge of a global expansion, taking the fight to eBay and Amazon in markets where margins are far higher than in China.
Alibaba is expected to raise around $20 billion dollars with its IPO, making it the largest US public offering ever. The company decided to file in the US after its board member voting policies were rejected by the Hong Kong Exchange.
The comparisons with Facebook are unavoidable. The social networking giant filed for public offering with almost no mobile revenue and saw its stock price plunge. It now generates 59% of its ad revenue from mobile and has clawed back some of its share price. The saga reflects the importance of mobile broadband in bringing unconnected users online, and China differs from Facebook’s core markets as mobile devices are far more prevalent for internet usage, and consequent online shopping purchases.
Alibaba’s mobile business model
That means that the mobile business model Alibaba will bring with it is already on show in China. In June, it plans to offer a 3G service as an MVNO of all three state-owned operators (China just recently opened the market to virtual operators and compelled the network owners to support a certain number). As an MVNO, Alibaba will sell its mobile packages through its Taobao and Tmall sites, with transactions handled by its electronic payments affiliate spin-off Alipay.