Rebuilding the next Alibaba, Jack Ma’s glory and ambition

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At present, Alibaba Group has a market value of 200 billion US dollars. Last month, PayPal went public. Its domestic counterpart is Alipay, which is run by Ant Financial. Since PayPal is worth 50 billion US dollars, what about Alipay and its Ant Financial?

The next Alibaba is about to emerge. Can Jack Ma’s glory and ambition be realized?

This article will analyze in detail the next Alibaba - Ant Financial. The article is divided into five sections, starting with the origin of Alipay and the Ant Empire with it as its core.
1. The Birth of Alipay

When Jack Ma first started Alibaba, he was working with the enterprise side, and the bank provided VIP services for enterprise accounts, such as acceptance payment, commercial bills, etc. At that time, international business already had tools like PayPal, and even if the target effect could not be achieved, there were still international remittance services from banks to help enterprises solve these problems. In other words, when Alibaba was running, there was not much demand for payment tools.

However, when he started Taobao, Ma Yun faced a different situation, as it connected merchants and individuals. Individuals could not enjoy VIP services from banks, and the amount of related redemption business was too small, so banks simply disdained to do this business.

Alibaba started Taobao in the first half of 2003. At that time, eBay was in full swing and had already purchased PayPal for 1.5 billion US dollars. As the person who knew e-commerce best at that time, Jack Ma naturally knew the significance of this. Following suit, at the end of 2003, Jack Ma established Alipay-related businesses. Of course, localized innovation is indispensable. For example, based on the domestic situation, PayPal's preference for sellers was changed to buyers, and the acceptance payment charging model was changed to a free model.

This tool-like thing that Jack Ma did unexpectedly grew into the first basic business of Ant Financial - Alipay. In March this year, Jack Ma even proposed the DT era at the Guiyang International Big Data Expo, which largely depended on the large amount of data accumulated by Ant Financial.

Summary: Origin is a tool that has made Jack Ma’s Ant Financial and even the DT era possible. The history of Ant today originated from here.
2. Ant Financial is de-Ali-izing

According to the latest valuation, Ant Financial is worth about 50 billion US dollars; this valuation is similar to the current market value of PayPal. Obviously, this is not enough for Jack Ma.

To put it bluntly, Alipay is just PayPal, but Ant Financial's business scope is much broader than this. Please see the following figure for details:

Of course, its business logic will not be elaborated here.

If you think about it carefully, how can PayPal satisfy Jack Ma's Ant Financial? It is the next Alibaba, aiming for a market value of 200 billion.

If we analyze what they did, we can obviously find some clues. I have previously written about Alibaba's investment in China Business Network, which is a very good article. Of course, I have read some articles by other authors on the same topic.

For example, in the writings of Professor Wei Wuhui, he noticed that the main body of this round of investment was Alibaba rather than Ant Financial. At the end of the article (an article on his WeChat official account), he briefly talked about the reason why Alibaba was the main body rather than Ant Financial, mainly due to red political reasons.

The author noticed this information and read a lot of recent information about Ant Financial. He found a trend: Ant Financial’s public relations department is trying its best to “de-Ali-ize” news reports, that is, to distance itself from Alibaba. The motivation behind this is worth pondering. The author has roughly thought about the following reasons:

1) Policy factors

Due to the current domestic financial regulation, the country is essentially unwilling to open up too much. In the list of investors in the previous round of Ant Financial, we found "national" capital such as the Social Security Fund and China Development Bank Financial. In the past, the investors must have been top private equity or investment banks. This is incredible. Differences and abnormalities are often worthy of special attention, and there may be special circumstances.

This time, to be more precise, Jack Ma’s financial innovation is to ensure that these state-owned capitals can get a share of the pie, otherwise there will be nothing to be desired.

Yu'ebao opened a hole in the banking industry, and Hang Seng HOMS opened a hole in the securities industry. Who will be the next one? Want to innovate without state-owned capital? This is in China!

Moreover, the valuation of 50 billion US dollars is really low compared with PayPal. I even suspect that the transferee only knows about state-owned assets and no foreign capital, just to share the benefits and avoid being strangled.

The "de-Ali" approach is to tell everyone that Ant Financial has ambitions that are not limited to being under Alibaba. In the future, Alibaba and Ant Financial will be on the same level.

The author predicts that in the next round of financing, top private equity firms or investment banks will appear, but the valuation will be very high. It is impossible to buy into Ant at a low price. (Everyone knows the reason.)

2) Get rid of Ali’s entanglement

In Alibaba, Jack Ma's performance can be said to be "full of bad deeds", but in terms of business logic, he did nothing wrong. More criticism comes from the public's demand for the "moral purity" of star entrepreneurs like Jack Ma.

To put it jokingly, maybe Jack Ma "has no problem with major issues (commercial interests); but when it comes to personal conduct (moral purity), he is not very decent."

Creating an ant alone just changed this. Ma Yun's move is undoubtedly to show the public his "moral purity" again.

3) Create a single ant to absorb more resources

If Ant wants to develop and create a market value of 200 billion, it definitely needs room for imagination.

If we only focus on Alibaba Group, Ant will always be smaller than Alibaba. There will even be a day when Alibaba will grow slower than Ant. This is the reason why PayPal was spun off.

After the split, Ant Financial can serve more businesses and people, not just the Alibaba system, and connect with more resources. This will be of great benefit to Ant's growth in the long run.

4) Spin-off of comprehensive groups is more welcomed by the capital market

Alibaba is an e-commerce company while Ant Financial is a financial company, and the valuation methods of their businesses are different.

For many conglomerates, valuations cannot be high, such as Fosun, Ping An, etc. Of course, if you want to talk about Berkshire Hathaway, that is an exception.

The main reason for the low valuation is the issue of development speed.

"De-Ali-ization" means splitting up, which is a necessary step for Ant to achieve its valuation of US$200 billion.

Summary: The goal of “de-Ali-ization” is to solve some of the genetic problems of the Ant Empire. On the one hand, it solves political concerns, on the other hand, it links more resources, and of course, it also helps Jack Ma “establish morality” and get rid of his unfavorable reputation.
3. Seeking diversification of application scenarios, O2O runs through Ant Financial

After solving the problem of development genes, potential obstacles to progress have been eliminated. The next step is to solve the problem of how to develop. Based on some recent developments of Ant, the author has discovered some situations:

1) Expand application scenarios

Take Alipay as an example. In recent years, it has begun to invade offline payments on a large scale.

√ Expand financial management scenarios, such as Yu'ebao and Zhaocaibao

√ Promote payment and unmanned supermarket applications in offline supermarkets, allowing Alipay to enter more businesses and households

√ Large-scale application of Zhima Credit in consumer finance

Because the data of the central bank is not suitable for application in Internet finance, Zhima Credit is open to the public on the one hand, and also obtains information from partners on the other hand, and your data will become part of it.

√ Invested US$600 million in Paytm, holding 40% of the Indian version of Alipay

This is the periphery, which means that Ant is no longer limited to the domestic market, but has begun to go overseas and conquer all directions.

√ Alipay version 9.0 and later began to introduce social concepts

Diversified application scenarios make Ant popular among the public

2) O2O runs through Ant

√ Alipay application on Didi Kuaidi

√ Invest 6 billion yuan in Koubei.com, which is about to be scrapped

I want to analyze this incident for you. The current leader of local O2O is undoubtedly Meituan. Although it is currently under siege, the boss shows his own data to tell you how it works.

Baidu Nuomi, Li Yanhong is going to invest 20 billion to develop it (this fully demonstrates the importance of O2O); Dianping has Tencent as its godfather;

Meituan is not listed yet and is currently suffering from a lack of funds. Alibaba has invested in Meituan, but is not a controlling shareholder. Jack Ma's investment in Koubei, a previously abandoned company that is about to die, is undoubtedly an attempt to force Meituan to abdicate.

This move by Ma Yun is very clever, and it is similar to the strategy of besieging a point and attacking the reinforcements. Instead of directly forcing the controlling stake, it is carried out in a roundabout way.

The core of O2O is, on the one hand, the entrance; on the other hand, data and application scenarios. For Ant Financial itself, seeking to control Meituan is a must, because these are too important to Ant.

Summary: This section analyzes how Ant Financial has taken the current path and how it has obtained enough data through scenarios. This is of great significance for the next stage of the DT era.
4. Where do the resources come from when a small ant grows into an empire?

After analyzing what Ant is doing now, everyone can imagine that this business requires a lot of resources and financial support.

Let's analyze Jack Ma's history of success to understand how he did it:

√ In 1994, Jack Ma founded Haibo Translation Agency, which allowed him to get in touch with business for the first time and understand business. He was 30 years old at that time, and the translation agency is still surviving well.

√China Yellow Pages, the first generation of Internet entrepreneurship, in 1995, he had experience in Internet entrepreneurship, when he was 31 years old.

√In 1998, 34-year-old Jack Ma worked on a project for the government and learned how to deal with the government.

The above three experiences let Ma Yun know what business is, what entrepreneurship is, and how to deal with the government. This was Ma Yun’s earliest business experience, and it also laid the foundation for his later success.

√In 1999, Alibaba was founded, ushering in the era of e-commerce entrepreneurship.

√ In 2003, Taobao was founded. Due to direct competition with eBay, it faced the dilemma of lack of money. In 2005, Yahoo became the controlling shareholder of Alibaba with 1 billion US dollars plus Yahoo China, but this also laid the seeds for the subsequent Alipay incident.

At that time, Taobao was not valuable, but Alibaba was valuable. This is also the reason why Alibaba was able to go public in 2007. Alibaba has never lacked money since then.

This history tells us that Alibaba nurtured Taobao and later Tmall.

√At the end of 2004, Alipay was founded, and Ant Financial expanded around Alipay.

This detail tells everyone that Taobao and Tmall support Alipay and Ant Financial.

√It can be predicted that in the DT era, Alibaba Cloud and others will be nurtured by Ant Financial.

This is a bit like a three-stage rocket, always one layer after another. Of course, there are issues involving asset transfer, and even serious ones such as the Alipay split.

However, Ant Financial and Alibaba chose a compromise on this issue. The relevant contract states that before Ant Financial goes public, Alibaba Group will receive 37.5% of Ant Financial's pre-tax profits; once Ant Financial goes public, Alibaba Group can choose to terminate the "profit sharing" and thus receive 37.5% of the total value of Ant Financial at the time of the IPO.

Summary: Where do Ant Financial's resources come from and how are they cultivated? Its breeders are Taobao and Tmall, which are currently the NASDAQ-listed entity Alibaba Group.

The author even predicts that Alibaba Cloud may be spun off from Alibaba Group to form a new company. Its components include Alibaba Cloud, Zhima Credit, and the Chinese version of Bloomberg (for details, please refer to my previous article "Jack Ma Invests $200 Million in China Business Network, Sounding the Rally for the Chinese Version of Bloomberg", just reply "014" to view it). This is the legendary DT era of Jack Ma.
5. Some potential problems in the growth of the empire

Ant has grown to 200 billion US dollars, and Alibaba, the next NASDAQ-listed company, is also facing many problems. The author analyzes it below:

1) Policy and legal issues

Jack Ma’s business is so big now, and if he continues to expand it, he will face more political and legal issues.

Since the company follows the Party's instructions and continues to grow, it obviously faces problems with the relationship between government and business. Even if state-owned assets are allowed to invest and share a share of the pie, it is mostly done out of necessity.

However, I have always felt that it is not a good fate for red-topped businessmen. Shen Wansan, Hu Xueyan, Sheng Xuanhuai (whose ending may be better) are all bloody examples.

Li Ka-shing is currently directly withdrawing from the mainland and Hong Kong, entering Europe, and choosing to change markets. This is his method.

There is also a red capitalist who was communistized - Rong Yiren. His father is Rong Desheng, and his descendant is Rong Zhijian. The current CITIC Group is always represented by their family.

But the current situation of Jack Ma and even Ant Financial is unclear. Of course, Jack Ma is still young, and the final solution will depend on Jack Ma's future developments.

If the policy and legal issues can be resolved smoothly, I think it is entirely possible for Ant to surpass Alibaba Group’s valuation. In the DT era, the era of data consumer finance, the imagination space here is much greater than that of Taobao and Alibaba.

2) Internationalization issues

Investing in Paytm is an indirect attempt to test the waters of internationalization. However, the most important requirement is to become a global third-party payment company like PayPal.

Of course, the most important issue here is: the internationalization of the RMB and the free convertibility of capital.

On the one hand, these two issues require national development, and on the other hand, they also require policy approval. For example, the State Administration of Foreign Exchange can relax controls on this issue.

Paypal is able to be used around the world because of these two factors. The same is true for Facebook.

Of course, we also saw that in June this year, Jack Ma visited the United States to build momentum for internationalization. Ant Financial's steps towards globalization have also gradually begun.

Summary: When analyzing the problems of ants, most of them involve policies. When the business reaches a certain level, what limits it is the highest political factor in human society at present.

Conclusion: Jack Ma has great ambitions. Can Honor realize them this time? I believe you have already got the answer while reading this.

The logic of the article is very clear, allowing everyone to see how Ant Financial was born from Alipay; how the genetic problems in its development prospects were adjusted; what is being done at the current stage to support the next Alibaba, the next market value of 200 billion US dollars; in the process of moving forward, how resources are imported to enable it to develop smoothly; and of course, at the end, it also analyzes the potential problems in the past.