Shares of Chinese tech company Alibaba rocketed during the company’s high-profile IPO. Investors and tech industry analysts are already drawing comparisons with Facebook, Tom.com and other recent examples in which speculators flocked to buy a stock without really understanding how the company was going to generate a positive ROI. In Facebook’s case, it’s safe to say that the majority of investors had an incomplete understanding of the company’s business model and its strategy for monetizing its ubiquity. Tom.com generated a huge buzz during its IPO in 2000, despite a near-complete lack of assets.
So with Alibaba’s IPO, now is the time for prospective investors to figure out exactly what it is this company does and whether or not it’s going to be a good buy in the long run.
First, Alibaba is China’s largest electronic commerce firm, and that is one of the reasons it’s getting so much attention. The Chinese market is enormous, and has some of the strongest growth potential in the world. At the end of 2013, the nation had about 690 million Internet users, which is still less than half of its total population.
Second, the company has a diverse range of holdings and interests, but generates its revenue through three primary channels:
- Taobao, the largest Chinese online shopping website
- Tmall, an online distributor of high-profile branded merchandise with a special focus on China’s growing middle class
- com, an online exporting brokerage
With its dominant market position in such a large country, Alibaba seems like a good buy. But experts and analysts have serious questions about whether or not the company can maintain that position, and whether or not its $25 billion valuation is reflective of reality. For investors, the key question is whether or not the company’s undeniable growth potential has already been saturated by its incredibly high initial valuation.
For a mobile app development company, the IPO holds special interest because Alibaba could soon tap into mobile commerce as China’s economy continues to grow and develop. That would create incredible opportunities to market shopping apps to Chinese consumers.
San Francisco mobile app developers will also want to pay close attention to how Alibaba performs following the IPO. Will the company continue its stranglehold on the e-commerce market as mobile phone usage in China continues to rise?Tags: alibaba, alibaba ipo, amazon, amazon.com, baba, china, chinese e-commerce, chinese exports, chinese internet, com, e-commerce, ebay, exit strategy, financial markets, internet bubble, jack ma, nasdaq, nyse, payment processor, public markets, taobao, tech ipo, tmall, tom.com, Yahoo