Site Linking Global Buyers, China Factories, Plans IPO

October 23, 2007

A few years ago, Jane Ivanov of Indianapolis was pregnant for the first time and frustrated. Amid the array of clothing available to expectant women, there was one thing she couldn’t find: sexy lingerie. Sensing an opportunity, the business-school graduate and her husband pooled $50,000 from their savings and credit-card borrowings to start a maternity-lingerie brand called Eve Alexander. All she needed was the manufacturer.For that, she turned to Alibaba.com, then a little-known Chinese Web site that has become a significant gateway for global trade. On the site, which connects small manufacturers in China and elsewhere with potential customers, Ms. Ivanov found a supplier in Hong Kong that could make the bras she wanted.

Now, she spends her days taking care of her two children and her nights fulfilling hundreds of catalog orders and arranging shipments to retailers, including more than 100 maternity boutiques, hospitals and online stores, most recently Target.com.

For almost a decade, Alibaba.com Corp., led by founder Jack Ma, has been positioning itself at the virtual nexus between China’s manufacturing juggernaut and buyers around the world who want its low-cost goods. Charging manufacturers to promote their products and services to customers on its site with English-language listings, it now dominates China’s business-to-business market. World-wide, it is the most visited import/export site, according to Web-site tracker Alexa.com. Alibaba is about to take a major new step.

Today, Alibaba Group, its parent company, which is 39%-owned by Yahoo Inc., is expected to officially announce the initial public offering of Alibaba.com to Hong Kong retail investors. The IPO is expected to be the biggest ever by a Chinese Internet company, raising as much as $1.3 billion, with trading in Hong Kong set to begin early next month. With a collection of online businesses, Alibaba Group has made headlines as one of the few Chinese Internet companies with a global profile.

Mr. Ma has expanded Alibaba Group to include Taobao.com, an online auction site that has overtaken eBay Inc. as the market-share leader in China, and online payment and software operations. Two recent additions to the group are Alimama, an online marketplace for Web publishers and advertisers, and Koubei, a classifieds site of which Alibaba Group owns 53%. These other operations aren’t part of the IPO.

In 2005, Yahoo paid $1 billion for its stake in Alibaba, and it turned over control of Yahoo’s Chinese operations to Mr. Ma.

Based in the eastern city of Hangzhou, near Shanghai, Alibaba.com gets the bulk of its revenue from small and midsize Chinese manufacturers who pay to join the site. The company helps them post listings that include descriptions of their products, contact information and, in some cases, videos showcasing the suppliers’ factories. Buyers also can post their requests for products in the “buying leads” section. Yu Xuehui, owner of heater manufacturer Ningbo Jasun Electrical Appliance Co., says Alibaba helped take his business to a new level. While he had to rely on outside firms to sell his products in the past, and mostly did domestic orders, he now has relationships with clients around the world. “I knew I wanted to export but had nowhere to start,” Mr. Yu says. Since joining the site six years ago, he says his annual revenue has increased by $1.3 million.

According to a copy of the preliminary IPO prospectus reviewed by The Wall Street Journal, Alibaba’s revenue in the year’s first half was 957.72 million yuan ($127.6 million), 61% more than the same period last year. It has about 24.6 million registered users, and, since it began charging for some services a few years ago, has amassed more than 255,000 paying members. Net profit this year is expected to more than triple, to $83 million.

But as Alibaba has expanded, so has its exposure to problems from counterfeiting to product safety. In its preliminary prospectus, Alibaba acknowledges that in providing a way for importers and manufacturers to communicate online, it risks listing tainted products and counterfeits. “We anticipate . . . that certain items listed on our marketplaces infringe third-party [intellectual property] rights or that suppliers list products and services that are substandard or potentially controversial,” it says.

The nonprofit International Anticounterfeiting Coalition says it considers Alibaba to be a platform for counterfeits. One of its members, Rob Holmes, CEO of IPCybercrime.com LLC, a private investigator that specializes in helping brand owners identify violations of intellectual-property rights, says Alibaba is “a major thorn in the side” of his clients. Manufacturers peddling counterfeit products use the “buying leads” section as a way to find customers, Mr. Holmes says.

Another problem: Some suppliers who have legitimate contracts with apparel brands covertly produce unauthorized lots of the products and sell them on Alibaba, Mr. Holmes says. “I would say about a third of the product on Alibaba is gray market, easily,” he says.

The company declined to comment because it is in the quiet period before its IPO. But Alibaba says on its Web site that it regularly cooperates with intellectual-property-rights owners, industry associations and government agencies to fight against violators. ” Alibaba.com respects intellectual property rights and we expect our users to do the same,” the statement says. In general, it is the responsibility of Alibaba users, and not the company itself, to comply with intellectual-property-rights laws. According to a Goldman Sachs report, the company takes down nearly 100 listings per month in response to patent and copyright complaints. Goldman is a lead underwriter of the IPO, along with Morgan Stanley.

Alibaba was founded in 1999 by Mr. Ma, a former English teacher from Hangzhou, and the company has grown to more than 6,000 employees.

Thousands of small- and midsize business owners recently came to a gathering called Alifest, an annual bazaar arranged by Alibaba to bring its clients together. Sebastien Breteau, CEO of Asia Inspection, says he lists his services on Alibaba.com so that buyers can pay to have their manufacturers inspected for safety and compliance or for quality control.

Meanwhile, Ms. Ivanov is expanding her brand to include other maternity apparel. “Because of Alibaba, housewives can make something of themselves,” she says.


NYT: Dealing With the Damage From Online Critics

October 5, 2007

As the power of the Internet grows, businesses small and large find themselves confounded by disenchanted employees, suppliers and competitors who seek fertile ground to air grievances online.

Armed with little more than a Web connection and a keyboard, these detractors can do everything from irritate, via a scathing review, to causing serious business problems by using message boards to reveal company secrets or spread rumors of unethical behavior. They may also start a gripe site or register a Web address in their target’s name.

“Anybody can write anything in the world, whether it’s true or not. It could be affecting my business right now,” Ms. Lambert, owning a gym she owns, Go Figure, in Westwood, Mass. said.

Business is not alone in such frustrations. Politicians, authors as well as other public and private individuals find themselves in the cross hairs of commentators emboldened by the anonymity of cyberspace. But such postings can do more than just irritate; financial damages can reach millions of dollars or shut down a business entirely.

Remedies vary by case and by state, but lawyers, Internet specialists and others counsel that the best course with may be to ignore irritating posts because trying to squelch a malcontent can have unintended consequences.

“Your reaction often, if you’re a small business, is to get angry and to fire off a letter,” said Barry Werbin, an intellectual property lawyer at Herrick, Feinstein in New York. “Some big companies do it. More often than not, the person who posts the gripe site can’t wait to get that letter and post it.”

Sometimes, Mr. Werbin added, “it can worsen the damage because it just fuels the fire.”

Assuming that the posting activity is not illegal or defamatory and truly damages a business rather than just an ego, there may be better ways to respond. Scurrilous opinions often appear on Web sites including Yahoo message boards, AOL and MySpace. Those sites may remove objectionable material if asked but are not legally required to do so. Even if they do remove it, the damage may already have been done. Besides, even if the comments are taken down, a determined whiner can find any number of other venues. Other online review sites, like Yelp or TripAdvisor, are particularly influential.

“New consumer opinion gets posted about every five seconds,” said Rob Crumpler, chief executive of Buzz Logic, which helps businesses identify influential bloggers.

Samantha DiGennaro, who runs her own strategic communications consulting firm in New York, says many companies either run scared from electronic media or fail to realize how quickly negative comments can jet around the Internet.

“People think, ‘It’s only on the Web. It’s not that important.’ But it’s almost more important than a newspaper or something in print,” she said. “Things live in perpetuity on the Web.”

Some large marketers may blog or respond anonymously. Ms. DiGennaro said appropriate responses were not one size fits all and must be tailored to the particular case. If something merits being addressed, she said, it can better be done in the name of the company rather than hiding behind anonymous postings.

On the technical front, a search engine optimization expert can tweak a site so that it moves a positive posting higher in an Internet search, tending to bury the negative one. Shailen Lodhia, vice president for sales at Submit Express, an optimization firm in Burbank, Calif., estimated results could take three months to a year, and monthly retainers could exceed $3,000.

The best defense is a good offense. Useful practices include registering personalized e-mail addresses as well as gripe domain names — not with the intention of using them but to prevent others doing so. Registering common misspellings as well as derogatory domain names is a good precaution and so is covering extensions like .biz and .org. Costs are minimal, some lower than $50 a year.

Companies that sell products or services should trademark their name to prevent others from using it as a domain name without authorization. Executives may find their only recourse is to sue if someone registers their name as a U.R.L. and uses it to defame them. Few companies thought to buy potentially negative domain names. Debra Condren, a business psychologist and career adviser, said the occasional negative comment could actually lend credibility to a company rather than tarnish it. She said people expected to see a range of opinions, and if they saw only positive ones on a company blog, for example, they might suspect that negative feedback was being censored. A range of opinions seems authentic.

Angie Hicks, founder of Angie’s List, a member-generated ratings service where users report their positive or negative experiences with local contractors, said every company gets complaints at some time, but the way it responds can be more telling than the complaint itself.


Microsoft Office Live Puts Your Business Online

January 8, 2007

By Richard Morochove

Microsoft’s Office Live offers a mix of services for the small business looking to establish an online presence. In addition to Web site and e-mail account management, some editions of Office Live also deliver business services such as contact and time management, and facilitate sharing documents with customers.

Office Live is now a commercial product for U.S.-based users, following a prolonged beta test phase. But while Microsoft’s offering is a good first attempt to better serve the online needs of small businesses, it has a few rough edges.

Limited Design Options

Office Live will appeal most to small businesses that do not have a Web site and want to establish and manage one. The design templates make it easy for neophytes to create and modify their own Web pages. Some interactive Web components, such as a forms submitter and a site search engine, are also included.

Unfortunately, I found the service’s Web Designer to be somewhat unreliable. It didn’t always save my changes when I moved to another page, even after saying it had. And a professional Web site designer would chafe at the limited template options available. Office Live’s Web Designer is far less capable than Microsoft’s FrontPage application, which has been discontinued.

Office Live’s services aren’t especially unique. You can get most of them, such as Web and e-mail hosting, elsewhere. However, Office Live’s suite of services does make an attractive bundle. The services are generally well-integrated, with the notable exception of adManager, an advertising service for promoting your Web site.

To use adManager, you must create a separate account and go through a sign-on procedure from within Office Live. It’s as though adManager doesn’t trust Office Live users, which is tantamount to Microsoft’s right hand being wary of shaking its left. Unlike Office Live, adManager is still a beta service. Presumably, Microsoft will eliminate these clumsy procedures when adManager graduates from beta testing. I plan to review the service at that time.

Three Versions, One Free

Office Live comes in three editions.

The free advertising-supported Office Live Basics provides a domain name along with Web site storage that can hold up to 500MB of data and e-mail management for up to 25 accounts with 2GB of storage each.

Office Live Essentials ($20 per month) boosts Web site storage to 1GB, allows 50 e-mail accounts, and adds online business contact management and workspaces where you can share information, such as Word documents and Excel spreadsheets, with your customers. This edition lets you import HTML files–perhaps from an existing Web site–and use more sophisticated third-party Web design tools, which are not included. You can also access e-mail and synchronize your contacts online with Microsoft Outlook on your PC.

Office Live Premium ($40 per month) increases Web site storage to 2GB and adds more business applications to help you manage customers, employees, and projects. You can also use Office Accounting 2007 Express (a separate free download) to manage this business information offline and share it with your accountant.

The free Office Live Basics sounds tempting, but only a stingy business owner would permit Microsoft-supplied advertisements, possibly from competitors, to run on the company’s Web site. Basics could work for personal Web sites; but for businesses it’s really a come-on to promote Essentials, which offers good value for the money. As for Live Premium, I’m not persuaded that it delivers sufficient value to justify the extra 20 bucks a month.

Microsoft’s Office Live paid versions offer free 30-day trials, so you can evaluate the services before you commit.

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