Asian internet business more complex than Alibaba IPO

October 5th, 2014 by · Leave a Comment

This article was authored by Jouko Ahvenainen, and was originally posted on telecomasia.net.

Alibaba conducted its IPO in the US a couple of weeks ago, and immediately became one of the most valuable companies in the US. Is Alibaba just an exception? Or can we expect more Chinese internet companies to expand to other western markets, offer their services or raise money from the capital markets; and maybe not only Chinese companies, but more Asian companies broadly.

Alibaba has for many western people been only an unknown Chinese e-commerce store. All Alibaba’s numbers are huge, if you consider the number of sellers and buyers, revenue, the number of packages and transactions. US companies like Amazon, e-Bay and UPS are far behind. At the same time, only half of China’s population has internet access, and a quarter have shopped online. Alibaba can grow in its home market, but it also plans to use the new capital to grow globally.

Internet services have been dominated by US companies. Or at least that's the easy assumption to make when looking at Google, Facebook and Amazon. But it is not the whole picture about the internet market, especially when we also include mobile services and mobile internet.

Chinese internet companies Tencent (including e.g. WeChat), Baidu and Qihuu 360 are also real internet giants, if we compare them to their western counterparts. Japan's SoftBank, which was also one of Alibaba’s owners, is a significant investor in many internet and mobile services. The latest rumors speculate that SoftBank plans to acquire DreamWorks Animation. Analysts see that SoftBank looks for new ways in to the US market. It already owns US carrier Sprint, but its endeavor to acquire T-Mobile was not successful.

Korea's Kakaotalk and Japan's Line also have hundreds of millions users. And there are many more growing companies for internet services, mobile apps and content. Should we actually conclude that Asia can take the #1 position in the global internet business?

China has been a difficult market to break into for foreign internet companies. In that way we can say the market is asymmetric, Chinese companies can grow globally, but local restrictions and the environment make it difficult for many companies to expand to China. Google and Facebook have faced these issues for a long time, but in this summer Line and Kakaotalk also encountered restrictions on offering their services in China.

Asia is the fastest growing market in many businesses. It has huge growth potential also in internet and mobile services. But local restrictions can create complexity to offer services, although it sometimes also protects building domestic business. The latest example can be seen in Thailand.

Sooner or later this can also cause tensions on a governmental level, if e.g. western countries require that there should be the same rules for all companies in Asia and vice versa if western governments want all companies to cooperate with data surveillance. It will also interesting if, for example. many Chinese internet companies go public in the US, requiring them to comply with more US regulation.

It is easy to say that Asian internet companies can challenge US giants and win global business. But the US capital market is still the most important market to raise capital and get resources for global business. And local restrictions, international trade rules and politics can also make it more complex to predict how an internet business will develop. The big picture can be much more complex than the successful Alibaba IPO could indicate.

If you haven't already, please take our Reader Survey! Just 3 questions to help us better understand who is reading Telecom Ramblings so we can serve you better!

Categories: Financials · Other Posts

Discuss this Post


Leave a Comment

You may Log In to post a comment, or fill in the form to post anonymously.





  • Ramblings’ Jobs

    Post a Job - Just $99/30days
  • Event Calendar