Alibaba's World

by Porter Erisman

  I told the reporter, “Well, we have the exact same policy as eBay, based on the same legal standard. If we are notified by a brand owner that one of our sellers has infringed on their intellectual property, we will investigate and take down the listing where appropriate.”

  The response seemed to satisfy the Hollywood Reporter, but responding to the crisis had taken up my entire morning, so I was late getting to Hangzhou for our all-hands staff meeting, which was being held at Hangzhou’s Great Hall of the People. When I finally arrived, thousands of smiling and laughing Alibaba staff members, all dressed in white shirts emblazoned with the logos of both Alibaba and Yahoo!, were streaming out of the venue. Clearly the news had gone over better with the Alibaba team than with their Yahoo! counterparts in Beijing.

  As people filed out of the auditorium, I found Dan Rosensweig next to the stage. “So what was your impression of the Alibaba team?” I asked, expecting him to be as effusive as I was feeling.

  “It’s very young,” he said. “We’re going to have to do a lot of training and bring in some expertise from the US.” I was slightly offended, not to mention reminded of the way our own Hong Kong expats had reacted to meeting the Alibaba team for the first time. It was a good reminder of why we’d made sure to maintain management control in our deal, to avoid too much oversight from the Yahoo! US team’s prying eyes. But I kept my mouth shut.

  Just then Jack walked over.

  “Hey, Jack, nice job today,” Dan said. “If this partnership goes well, maybe someday we’ll go ahead and buy the rest of Alibaba.”

  Jack laughed. “Well, I think someday, if you play your cards right, maybe Alibaba will buy Yahoo!.” I looked at Jack and realized that he was only half joking.

  “Ha, I don’t think so,” Dan replied. Clearly he thought Jack’s boast was cute but preposterous. “Last I checked, Yahoo! was worth $40 billion and Alibaba was worth $4 billion. You’ve got a long way to go.”

  With the deal announced, it was time to turn our attention to the next big media frenzy, Alibaba’s annual West Lake Summit. Jack had started the event back in 2001, at the depths of the Internet winter, when he brought together the CEOs of five of China’s leading Internet companies. Over time the summit came to be regarded as a sort of Davos for China’s Internet industry, and this year’s event would have a very special keynote speaker—former US president Bill Clinton.

  The introduction to Bill Clinton had come through Marcy Simon, who had her own small PR firm which counted the Clinton Foundation as one of her clients. Marcy had approached me at a conference I’d attended with Jack. She’d seen Jack speak a couple of times, had grown into a fan, and wanted to see if she could work for us. Given her background—she had worked for Bill Gates as well—she certainly seemed like someone who could help with our PR efforts in the US, so we retained her as a consultant. Not long after she began working on our PR campaigns, she introduced us to Bill Clinton’s staff.

  Having a former US president speak at our event was quite a source of pride for Alibaba. Clinton was broadly popular and one of the few Westerners who could argue credibly to a Chinese audience about the need to open China’s Internet. When his keynote appearance was announced, China’s blogosphere lit up with excitement.

  But several weeks before the event eBay tried to get Clinton to cancel. When I approached Joe Tsai with a small question, he responded sharply, “I can’t deal with this right now—I’m trying to make sure Clinton still speaks at our event. eBay is trying to get him not to speak.” I was shocked and worried. If Clinton pulled out, it would be a devastating blow to Alibaba’s reputation in China and a major loss of face for Jack. Surely eBay knew this, and if it succeeded, Alibaba would suffer serious damage while we were still in the process of closing our deal with Yahoo!.

  The picture grew even clearer when I was forwarded a PowerPoint presentation that eBay’s general counsel had sent to Clinton’s assistant, Doug Band. On it were screenshots from Alibaba’s website showing postings for illicit items such as AK-47s, uranium, and counterfeit goods. While the vast majority of the products posted on Alibaba were legitimate, it was impossible for Alibaba to screen out all the bad actors. The website policy—and applicable laws—stated that members were responsible for their postings. A marketplace operator like Alibaba was simply responsible for taking down illegal postings when made aware of them. But it was clear that some illegal listings had made it onto the site. The big question was how Clinton’s team would react.

  In addition to the email from eBay’s general counsel, I heard from Marcy that eBay’s founder, Pierre Omidiyar, a billionaire donor to Clinton’s foundation, had called Clinton and pleaded with him not to attend our West Lake Summit. “In fact, he made two calls,” Marcy said. It was a full-court press.

  I found it ironic that, just a few weeks earlier, eBay was desperately trying to invest in Alibaba but was now doing everything within its power to smear us. Fortunately eBay failed to land its blows and Marcy informed us that Clinton would still attend the summit, despite eBay’s protests. “I explained to Clinton, it’s just because eBay is competing with Alibaba,” she told me.

  A few weeks later Clinton’s plane touched down in Hangzhou. The city had worked hard to provide a suitable welcome. As the motorcade rolled to the entrance of the Grand Hyatt, fountains on the West Lake swayed to orchestral music while Chinese tourists lined the hotel perimeter, hoping to get a glimpse of the former president. The city’s pride was still recovering from comments made by the last US president to visit Hangzhou—Richard Nixon—who reportedly had remarked, “Beautiful lake, ugly city.” Local officials were determined not to let that happen this time.

  After Clinton strolled through the hotel lobby and went up to the presidential suite, Jack approached me with an urgent request. “Porter, I’ve never asked you to write a speech for me. But this is the one time I think I need your help. Can you write the introduction for me to introduce Bill Clinton?” Sure, I said. This time was different. So I headed to my hotel room to work on Jack’s opening comments.

  As I was writing Jack’s speech, Marcy pulled Jack aside and told him that he and Joe were invited up to Clinton’s suite to chat and get to know each other. It was the night before Jack’s birthday, and Marcy surprised him with a birthday cake, which they shared with Clinton. As Marcy would tell me later, Clinton joked with Jack about eBay’s antics leading up to the summit, saying with a laugh, “Boy, those eBay folks sure are mad at you.” Luckily Clinton and Jack hit it off, setting the tone for what we assumed would be a successful summit.

  Until the next day, when I woke up to a press release issued by Reporters Without Borders and Human Rights in China: “Clinton Urged to Raise Shi Tao Case at China Internet Summit.” I read further to learn that Reporters Without Borders was reporting that Yahoo! had provided a journalist’s email information to the Chinese government which had then sentenced the Beijing reporter to ten years in prison for “leaking state secrets” to foreign media. All the journalist, Shi Tao, had done was leak a Communist Party directive to Chinese journalists that they should not report on the upcoming fifteenth anniversary of the Tiananmen Square massacre. When Shi Tao sent the document to foreign journalists, he had assumed that by using Yahoo! China, rather than a local email provider, he would be able to maintain his anonymity. But when the Chinese government asked for the user information, Yahoo!’s legal team handed it over, exposing Shi Tao as the source.

  Suddenly it was obvious that when we acquired Yahoo! China, we had acquired a political time bomb. As we headed into a radio interview, I briefed Jack on the issue—it was the first he’d heard about it. When I spoke to Mary Osako, a member of Yahoo!’s communications team, she told me that Yahoo! would be canceling Jerry Yang’s appearance at the press conference that was supposed to follow Jerry’s planned fireside chat with Jack at the summit. “The only thing the foreign media are going to want to talk abo
ut is the Shi Tao case,” she told me.

  The conference began without a hitch. We had persuaded the local Hangzhou television station to broadcast Bill Clinton’s speech live, a rarity in China. When Clinton took the stage, he made no mention of the Shi Tao case. Instead he argued persuasively, “Whatever political system a country has, the Internet has the potential to put power through information and communication in the hands of ordinary people. And I think on balance that has to be a good thing, anywhere in the world.”

  Then Jerry and Jack took the stage for their fireside chat. It was the first time Jack and Jerry, together in the same room, laid out their common vision for the partnership. They discussed how they’d first met in Beijing, traveled to the Great Wall together, and ultimately crossed paths again at Pebble Beach in the fateful meeting that had led to the partnership. A Q&A session followed the fireside chat. Peter Goodman of the Washington Post stood up to ask the last question and addressed the controversy:

  “Mr. Yang, your company was founded at a time when Internet companies were marketing themselves to consumers and to shareholders and the public as not merely business propositions but almost forces for liberation, for freedom of information, free flow of information, freedom of expression. There are now people saying that your company is effectively a tool of the Chinese government, that you’ve become a force for repression. How does that make you feel personally? And what can you tell us about your company’s role in the Shi Tao case?”1

  The room was filled with silence as Jerry Yang ruminated over the question. When he finally answered, he fumbled through a lengthy explanation:

  “We don’t know what they want that information for, we’re not told what they look for. If they give us the proper documentation and court orders, we give them things that satisfy both our privacy and the local rules. I do not like the outcome of what happens with these things.”2

  From a PR perspective Jerry was caught between the Chinese government and US politicians. Any comment from him, however deft, would likely dominate the headlines the next day. But his wishy-washy answer left the impression that even Yahoo!’s cofounder didn’t believe its actions in China were justified. In my opinion Yahoo! could have reasonably argued that the net effect of Western Internet companies in China was to create a more open society there. But instead Jerry tried to straddle the fence, and to critics in the West he appeared to lack a moral center.

  For his part Jack gained applause from the mostly local crowd: “As a business, if you cannot change the law, follow the law. Respect the local government. We’re not interested in politics. We’re focused on e-commerce.” That response, too, would never satisfy all the Western critics. But at least it seemed born of clarity and conviction, of Jack’s own deepest beliefs.

  When the Washington Post came out the next day, on September 11, the headline read: “Yahoo Says It Gave China Internet Data.” Neither Yahoo! nor Alibaba came across well in the article, and even Clinton was drawn into the controversy, with Goodman reporting, “Clinton did not mention the Shi case in his speech. As he was leaving the hall, the former president declined to answer a question about the case before melting into a thicket of Chinese security and Secret Service officers.” Marcy later told me that Clinton had been blindsided by the issue and was furious at his staff for not properly briefing him. But all was not lost. “At least the president liked Jack,” Doug Band, Clinton’s assistant, told me later.

  As we worked to close our deal with Yahoo!, the Shi Tao case continued to hang over us. Until this point Alibaba had been fortunate to operate in the politically neutral domain of e-commerce. But in acquiring Yahoo! China, we were stepping into a new domain, operating a portal that included news, information, and communication services, such as chat and email. It was the first controversy to drive a wedge between Yahoo! and Alibaba, but I was betting it wouldn’t be the last.

  More troubling to me was that I had to think about my own role in a company that now operated a general portal that was beholden to China’s laws concerning privacy and censorship. As an American I had a luxury that my local colleagues did not—I could choose whether to work within the constraints of China’s laws. I had started my career by teaching leadership workshops in Washington, DC, that promoted democracy to high school students and encouraged them to learn about America’s democratic processes. By staying with Alibaba was I somehow betraying the very values I had so fervently espoused?

  But I didn’t dwell on this thought for long, as I could see the benefits that the Internet was bringing to China every day. Compared to my student days in Beijing in 1994, when government minders opened my mail and even a fax machine had to be registered with the government, China had become a much more open society. Sure, it was not a Western-style representative democracy. But individual liberties were expanding every day. It was just a matter of time, I thought, before the Internet, a Trojan horse, forced China to open to an even greater extent. Besides, I figured, widespread adoption of e-commerce in China meant one thing—the government could never simply pull the plug on the Internet in China. If the government censored blogs or media content, the local population would be irritated. But if the government pulled the plug on millions of shop owners who depended on the Internet for their livelihoods, people would take to the streets.

  Of course, executives of American companies faced the same moral choice when deciding whether to operate within China. A year earlier, at our meeting with the Google executives, I had admired Sergey Brin’s efforts to find a way to operate in China without compromising the company’s values. At that time, Google decided that the benefit to the Chinese of a more open Internet was in keeping with its famous corporate principle, “Don’t be evil.” But Google’s leaders had also promised that if the compromises grew to be too much, they would pull out of the China market (ultimately this is precisely what they did). Yahoo! had offered no such assurance. Its message was simply that it wanted to profit from the China market.

  In a way I was relieved that this news had broken before we closed the deal. My biggest fear was that Alibaba would somehow be dragged into the morass with Yahoo! and, as a Chinese company, be seen as the enemy. I had seen a young idealistic team survive and thrive despite government restrictions on the Internet, not because of them. If the same thing happened after the deal was done, Alibaba would be an easy target. But as it turned out, Yahoo!’s fumbling of the communication left it alone in the crosshairs. Not long after the Shi Tao revelation, Yahoo! would be called to Congress to testify about its actions in China.

  By the end of the West Lake Summit, the Alibaba-Yahoo! coming out party had been far overshadowed by the Shi Tao case, at least in the Western media. However, China’s censorship regime prevented local media from covering the controversy, so the Chinese public never heard about it. But while the issue was not on the radar of the general public, and our customers in China, we could only assume that it was on the radar of Chinese government officials. So we still had to tread carefully to ensure that the government would approve the deal.

  To this end I went with Jack to meet with Wang Guoping, the local Communist Party secretary. I’d met Wang a few times before, and he always surprised me by defying the stereotype of a boring Communist bureaucrat who spoke only in party platitudes. Chubby and bespectacled, Wang Guoping was outspoken, funny, and even brash. He was a giant version of our COO Liqi and more closely resembled Hangzhou’s results-oriented local entrepreneurs than Beijing’s bureaucrats. He was regarded as holding the real power in Hangzhou, more so than the feeble mayor, Mao Linsheng, despite the difference in their titles. Secretary Wang was as much a capitalist as any Communist Party secretary could be, and it was a good thing for Hangzhou, as it was for Alibaba.

  The meeting took place in a quiet cluster of teahouses on the lush grounds around the West Lake. When I arrived, Jack and Wang Guoping were already sitting together, chatting over tea, as is typical protocol for su
ch an event. Lining Jack’s side of the room, in order of rank, was Alibaba’s senior management team. Lining Wang Guoping’s side, in order of rank, were local government officials. With every word Wang spoke, the officials went through the customary motions of taking notes.

  Our main goal for the meeting was to impress upon the local leaders the significance and global impact of the deal. There were many ways businesses sought to please the local government in China—some clean and some not—and we had always done the right thing in the belief that the best way to gain government support was to show that you were attracting business, attention, and investment to the city. To this end, before meeting with Wang Guoping, Jack had called me and asked me to print out the full set of articles the West Lake Summit had generated in the Western media about the event. The result was a printout of Alibaba news clippings that ran for several hundred pages. While many of the reports discussed the Shi Tao controversy, I’d made sure they were at the bottom of the stack and hoped Wang wouldn’t read that far.

  After exchanging small talk with Wang Guoping, Jack motioned for me to hand over the media clippings and said, “Porter, tell Secretary Wang about the international media coverage.”

  “The deal has been in the headlines all around the world,” I said. “All of the leading media have been reporting on it. I think a lot of people are seeing Hangzhou as the center for e-commerce in China.”

  Wang Guoping nodded in approval. Our West Lake Summit had propelled his city into the global spotlight. Then Wang had a question:

  “But Manager Ma, one thing I’m still a little confused about is, for once and for all, can you tell me: Did Alibaba acquire Yahoo! or did Yahoo! acquire Alibaba?”

  Wang Guoping wasn’t the only one with this question in China. Following our announcement, the headlines had repeatedly asked, “Who acquired whom?,” sending our local PR team into crisis mode to argue our case to the local media. The confusion made clear to me why Jack had been so insistent upon rejecting Yahoo!’s request to rename our company “Alibaba-Yahoo!.” Doing so would have only confused the market and put our efforts in China at risk.