Chinese Internet marketplace Alibaba has been grabbing its share of headlines in the months leading up to last Friday’s blockbuster Alibaba IPO, and at least after the first day, it did not disappoint investors. Priced at $68 a share before the IPO, it ended the day at $93.89. This placed Alibaba’s market cap at $168 billion, far above the current market caps for Amazon ($153.08 billion) and eBay ($65 billion).
The historic market cap is a sign that the Internet giant has indeed ‘made it’, breaking the mould for Chinese companies, whose brands rarely resonate beyond their home markets. The ‘Alibaba’ name carries real cachet and value. Indeed, as Alibaba Senior Counsel Karen Law explained, the company devotes a significant amount of resources tracking and shutting down companies infringing on its trademarks. While this is obviously not an ideal situation for Alibaba, the fact that others are trying to copy its mark and benefit from the company’s goodwill means that the Alibaba brand is valuable and has a strong reputation in the market. The Alibaba IPO, and the flood of news coverage it has generated, will only add to this.
At the same time, Alibaba has faced accusations that it has been too easy to use the platform for trading counterfeit goods. Seemingly sensitive to this criticism, Alibaba has recently put a lot of effort into addressing this perception, making several high agreement deals to step up monitoring on its sites, including Taobao and Tmall. Last year, it entered into an agreement with Louis Vuitton Moet Hennessy Group to work together to stop counterfeit sales, and in August, it made similar arrangements with Keiring, which owns the Gucci brand. While the issue of counterfeit goods is not yet resolved, Alibaba is being seen to be taking measures to address it. In the first ten months of 2013, it removed 114 million product listings from Taobao alone.
Arguably, other companies in a similar position would have taken a less stringent approach –after all, counterfeit goods may significantly increase traffic and revenues. In Alibaba’s case, it appears that a more long-term view is bringing tangible rewards. Time will tell how Alibaba evolves post-IPO, but the example set by this historic precedent may mark a key turning point for Chinese businesses that are looking to build a trusted international brand.