Alibaba Doesn't Need Jack

(Bloomberg Opinion) -- Alibaba Group Holding Ltd. needs to get past the Jack Ma era. And fast. Thankfully, its latest earnings indicate it's managing to do just that.

Revenue and operating income at the e-commerce giant both hit new highs despite a 3.9% decline in retail sales in a battered Chinese economy that limped through the Covid-19 pandemic last year. And Alibaba's newer businesses, such as cloud computing and logistics, continued to grow strongly.

More important, it may be able to escape any major impact from a crackdown on financial-services affiliate Ant Group, which led to that company's aborted Hong Kong listing. Recall that Alibaba founder Ma also founded and is the chief shareholder of Ant. Seeking to soothe investors, current Alibaba Chairman and Chief Executive Officer Daniel Zhang explained that spending on its platforms isn't greatly driven by Ant products.

This matters because there are strong indications that Ant's business model may be upended, including separating payments from loans. Alibaba owns 33% of Ant and gets a share of that company's profits. But it is Ant's core product Alipay that has been key to unlocking the potential of e-commerce in China over the past two decades. The provision of credit services, such as microloans, further bolstered the spending power of consumers and helped merchants hang out their shingle. But Zhang sought to downplay that role, pointing to the existence of other funding channels.

Ma was the driving force behind Alibaba for 20 years and still holds a place as a spiritual leader. But he stepped away in September 2019 to leave Zhang to take the dual roles of CEO and chairman. This didn't hurt Alibaba any: Its market capitalization climbed a record $352 billion in the 12 months after he stepped away. But then Jack had to go and open his mouth.

In late October at a forum in Shanghai, Ma shared his criticisms of Chinese financial regulations. The timing was terrible, and the fallout was huge. Ant was prepping for a massive IPO, but that got pulled at the last minute at the behest of regulators who decided the company's business model needed a second look.

Alibaba suffered. Its shares dropped 30% in the next two months, and Ant's valuation looks to be sliced in half. And now Alibaba is in the spotlight, too, receiving notice on Dec. 24 that regulators had started an investigation into possible anti-monopoly law violations. Alibaba is cooperating, it wrote in a statement, without saying much more.

Quite possibly the Ant business model and Alibaba's perceived monopoly power would have caught attention even if Ma hadn't shared his negative opinion of regulators. But the fact that he went off the radar for months after his comments and then was left out of a state media outlet's laudatory list of tech luminaries indicates this was no coincidence.

Speaking about life after Jack, Zhang in September 2019 noted the importance of blazing his own trail and building new businesses — such as groceries and cloud computing — even if doing so may impact legacy offerings.

“If we don't kill our existing business, someone else will,” Zhang told Bloomberg News, perhaps not imagining that “someone else” might include regulators or its own founder. 

With new divisions growing strongly amid an economic slowdown, alternative finance platforms available to feed spending and the hope of avoiding a harsh regulatory backlash, it's becoming clear that Alibaba can do without Jack.

This column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.

Tim Culpan is a Bloomberg Opinion columnist covering technology. He previously covered technology for Bloomberg News.

©2021 Bloomberg L.P.