Expectations are high that Chinese e-commerce giant Alibaba Group will surpass Facebook as the largest tech IPO in history following its F-1 filing to go public in the US.
Although Alibaba is based overseas, institutional investors in the US are knowledgeable about the company’s incredible growth as a result of Yahoo’s investment in it nine years ago, say PR agency executives with expertise helping Chinese companies expand globally.
Yet experts note Alibaba has to win over the average US investor and customer, who has likely never heard of the company, to create demand for its shares over the long term.
Founded in 1999 by former school teacher Jack Ma, Alibaba has two key e-commerce services: Taobao Marketplace, which has more than 8 million vendors, and Tmall, a shopping platform for bigger brands such as Apple and Adidas.
Although communications experts told PRWeek that Alibaba has a good corporate story, its most identifying characteristic in the US is the fact that the company is from China, where corporations have a well-reported reputation for being secretive and corrupt.
"The challenge Alibaba faces is the extent to which its ‘China-ness’ diminishes its brand value and trust among US customers and investors," points out Bill Black, senior partner and global public affairs leader at FleishmanHillard.
He notes that rising tensions between the US and China have complicated that challenge. Earlier this week, a US grand jury indicted five Chinese military officers of cyber-spying. China denied the accusation and warned of repercussions, starting with the suspension of a Sino-US working group on cyber issues.
Yet unlike many Chinese companies, Alibaba has a success story "that is very explainable to investors in the West," Black adds.
"With some Chinese companies, you’re not quite sure if they had undo government support or perhaps cut corners. But Alibaba can take away the mystery around its success," he explains. "They have a great origin story or mythology if you will – Jack Ma, this schoolteacher who had this big idea, built it himself, and then caught this massive wave of an expanding middle class in China."
Ma is also the rare Chinese business leader who is not only comfortable talking to the media, in addition to investors and other stakeholders, but who is charismatic and comfortable in large crowds. He also speaks English well, as evidenced by interviews with the likes of Charlie Rose.
While he stepped down as CEO last year, Ma remains chairman and is by all accounts the best advocate for the company.
"He is like a Steve Jobs or Bill Gates. He personifies the company, has a lot of charisma, and gives authenticity to Alibaba," says Black.
David Wolf, MD of Allison+Partners’ global China practice, who splits his time between Beijing and San Francisco, says Alibaba should "start telling human feel-good stories. That will help them on the credibility and brand identity side."
Hey says it could begin with explaining "how Alibaba’s services have enabled Chinese people to create their own businesses and, in doing so, build better lives for themselves."
"They also need to tell stories outside of Wall Street about how they’ve created entire industries in China and now in the US by enabling companies to get involved in international trade who otherwise would not have had the opportunity," Wolf adds. "And they need to tell it from the standpoint of Western companies – not Chinese companies."
Justin Knapp, VP of the China Outbound practice at Ogilvy PR, recently relocated to the WPP firm’s Grand Rapids, Michigan, office after nearly a decade in Beijing. He notes that Alibaba faces challenges building its brand story, for one not just comparing itself to a well-known US brand.
"Chinese companies have always coined themselves the Facebook, Google, or Twitter of China when listing in the US," says Knapp. He notes that Alibaba "actually started out in the b-to-b space working with Chinese exporters looking to connect with overseas buyers" so it is "not a clone of an American company."
Alibaba is working with a trio of PR agencies, Sard Verbinnen & Co., Brunswick Group, and Hill+Knowlton Strategies, before going public.
Opening the door for Chinese counterparts
Agency pros say Alibaba’s success or failure will have significant implications for Chinese businesses.
Every other Chinese company is watching Alibaba's move in the US very closely," says Daisy King, MD and head of the US- China Specialty Group at Burson-Marsteller.
"Alibaba’s IPO will have an impact on the IPO market in general and will influence its respective storytelling efforts. This is certainly an encouragement for other Chinese companies looking to go abroad," she says. "It might raise another wave of US public listings of Chinese companies just like what happened after [Chinese search engine] Baidu's Nasdaq listing in 2005."
However, King notes that "many portfolio managers we know said because they will have to buy into the deal, that doesn’t leave enough money to go around for others. It also means they have to sell down current other technology positions, no matter if it's a US company or a Chinese one and skip on other IPOs."
Knapp adds that a successful Alibaba IPO would also quell investors’ concerns about Chinese companies going public in the US.
"If Alibaba does well, it will potentially open the door for more Chinese companies to list. Certainly, the appetite for Chinese Internet and tech companies would increase," he says. "It also might help quell some of the concerns about variable interest entities, Big Four auditing issues, and reverse takeovers, which still loom in the background. Investors tend to have short memories [and] growth has an interesting way of masking deeper issues."
Other Chinese companies are looking to piggyback on the anticipated success of Alibaba. Zhaopin, China’s biggest job-recruitment website, for example, has filed to go public on the New York Stock Exchange. (Aliababa has not yet picked a US exchange on which to float its IPO).
"They have timed their IPO to literally ride on the coattails of Alibaba," explains Wolf. "I suspect we’ll be looking at two interesting cases consecutively, and no doubt they will both influence future activities of Chinese companies."
He adds that as companies increasingly compete in the global marketplace, they will need to communicate with more transparency, including in China.
"For more and more companies, China is now the tail that wags the dog," Wolf adds. "Decisions about how to talk in China need to be made at a global level, because that is now affecting global campaigns."