Alibaba vs. Google: Showdown in Asia?

On Tuesday, Alibaba.com, the second-biggest Internet company in Asia just behind Yahoo Japan, debuted on the Hong Kong stock market to spectacular demand. In a matter of hours, the e-commerce site's stock tripled in price and immediately chatter began.

Some analysts called the stock overpriced, while a few media reports compared Alibaba to another hot tech company -- Google.

During its IPO, Alibaba.com sold 858.9 million shares and raised $1.5 billion. It was the biggest IPO by a Chinese Internet company and roughly matches Google's $1.66 billion debut in 2004.

But tech industry analysts point out that while Alibaba and regional Web leaders may expose Google's weaknesses, the site doesn't pose a significant threat to Google.

Alibaba's business is quite different from Google's, Todd Greenwald, an analyst at Nollenberger Capital Partners, told ABCNEWS.com.

Alibaba, despite its similar position as an Internet leader, is an e-commerce site, not a search site, like Google. Alibaba allows smaller Asian manufacturers to connect with people who need their products. Users can input a product they're looking for and Alibaba connects them to sellers.

The most basic level of the site is free, but for a fee, more personalized, advanced services can be had.

"Alibaba is much more focused on e-commerce and portals in China," said Greenwald. "If there's a threat to [Google], it's Baidu.com. Google's the No. 2 search portal in China and is really battling it out with Baidu," a search engine.

But the ambitions of Alibaba's founder, Jack Ma, are big.

"I want to turn the company into a leading e-commerce platform for China, Asia and even the world," Ma told reporters on Monday.

Similarly, two years ago, Ma threw down the gauntlet to Google and other search sites.

"We will use all the resources we have to focus on search in the next two to three years in China. ...We already won (over) eBay. We already bought Yahoo! and the money is to stop Google," Ma reportedly told journalists in 2005. Yahoo! now has a 40 percent interest in Alibaba.

Still, as Google's interests extend further and further beyond search -- Froogle, anyone? -- the Silicon Valley behemoth runs the risk of being good, not great, at everything, said Rob Enderle, a principal analyst at the Enderle Group.

Enderle attributes the investor excitement surrounding Alibaba to the "Google halo effect."

"Anybody that pops up as a creditable competitor for Google with a regional focus is going to be successful," Enderle said. "But it doesn't necessarily mean that they'll be as successful, because Google is a global player."

Like Greenwald, Enderle believes that Alibaba doesn't pose a competitive threat to Google. However, he argues that regional sites that cover a specific service area, like Alibaba, do pose some threat to Google's ever expanding arsenal of services.

"Undoubtedly, Google will be nibbled to death by turkeys because a lot of folks can come in and niche them out by region and bleed Google through that niche. They're going to have to address this at some point," Enderle said. "For Google who's a global player, they have to try to kind of be the best at doing everything. That means that some other company will be the best at doing something."

Enderle also said that regional companies can offer a better user experience because they understand the culture and the language in a way that Google may not.

"Naturally, they should be able to provide a better overall experience or at least one that is competitive," he said. "The market has changed. ... For Google at their stock price, it only has to be seen as a company that has moved into a slight decline for that stock to move dramatically."

Join the Discussion
blog comments powered by Disqus
 
You Might Also Like...