Alibaba Set to Be Second Biggest Internet IPO Ever

alibaba-logo.pngChina’s high-flying Internet stocks are about to get a major addition when B2B marketplace Alibaba goes public on November 6. The IPO is on track to raise $1.5 billion for the Chinese Internet company, according to Bloomberg. That would make it the second-biggest Internet IPO ever, after Google’s $1.9 billion offering in 2004.

Alibaba, which was founded by Chinese celebpreneur Jack Ma, saw its profits rise 382 percent during the first half of 2007 to $39 million (or 292 million RMB), on revenues of $128 million (or 957 million RMB), a 61 percent rise. You can find the find the financials here. Alibaba’s main business is to function as a directory for Chinese manufacturers and other companies, and connect them to other companies around the world looking for suppliers. Alibaba also runs Taoboa, an eBay-like marketplace that is more for consumers and saw $2 billion worth of goods traded over its site the first half of this year; Alipay, the PayPal of China; Yahoo China (Yahoo owns 40 percent of Alibaba); and Alisoft, a Web-based accounting and management software for small businesses.

For a dose of competitive counter-hype on Alibaba, I asked the CEO of Atlanta-based manufacturing marketplace, Mitch Free, for his take on Alibaba’s business prospects. (I’ve written about previously here and here). Says Free:

There is not a lot of depth in what their business is doing. They are basically a directory and that offers limited value beyond supplier discovery. They will need to build or acquire the systems to truly facilitate industrial commerce and protect intellectual property. Bringing products to market is about more than just finding a supplier. Bringing products to market and sourcing the components requires a lot of collaboration, logistics, revision control, negotiation, due diligence, process and workflow integration.

Alibaba has done a great job selling listings to suppliers in China. However, Alibaba is virtually unknown within the industrial community in North America and Europe. In order for their model not to implode they will need to deliver value to their supplier customers in China. And for those customers, value for the money they spend with Alibaba will be judged by the new customer relationships they win as a result of being on Alibaba. Alibaba will also need to build a brand and value proposition with the industrial-buying community in North America and Europe. The challenge for them will be that those buyers have moved way past using directories and are looking for more transactional depth and process integration.

Conveniently, that is what offers. And, which is backed by Amazon’s Jeff Bezos, is entering China in a big way. So it is a potential competitor of Alibaba’s. But behind Free’s trash talking, there is some good analysis. He knows the manufacturing market well, and China is his biggest growth area. (If Jack Ma or someone else from Alibaba would like to respond, send me an e-mail to erick at techcrunch).

TechCrunch reported on Alibaba’s IPO earlier here and way back in July.