21 Mar Alibaba’s business model

Two days ago, Business Insider published a good summary of little known facts about Alibaba.

Several facts highlight how the mega trade-web dwarfs competitor e-commerce platforms in the U.S. and in China on several critical measures, including employees, registered users, web visits, sales throughput (on track to handle $1 TN in transactions) and revenues ($1.8 BN in 3Q2013).

Another competitive advantage of Alibaba is that it blocks search engine spiders, thereby retaining the control and benefit of most of the information published on its site. The March 23 2013 Economist article on Alibaba discusses the spider tactic in more detail and offers a deeper discussion of Alibaba’s information advantage generally.

But the most interesting aspect of Alibaba is one that has received almost no attention. That is Alibaba’s role in transforming and developing China’s SME financial services market.

Alibaba, together with its financial backer and deal sponsor Orient Securities Asset Management, is the micro-loan securitization pioneer in China. Approval was granted by the CSRC in June 2013 for the creation of Alibaba Separate-Account Asset Management, a master trust structure. It will issue 10 series, each backed by RMB 100-200 MM, with a 1-2 year maturity. The first series, backed by RMB 500 MM, priced with three tranches (A: 75%, B: 15% and C:10%) of a 15-month maturity. The bonds were listed on the Shenzhen Stock Exchange on September 25, 2013.

With this foray into self-financing, I believe it is well worth reconsidering Alibaba’s business model. Is it really a giant, diversified trade web? Or is it (as I believe) a brand new banking model for the 21st Century?