Jonathan Lu’s first job after college wasn’t what he’d envisioned -- stuck at the reception desk at a Holiday Inn in Guangzhou, China. He had forgotten to fill out a page of his university entrance exam and instead of architecture school, he ended up in a hotel management program.
Alibaba Group Holding Ltd.’s chief executive officer recounts the story to show his ability to overcome hurdles -- and how in just 15 years he went from greeting hotel guests to being tapped this February by billionaire Jack Ma to run China’s largest e-commerce company.
Today, the 43-year-old Lu is charged with guiding the company through a potential multibillion-dollar initial public offering, while fending off rivals such as China Internet giant Tencent Holdings Ltd. (700) and navigating a shift to mobile computing.
“I get very excited when I face setbacks,” Lu said of his earlier misadventure. “It stimulates my potential.”
Lu is the corporate alter-ego of Ma, the outspoken Alibaba founder and visionary who has landed in the headlines for slamming rivals such as EBay Inc. (EBAY:US) or, again last week, for railing against pollution in China that has made water “undrinkable” and food “inedible.” The slight, soft-spoken Lu operates largely behind the scenes.
“We complement each other very well,” Lu said. “He looks forward and outside of the box, I focus on the present.”
Alibaba is heading for an IPO that may make it the world’s most valuable Internet company after Google Inc. Analysts estimate the share sale, which may come next year, will value Alibaba higher than Facebook Inc. (FB:US)’s initial $81 billion and could see it reach $190 billion, or about 12 percent more than Amazon.com Inc. now.
In the meantime, Lu will need all his perseverance in executing Ma’s vision. His job is to develop the equivalent of an EBay, an Amazon and a PayPal all at the same time -- in a country where credit card use is rare and traffic jams hamper deliveries for days.
“A lot of pressure, a lot of things I need to do,” said Lu, during an interview at Alibaba headquarters in Hangzhou, a city of 8.8 million people about 100 miles southwest of Shanghai. “The battle in e-commerce has never stopped because the cake is too big.”
While the closely held company doesn’t report detailed financial results, basic figures are made public by Yahoo! Inc. (YHOO:US), which owns a stake. In the second quarter, Alibaba’s revenue climbed 60 percent to $1.73 billion and net income more than doubled to $707 million. That’s about the same revenue (FB:US) as Facebook with more than twice the profit.
Lu grew up in Guangzhou, a trading hub about 75 miles up the Pearl River from Hong Kong. His father and mother were “ordinary workers,” he said, declining to be any more specific.
Lu was in elementary school during the last years of the Cultural Revolution in the 1970s, when the bloody turmoil of Mao Zedong’s drive to stamp out capitalist and traditional influences petered out in economic stagnation and political infighting. The chairman’s portrait hung at the front of his classroom, and the first lesson Lu learned was the importance of class struggle.
After Mao’s death, reformers led by Deng Xiaoping gained power and opened China’s economy to foreign investment and more extensive private enterprise.
Lu, a good student, said he had imagined a bright future after high school, perhaps as an architect. As it happened, failing the grade for architects’ school and landing the job at the Guangzhou Holiday Inn proved serendipitous stepping stones toward an even brighter future.
Six years after he joined, a foreign guest who had set up an Internet fax company in the city hired Lu as a service manager.
The business shut down after a year, and Lu started a similar firm on his own. In 1999, Alibaba offered to buy his company.
A year later, Lu began managing the South China sales region for Alibaba.com Ltd., the company’s website that lets businesses sell to other businesses. When Ma came to town, Lu drove him around to meet customers and give speeches across Guangdong, a province about the size of Florida.
During the long drives, Lu would offer his thoughts on how to fine-tune sales incentives and other policies, while Ma would outline the big picture.
“That was a time for us to really get to know each other,” Lu said. “Him talking and me listening, him sleeping and me driving.”
Lu became one of the key people Ma would turn to execute his ideas for building an Internet powerhouse. In 2004, Lu led a team in developing Alipay, a system for making payments that ensures the safety of online transactions without credit cards.
“Jonathan was very low key and didn’t like to promote himself,” said David Feng Dahui, chief technology officer of medical website DXY.com, who worked for Lu at Alipay. “But you could tell that he was quite decisive.”
In 2008, Lu was promoted to become CEO of Taobao Marketplace, a website similar to EBay’s that lets individuals trade with each other. During his tenure, the service’s transaction volume grew more than eightfold.
Ma again turned to Lu in 2011 to take the helm of Alibaba.com, the business-to-business website that at the time was publicly listed. The previous CEO had resigned after an internal probe found that more than 2,000 subscribers had engaged in fraudulent sales. Lu moved quickly to clean up the site, used by companies such as Wal-Mart Stores Inc. and Procter & Gamble Co. to find China exporters.
“He sets the direction and then he’s really able to empower people to do what they need to do,” said Brian Wong, an angel investor who used to work for Lu at Alibaba.
Ma bought out the public shareholders in Alibaba.com in 2012, folding the unit back into the parent company. Lu became chief data officer and oversaw development of a mobile operating system called AMOS, until he was tapped to become CEO.
Ma’s offer came during tea at the Peninsula hotel on Shanghai’s historic Bund in February. It wasn’t the first time Ma had taken Lu out to propose a new job -- -- he’d done it over drinks, dinner and once as the men got foot massages.
“Ninety percent of the time, it is him talking,” said Lu, tilting his head with a laugh. “Then I say yes.”
In a letter to employees in March when Lu’s promotion was announced, Ma said he was chosen for qualities that included “his curiosity and ability to grasp new ideas, his judgment and decisiveness.” Alibaba declined to make the founder, who remains as executive chairman, available to be interviewed for this story.
Lu, who got married earlier this year, says he’s ready to take on a higher profile role as needed.
“Our plan is that Jack doesn’t need to come out so often,” Lu said. “I will face the public more often, but this needs time and I also need to improve myself.”
Alibaba hasn’t officially said when it will go public, though people familiar with the matter said last month it would happen next year. The company may list in New York after talks with the Hong Kong exchange broke down, two people familiar said in September.
Analysts have been steadily increasing estimates of the company’s value as financial details are disclosed through Yahoo.
Alibaba is valued at $120 billion according to the average estimate of six analysts in October. Carlos Kirjner at Sanford C. Bernstein lapped the field by doubling his valuation to $190 billion.
He based the figure on a projection that Alibaba’s net income will climb from $2.6 billion this year to $6.1 billion in 2015, as revenue rises from $6.6 billion to $13.5 billion. A market value of 30 times 2015 profit is in line with Tencent, he said.
Lu is taking none of this for granted. The rival he watches most closely these days is Tencent, a Shenzhen-based company that’s moved beyond games into Web services, search and e-commerce. Tencent has 990 million registered instant messaging accounts, and it’s increasingly offering them opportunities to buy and sell goods, much like Alibaba. Tencent even has its own Alipay-like service. Its name? Tenpay.
On the strategic front, Lu’s priority is preparing Alibaba for the shift to mobile computing. The company is working to make its instant messaging app, Laiwang, more competitive with Tencent’s WeChat. It’s also developing better apps to let consumers and companies conduct business from mobile phones.
All of this may just be a warm-up for when investors and bankers will scrutinize Lu and his lieutenants to see if they’re worthy of an IPO comparable to Facebook’s.
“You have to believe in yourself,” he said. “Success is often just the difference between committing and giving up.”
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