Alibaba's World (15 page)

The first sign was a phone call I received from a journalist at the
Hollywood Reporter,
the day after our announcement with Yahoo!.

“I just received a strange fax I’d like to ask you about,” he said. “It includes US congressional testimony from the International Anti-Counterfeiting Coalition earlier
this year. They are claiming that Alibaba is the world’s largest trading hub for counterfeit goods.”

I immediately suspected eBay was behind the fax, based on the attack line Meg had recently used at eBay’s annual shareholder meeting. Although it smacked of the pot’s calling the
kettle black, it seemed that eBay was weaving into its narrative the message that Alibaba was a clearinghouse for counterfeit goods. As a Chinese company Alibaba was an easy target for
eBay and its political allies in Washington, perhaps even an easy way to deflect to us criticism of counterfeits on eBay.

“Interesting. Who sent the fax?” I asked.

“It didn’t say. It was sent to me anonymously. There were no contact details. But I heard a number of other journalists also received it.”

Someone was trying to smear us. Could it be that, if eBay couldn’t buy us, it was going to do anything within its power to interfere with our Yahoo! deal? When Henry Gomez told me,
“There is always a way of getting the word out,” was this what he had in mind? I couldn’t be 100 percent sure that eBay was behind it, but I realized that things might get really
ugly really fast.

I told the reporter, “Well, we have the exact same policy as eBay, based on the same legal standard. If we are notified by a brand owner that one of our sellers has infringed on their
intellectual property, we will investigate and take down the listing where appropriate.”

The response seemed to satisfy the
Hollywood Reporter,
but responding to the crisis had taken up my entire morning, so I was late getting to Hangzhou for our all-hands staff meeting,
which was being held at Hangzhou’s Great Hall of the People. When I finally arrived, thousands of smiling and laughing Alibaba staff members, all dressed in white shirts emblazoned with the
logos of both Alibaba and Yahoo!, were streaming out of the venue. Clearly the news had gone over better with the Alibaba team than with their Yahoo! counterparts in Beijing.

As people filed out of the auditorium, I found Dan Rosensweig next to the stage. “So what was your impression of the Alibaba team?” I asked, expecting him to be as effusive as I was
feeling.

“It’s very young,” he said. “We’re going to have to do a lot of training and bring in some expertise from the US.” I was slightly
offended, not to mention reminded of the way our own Hong Kong expats had reacted to meeting the Alibaba team for the first time. It was a good reminder of why we’d made sure to maintain
management control in our deal, to avoid too much oversight from the Yahoo! US team’s prying eyes. But I kept my mouth shut.

Just then Jack walked over.

“Hey, Jack, nice job today,” Dan said. “If this partnership goes well, maybe someday we’ll go ahead and buy the rest of Alibaba.”

Jack laughed. “Well, I think someday, if you play your cards right, maybe Alibaba will buy Yahoo!.” I looked at Jack and realized that he was only half joking.

“Ha, I don’t think so,” Dan replied. Clearly he thought Jack’s boast was cute but preposterous. “Last I checked, Yahoo! was worth $40 billion and Alibaba was worth
$4 billion. You’ve got a long way to go.”

With the deal announced, it was time to turn our attention to the next big media frenzy, Alibaba’s annual West Lake Summit. Jack had started the event back in 2001, at the depths of the
Internet winter, when he brought together the CEOs of five of China’s leading Internet companies. Over time the summit came to be regarded as a sort of Davos for China’s Internet
industry, and this year’s event would have a very special keynote speaker—former US president Bill Clinton.

The introduction to Bill Clinton had come through Marcy Simon, who had her own small PR firm which counted the Clinton Foundation as one of her clients. Marcy had approached me
at a conference I’d attended with Jack. She’d seen Jack speak a couple of times, had grown into a fan, and wanted to see if she could work for us. Given her
background—she had worked for Bill Gates as well—she certainly seemed like someone who could help with our PR efforts in the US, so we retained her as a consultant. Not long after she
began working on our PR campaigns, she introduced us to Bill Clinton’s staff.

Having a former US president speak at our event was quite a source of pride for Alibaba. Clinton was broadly popular and one of the few Westerners who could argue credibly to a Chinese audience
about the need to open China’s Internet. When his keynote appearance was announced, China’s blogosphere lit up with excitement.

But several weeks before the event eBay tried to get Clinton to cancel. When I approached Joe Tsai with a small question, he responded sharply, “I can’t deal with this right
now—I’m trying to make sure Clinton still speaks at our event. eBay is trying to get him not to speak.” I was shocked and worried. If Clinton pulled out, it would be a devastating
blow to Alibaba’s reputation in China and a major loss of face for Jack. Surely eBay knew this, and if it succeeded, Alibaba would suffer serious damage while we were still in the process of
closing our deal with Yahoo!.

The picture grew even clearer when I was forwarded a PowerPoint presentation that eBay’s general counsel had sent to Clinton’s assistant, Doug Band. On it were screenshots from
Alibaba’s website showing postings for illicit items such as AK-47s, uranium, and counterfeit goods. While the vast majority of the products posted on Alibaba were legitimate, it was
impossible for Alibaba to screen out all the bad actors. The website
policy—and applicable laws—stated that members were responsible for their postings. A
marketplace operator like Alibaba was simply responsible for taking down illegal postings when made aware of them. But it was clear that some illegal listings had made it onto the site. The big
question was how Clinton’s team would react.

In addition to the email from eBay’s general counsel, I heard from Marcy that eBay’s founder, Pierre Omidiyar, a billionaire donor to Clinton’s foundation, had called Clinton
and pleaded with him not to attend our West Lake Summit. “In fact, he made two calls,” Marcy said. It was a full-court press.

I found it ironic that, just a few weeks earlier, eBay was desperately trying to invest in Alibaba but was now doing everything within its power to smear us. Fortunately eBay failed to land its
blows and Marcy informed us that Clinton would still attend the summit, despite eBay’s protests. “I explained to Clinton, it’s just because eBay is competing with Alibaba,”
she told me.

A few weeks later Clinton’s plane touched down in Hangzhou. The city had worked hard to provide a suitable welcome. As the motorcade rolled to the entrance of the Grand Hyatt, fountains on
the West Lake swayed to orchestral music while Chinese tourists lined the hotel perimeter, hoping to get a glimpse of the former president. The city’s pride was still recovering from comments
made by the last US president to visit Hangzhou—Richard Nixon—who reportedly had remarked, “Beautiful lake, ugly city.” Local officials were determined not to let that
happen this time.

After Clinton strolled through the hotel lobby and went up to the presidential suite, Jack approached me with an urgent
request. “Porter, I’ve never asked
you to write a speech for me. But this is the one time I think I need your help. Can you write the introduction for me to introduce Bill Clinton?” Sure, I said. This time
was
different. So I headed to my hotel room to work on Jack’s opening comments.

As I was writing Jack’s speech, Marcy pulled Jack aside and told him that he and Joe were invited up to Clinton’s suite to chat and get to know each other. It was the night before
Jack’s birthday, and Marcy surprised him with a birthday cake, which they shared with Clinton. As Marcy would tell me later, Clinton joked with Jack about eBay’s antics leading up to
the summit, saying with a laugh, “Boy, those eBay folks sure are mad at you.” Luckily Clinton and Jack hit it off, setting the tone for what we assumed would be a successful summit.

Until the next day, when I woke up to a press release issued by Reporters Without Borders and Human Rights in China: “Clinton Urged to Raise Shi Tao Case at China Internet Summit.” I
read further to learn that Reporters Without Borders was reporting that Yahoo! had provided a journalist’s email information to the Chinese government which had then sentenced the Beijing
reporter to ten years in prison for “leaking state secrets” to foreign media. All the journalist, Shi Tao, had done was leak a Communist Party directive to Chinese journalists that they
should not report on the upcoming fifteenth anniversary of the Tiananmen Square massacre. When Shi Tao sent the document to foreign journalists, he had assumed that by using Yahoo! China, rather
than a local email provider, he would be able to maintain his anonymity. But when the Chinese government asked for the user information, Yahoo!’s legal team handed it over, exposing Shi Tao
as the source.

Suddenly it was obvious that when we acquired Yahoo! China, we had acquired a political time bomb. As we headed into a radio interview, I briefed Jack on the
issue—it was the first he’d heard about it. When I spoke to Mary Osako, a member of Yahoo!’s communications team, she told me that Yahoo! would be canceling Jerry Yang’s
appearance at the press conference that was supposed to follow Jerry’s planned fireside chat with Jack at the summit. “The only thing the foreign media are going to want to talk about
is the Shi Tao case,” she told me.

The conference began without a hitch. We had persuaded the local Hangzhou television station to broadcast Bill Clinton’s speech live, a rarity in China. When Clinton took the stage, he
made no mention of the Shi Tao case. Instead he argued persuasively, “Whatever political system a country has, the Internet has the potential to put power through information and
communication in the hands of ordinary people. And I think on balance that has to be a good thing, anywhere in the world.”

Then Jerry and Jack took the stage for their fireside chat. It was the first time Jack and Jerry, together in the same room, laid out their common vision for the partnership. They discussed how
they’d first met in Beijing, traveled to the Great Wall together, and ultimately crossed paths again at Pebble Beach in the fateful meeting that had led to the partnership. A Q&A session
followed the fireside chat. Peter Goodman of the
Washington Post
stood up to ask the last question and addressed the controversy:

“Mr. Yang, your company was founded at a time when Internet companies were marketing themselves to consumers and to shareholders and the public as not merely business propositions but
almost forces for liberation, for freedom of
information, free flow of information, freedom of expression. There are now people saying that your company is effectively a
tool of the Chinese government, that you’ve become a force for repression. How does that make you feel personally? And what can you tell us about your company’s role in the Shi Tao
case?”
¹

The room was filled with silence as Jerry Yang ruminated over the question. When he finally answered, he fumbled through a lengthy explanation:

“We don’t know what they want that information for, we’re not told what they look for. If they give us the proper documentation and court orders, we give them things that
satisfy both our privacy and the local rules. I do not like the outcome of what happens with these things.”
²

From a PR perspective Jerry was caught between the Chinese government and US politicians. Any comment from him, however deft, would likely dominate the headlines the next day. But his
wishy-washy answer left the impression that even Yahoo!’s cofounder didn’t believe its actions in China were justified. In my opinion Yahoo! could have reasonably argued that the net
effect of Western Internet companies in China was to create a more open society there. But instead Jerry tried to straddle the fence, and to critics in the West he appeared to lack a moral
center.

For his part Jack gained applause from the mostly local crowd: “As a business, if you cannot change the law, follow the law. Respect the local government. We’re not interested in
politics. We’re focused on e-commerce.” That response, too, would never satisfy all the Western critics. But at least it seemed born of clarity and conviction, of Jack’s own
deepest beliefs.

When the
Washington Post
came out the next day, on September 11, the headline read: “Yahoo Says It Gave China Internet Data.” Neither Yahoo! nor
Alibaba came across well in the article, and even Clinton was drawn into the controversy, with Goodman reporting, “Clinton did not mention the Shi case in his speech. As he was leaving the
hall, the former president declined to answer a question about the case before melting into a thicket of Chinese security and Secret Service officers.” Marcy later told me that Clinton had
been blindsided by the issue and was furious at his staff for not properly briefing him. But all was not lost. “At least the president liked Jack,” Doug Band, Clinton’s assistant,
told me later.

As we worked to close our deal with Yahoo!, the Shi Tao case continued to hang over us. Until this point Alibaba had been fortunate to operate in the politically neutral domain of e-commerce.
But in acquiring Yahoo! China, we were stepping into a new domain, operating a portal that included news, information, and communication services, such as chat and email. It was the first
controversy to drive a wedge between Yahoo! and Alibaba, but I was betting it wouldn’t be the last.

More troubling to me was that I had to think about my own role in a company that now operated a general portal that was beholden to China’s laws concerning privacy and censorship. As an
American I had a luxury that my local colleagues did not—I could choose whether to work within the constraints of China’s laws. I had started my career by teaching leadership workshops
in Washington, DC, that promoted democracy to high school students and encouraged them to learn about America’s democratic processes. By staying with Alibaba was I somehow betraying the very
values I had so fervently espoused?