HONG KONG/TAIPEI/TOKYO -- It was during a two-month trip to Africa last year that Jack Ma Yun realized it was time to step down as the captain of Alibaba, the powerful Chinese technology company he had founded in his apartment nearly two decades earlier.
While Ma was off meeting African heads of state and pushing his $10 million fund to encourage entrepreneurs on the continent, the world's largest e-commerce company was humming along just fine without him.
"For over 60 days, without coming back, I didn't get one phone call from the company," Ma recalled at an investor meeting last autumn. "I knew they were ready," Ma said.
Whether investors are ready or not, the former English teacher who built Alibaba Group Holding into a $453 billion tech powerhouse is set to yield the chairmanship of the company in September. And while the move has been well-telegraphed, there remain persistent concerns over the future of Alibaba without its charismatic founder at the helm.
Since Ma stepped down as Alibaba's CEO in 2013, he has gradually faded from Alibaba's day-to-day operations. This hasn't hindered the company's growth: Alibaba has become a multinational conglomerate that includes retail, financial services, media and cloud computing. The company has even expanded its presence beyond earth, putting a satellite and a mini space station in orbit in 2018. Over the last five years, revenue has grown at an average annual rate of 49%.
Much of that recent expansion has been overseen by Chief Executive Daniel Zhang Yong, a 12-year Alibaba veteran credited with launching Singles Day, the Chinese sales bonanza that has outstripped Thanksgiving as the world's biggest retail event.
Zhang, who is little known outside the company, will step into the chairman's seat when Ma departs in September. Hardworking and serious, Zhang will take the chairman's job at a tricky time for Alibaba: Its biggest market, China, is experiencing its worst economic slowdown in almost 30 years, shaking consumer confidence. Chinese leaders in Beijing are tightening their grip over private firms, particularly the country's tech companies. And Alibaba is seeking future growth in overseas markets at a time when Washington and Beijing are locked in a technology cold war that only appears to be intensifying. These issues have raised questions about how -- or whether -- Alibaba can maintain its record of blistering growth in the post-Ma era.
While the company touts its investments in future technologies like artificial intelligence, China's economic slowdown has exposed how reliant it is on its oldest business: e-commerce.
Amid a trade war with the U.S., China's economic growth fell to 6.6% in 2018 -- its weakest reading since 1990 -- dragging down many consumer-oriented businesses with it. With Chinese consumers tightening their belts, pressure is mounting for Alibaba to seek growth outside retail.
"That is [the] biggest problem. Alibaba has not found any business better than online retailing," said Ming Lu, a Shanghai-based analyst with financial network Smartkarma. Although the company has launched many new initiatives, the commerce business still accounted for 88% of its total revenue in the December quarter.
Shares of Alibaba fell nearly 4% on Sept. 10 last year, the day Ma revealed his retirement plan. Although the stock price has since recovered, concerns over Alibaba's future still loom. It is among the top 10 most shorted stocks on the New York Stock Exchange as of April 30, the latest data available, according to FactSet Research.
One concern is the growing regulatory uncertainty in China. In November, Zhou Xuedong, director of the People's Bank of China, the country's central bank, said that some of China's financial holding companies had boomed through "barbaric" expansion, requiring an urgent regulatory response. Since then, Chinese regulators have put Ant Financial, Alibaba's fast-growing fintech affiliate, and four other companies under a trial supervisory program designed to reduce debt risks -- a scheme expected to expand across the sector later this year. At the same time, regulators have yet to approve, after 16 months, Alibaba's plan to convert its profit-sharing agreement with Ant into a one-third stake.
"It's definitely with the Chinese government's support that Alibaba could grow into such an empire," said Joseph Fan, a business professor at the Chinese University of Hong Kong. "Alibaba's future is definitely not relying on Jack Ma himself or his successors. It's whether the Chinese government would continue to support Alibaba's businesses as it did in the past, and whether regulations there are continuing to be favorable to Alibaba."
Though Ma, 54, said he decided to step down because he wanted to devote his time to education and philanthropy, some observers suggest his move was linked to growing pressure from Beijing. Richard Dasher, director of the U.S.-Asia Technology Management Center at Stanford University, told the Nikkei Asian Review that one of the possible factors behind Ma's decision to retire was that he "realized that he was becoming a powerful enough person that it might not be popular with the government."
Dasher added: "So before anything happens, he's going to move on and be quieter -- get out of sight."
Ma will give up his board seat in 2020, though he will continue to serve as a lifetime member of the Alibaba Partnership, a group of 36 senior executives which controls most appointments to the company's board. Many believe that even after his retirement, Ma will still have final say on big decisions at Alibaba, since he controlled at least 6.4% of the company as of July 18, 2018. But analysts also believe that Ma won't maintain the high profile he used to enjoy, saying that his international status may have hit a nerve inside the Communist Party, which is determined to strengthen its hold on all aspects of Chinese society. In November, China's official media revealed that Ma is a member of the Communist Party.
"When a foreign leader came to China and the first person he wanted to meet was Jack Ma rather than [Chinese president] Xi Jinping, you knew the company was going to be in trouble," said a venture capitalist who has close ties with Alibaba. He was referring to Malaysian Prime Minister Mahathir Mohamad's decision to visit Ma in 2018 before heading to Beijing for a meeting with the Chinese president. Mahathir and Joko Widodo, his Indonesian counterpart, named Ma an adviser to their governments.
The venture capitalist believes it became too risky for Ma to remain as Alibaba's public face. The company has denied any connection between political pressures and Ma's retirement, calling the speculation "baseless."
Head in the Cloud
Unlike Ma, Alibaba's chairman-in-waiting shows little interest in becoming Alibaba's spokesperson in chief. Although Zhang took over as the company's CEO four years ago, the Shanghai native remains a less familiar face to the Chinese public -- and even to investors, despite speaking at many shareholder gatherings.
"I enjoy walking on the street, and nobody can recognize me," Zhang said in an interview with The Information last year.
Zhang has given himself a nickname, "Xiao Yaozi," a reference to a character in the martial-arts novels of Hong Kong author Louis Cha. While Xiao Yaozi is known as a free and unfettered spirit, Zhang is seen by some Alibaba employees as a man who hardly leaves the office.
"He works all day long," an engineer at Alibaba's headquarters in Hangzhou spoke of Zhang. "He doesn't even go out for lunch and dinner. Instead, his assistant brings food to his office every day."
Zhang's work ethic, along with his "superb talent, business acumen, and determined leadership" were the reasons cited by Ma for selecting him lead the company. Zhang's signature initiative, the Nov. 11 Singles Day shopping festival, generated sales of 213.5 billion yuan (equivalent to $30.7 billion at the time) within 24 hours last year.
"It's not easy to operate a company like Alibaba, but I'm pretty sure -- I'm 100% sure -- Daniel Zhang will do a better job than I do," Ma told investors and employees at a conference last year.
It is indeed a sprawling enterprise. Chinese people can shop at Alibaba's e-commerce platform, apply for a loan from its financial unit, pay for goods with Alibaba's e-wallet, and get their purchases delivered through Alibaba's logistics network. When they are tired of their stuff, they can sell it on Alibaba's secondhand goods platform. It runs a brick-and-mortar supermarket called Freshippo and operates a food-delivery app. Some of the movies on its streaming site -- including this year's Best Picture Oscar-winning "Green Book" -- are produced by Alibaba Pictures. And all of these services are powered by AliCloud.
But Zhang, 47, is still looking for new areas of growth. He is focused on digitizing China's brick-and-mortar stores and expanding its cloud computing unit, which hosts vast amounts of data on behalf of other companies. Since Alibaba entered the business in 2009, cloud services have become the company's second-largest revenue generator. Sales in this segment jumped 84% on the year to 6.6 billion yuan in the December quarter. While that only makes up a single digit share of Alibaba's revenue, Zhang has said it could grow to outstrip even e-commerce. "I think the cloud will be ... the main business of Alibaba in the future," Zhang was quoted by CNBC as saying last year.
In Asia-Pacific, primarily China, Alibaba's cloud business has leaped past Amazon and Microsoft combined in two of the biggest categories of cloud services: infrastructure as a service and infrastructure utility services, according to Gartner Research. The Chinese technology giant is also seeking to challenge the western tech companies in Europe and the U.S., where it has opened four data centers in recent years.
Alibaba's overseas push into cloud computing comes as Washington is accusing Chinese technology companies of spying for Beijing. The Trump administration's recent campaign against Huawei Technologies has led to bans of Chinese telecom equipment in countries ranging from Japan to New Zealand and Australia. Alibaba declined to comment on whether the backlash against Huawei has spilled over and hurt its international cloud business, citing rules against commenting on other companies. But some analysts say some impact is inevitable.
"Jack Ma is surely the best ambassador of his company over the years, and he could definitely help Alibaba with great external communications. But at the end of the day, Ma and his successor could not change all those complicated political factors between U.S. and China," said Liu Ningrong, a professor and principal at the Institute for China Business at the University of Hong Kong.
"Alibaba will definitely face headwinds when it expands to the U.S. and Europe. Even Jack Ma cannot change that."
But others say the customers for cloud services -- big, data-consuming businesses focused on the bottom line -- won't be so affected by the change at the top.
"Ma is a very good ambassador to deal with foreign governments, but on the business to business level, businesses are very rational," said Jeffrey Towson, a professor of investment at Peking University in Beijing.
"I don't think Alibaba is one-person company," he continued. "Everybody has their role. If Daniel Zhang is not great at something, someone else will take care of that."
Built to last?
Jack Ma's most important role, according to Towson, has been to create a culture at Alibaba that is strong enough to thrive without him -- a task that has eluded founders of other successful technology companies.
American tech companies have sometimes faced difficulties after the departure of their founders, including Microsoft in the years after Bill Gates' retirement, and Apple after founder Steve Jobs was forced out in 1985.
"I have put a lot of thought and preparation into this succession plan for 10 years," Ma said in a letter to shareholders published on the company's website. Ma once said that he was building Alibaba to last for over three centuries, and has visited churches, the military and other institutions to learn how to build an enduring organization.
Those preparations have paid off, Towson said. "He built a culture that lives on without him as strong as with him," he said. "Jack Ma has been on the road for years but Alibaba has been rocking and rolling."
Dozens of Alibaba employees, business partners and industry observers told Nikkei that they had not noticed any setbacks following Ma's announcement. And in Hangzhou, the allure of Alibaba remains as strong as ever.
"In the early days, perhaps people joined Alibaba for Jack Ma," said Stray Mao, 25, while eating oysters at a restaurant near Alibaba's headquarters. "Today, we want to join Alibaba for Alibaba itself."
Indeed, despite its recent sluggish growth, Alibaba still logged quarterly revenues of around $17 billion during the October-December period -- the equivalent of the economy of Laos in 2017. Analysts expect its January-March quarter earnings, scheduled to be announced on May 15, to show revenue rising 47% on the year to reach 91 billion yuan, according to a Refinitiv survey.
David Dai, an analyst at Bernstein Research, says Alibaba remains poised for strong growth, noting its robust ecosystem in China and promising cloud business. "I believe Alibaba can thrive even after [Ma's] retirement," he said. "We think there will be no big changes after this transition."
Others are more cautious. Danny Law, an analyst with Chinese brokerage company Guotai Junan International, notes that Alibaba is burning cash to cultivate its next growth engine. Last year, the company said it would spend 3 billion yuan subsidizing its food delivery unit in a fierce price war against Tencent Holdings-backed Meituan Dianping. Meanwhile, Alibaba's cloud business, despite rapid growth in revenue, lost more than 5.5 billion yuan.
"How to monetize such new businesses or how to strike a balance between spending and growth could be one of the questions that Alibaba should solve in the future," Law said.
But Zhang, described by Ma as having the "guts to innovate," seems not to be concerned. In a keynote speech at Tsinghua University in April, Zhang encouraged business school graduates to pursue a long-term vision.
"If you can see it, everybody can see it," Zhang said. "A real entrepreneur may identify an opportunity, not only for today, but also for tomorrow."
And for Alibaba, tomorrow remains to be seen.
Jenny Chen in Hong Kong contributed to this report.