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Alibaba Files for an IPO: Why You Should Care

Alibaba's headquarters in Hangzhou, China
Alibaba's headquarters in Hangzhou, ChinaPhotograph by Nelson Ching/Bloomberg

The Chinese technology company Alibaba filed in the U.S. today for its initial public offering. What is Alibaba, you may be asking if you’re not Chinese or an obsessive reader of tech blogs? It’s an e-commerce company, a mix of Amazon, EBay, and PayPal. There’s Tmall, an online shopping mall; Taobao, a marketplace where small Chinese companies can sell directly to consumers; and Alipay, a digital payments company that Chinese consumers use through their mobile phones for all sorts of transactions, on Alibaba sites or off.

And why is this a big deal? Because Alibaba does huge business, and therefore is going to be worth a lot of money. Last year, Alibaba sold $248 billion in goods—everything from frozen fish fillets to Nike sneakers to used jetliners. In one day last year, it saw $5.8 billion in transactions. Alipay was used in payments worth $519 billion. Alibaba is the biggest e-commerce site in the world’s fastest-growing economy, one where many inhabitants aren’t even online yet. Because it functions largely as a marketplace, Alibaba’s operating costs are relatively low, and that, along with its very low taxes, means it enjoys profit margins of 45 percent.