Everything you need to know about Alibaba's blockbuster IPO

Friday is going to be a big day on Wall Street

Alibaba headquarters, China
(Image credit: (Qilai Shen/In Pictures/Corbis))

For weeks, Wall Street has been working itself into a frenzy over Alibaba's potentially record-breaking IPO on Friday, Sept. 19, said Chris Wright at Forbes. But as is so often the case when internet companies go public, hype can quickly become hyperbole. So what exactly does the Chinese e-commerce giant do to warrant a market value of more than $170 billion, three times bigger than General Motors? "It's almost easier to list what Alibaba doesn't do," said Mark Broad at BBC. As China's biggest online commerce company, Alibaba owns several wildly popular and successful sites: Taobao, an eBay-like platform; Tmall, which helps retailers sell to China's booming middle class; and the flagship Alibaba, which connects Chinese manufacturers and wholesalers with consumers and companies around the world. It also owns stakes in the Chinese equivalents of PayPal, Twitter, and YouTube and reportedly handles 80 percent of online retail sales in China — a market projected to be worth $713 billion by 2017.

Whatever you do, don't call it "the Amazon of China," said Charles Riley at CNN. Despite inevitable comparisons, there are huge differences in the companies' business models. "Compared to Amazon, Alibaba's revenue is small," but it enjoys much higher profit margins because it acts only as the middleman between shoppers and sellers, making money on advertising and product search placement, and in some cases, commissions on transactions. That's very different from Amazon, which incurs higher costs — and lower profits — by acting as the seller itself. And since Alibaba is poised to tap into China's rapidly expanding internet audience, it's no wonder that "investors are salivating" at the prospect of owning a slice.

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Sergio Hernandez is business editor of The Week's print edition. He has previously worked for The DailyProPublica, the Village Voice, and Gawker.