Alibaba Is Already Bigger Than Facebook, Amazon, and IBM

Alibaba CEO Jack Ma outside the New York Stock Exchange prior to his company’s initial public offering Friday. Jason DeCrow / AP

Amazon, Facebook, IBM, Intel. As of midday on Friday, Alibaba is now worth more than all of them.

On its first day as a publicly traded company on the New York Stock Exchange, shares in the Chinese e-commerce giant shot up by nearly one-third above their initial asking price. The surge put the value of the company at around $228 billion. The only U.S. tech companies worth more by market cap are Apple ($609 billion), Google ($400 billion), and Microsoft ($387 billion).

And even those giants may see Alibaba closing in.

The reasons aren’t that complicated, but there’s a certain provincialism to how we Americans view our tech industry that might lead us to believe Alibaba’s ascendancy is coming out of nowhere. The simple fact is, unlike any of this country’s biggest tech companies, Alibaba has mastered the Chinese economy. And it’s more likely to achieve the same results elsewhere in the world before U.S. companies do the same in China.

Take Apple. Despite its best efforts (including selling its wares on Alibaba’s Tmall), the company has struggled mightily to penetrate the Chinese consumer market. Most recently, failure to get the necessary regulatory approval is keeping its new iPhone 6 models off the Chinese market. Google lags homegrown Chinese search engines in popularity (in large part because it voluntarily exited the country after apparently being infiltrated by Chinese hackers), and Microsoft in China is battling an anti-trust probe.

Alibaba’s inside track with a Chinese government eager to back its domestic tech industry over incursions by U.S. rivals is one obvious advantage. But more profound is simply how completely it has captured the Chinese consumer market. The company estimated in its SEC filings before going public that China at the moment has 302 million potential online shoppers—nearly equal to the entire population of the U.S., but just a fraction of China’s more than 1.3 billion, many more of whom become likely Alibaba customers once they go online.

Because of that mastery, Alibaba becomes the go-to destination for any U.S. company that wants to reach the Chinese consumer market quickly. And Alibaba’s shares become the most compelling proxy yet for U.S. investors who want to put their money into the Chinese consumer economy. In a way, Alibaba shares are like their own index fund for the Chinese economy. And as long as investors see the potential of that economy to grow, Alibaba shares will go up.

Alibaba may not have invented any dramatic new technologies. It didn’t invent the iPhone or search, a groundbreaking operating system or even online shopping. But in the business of technology, innovation isn’t just what happens in research and development. It’s what happens when you make that technology available to as many people as possible.