Chapter 35: Unwittingly Falling into the Trap

The “Alipay” currently in Gu Cheng’s hands was not, in the strictest sense, the same thing as the “Alipay” Ma Feng would create in another timeline in 2005.

The legal basis for the fully developed version of Alipay did not yet exist in 2002.

Online banking that required a USB security key and processed one transfer for every online purchase would not become widespread among the major state-owned commercial banks until 2003. For now, only China Merchants Bank had taken the lead as a pioneer in the pilot program; the other banks were still waiting and watching.

The users currently spending money on Dingdang.com and a certain online literary site were, in essence, no different from people buying game credits or signing up for traditional service-industry membership cards. They first deposited a certain amount of membership credit into Alipay, then spent that balance one purchase at a time.

Although Gu Cheng also sold products on behalf of other companies, the legal nature of his business was still primarily B2C e-commerce. The goods being sold were products operated and supplied directly by the platform itself.

This amounted to exploiting a tiny loophole in the law as it currently stood. A payment platform selling its own B2C products did not count as a “third-party financial instrument” and therefore did not fall under the jurisdiction of the China Banking Regulatory Commission. But if it were used for a C2C platform like Taobao, the nature of the business would be entirely different.

If you did not sell goods yourself and merely provided pure payment services, whom else could the banking regulator possibly supervise?

Gu Cheng understood the twists and turns involved. So did Ma Feng.

That was why the two men reached a tacit understanding. They both knew the direction and degree of next year’s policy changes, so they would settle their intentions first. By the beginning of the following year, the policies would naturally become clear. Once Taobao went online and Alipay’s functions were revised, neither of them could be accused of firing ahead of the policy signal and jumping the gun.

Deep down, Gu Cheng was still a man of the content industry.

He had no interest in running an e-commerce business dealing in physical goods, nor did he possess the time or the inclination to manage logistics, quality assurance, and supply chains.

Everyone should do what they were good at. If money did not help one’s core enterprise, there was no point coveting it.

Gu Cheng had little interest in money itself. In his eyes, money was merely a means of realizing his ambitions in the content industry.

This was not posturing. It was simply the mindset that naturally emerged in anyone with ideals after amassing a fortune worth several billion. At that level, money became nothing more than a number determining how quickly one’s ambitions could be realized.

Since that was the case, it was better for him and Ma Feng to take what they each needed, secure mutually beneficial terms, and stop while things were going well.

If Ma Feng could make Alibaba a great deal of money while multiplying Alipay’s user base several times over—cultivating more people accustomed to making payments and encouraging them to support legitimate works, thereby benefiting the country’s musicians, filmmakers, and writers—then that would be a merit of immeasurable value.

…

Help was help, but certain matters still had to be made clear.

In particular, Gu Cheng felt it necessary to make Ma Feng understand just how great a favor he was receiving.

“There’s no problem with letting you use Alipay free of charge, and I’ve already agreed to the term you proposed. But there’s one thing that must be made clear. Originally, I was running a B2C business. Every e-commerce order was sold by my own company, and every bit of profit went to me. I was willing to absorb a little in bank processing fees.

“But now you intend to use Alipay to pay merchants on the customer-facing end. It’s easy to imagine that future cash flow will be hundreds of times greater than it is now. Yet the profits will all go to the merchants, while the platform itself will earn little more than advertising fees. My Alipay, meanwhile, won’t earn a single cent and will simply keep paying bank processing fees out of pocket. That is a very substantial favor.”

After saying this, Gu Cheng paused to give the other man time to digest it.

Ma Feng merely raised his glass to him sincerely, then drained his own drink first. He said nothing more, which amounted to an acknowledgment of Gu Cheng’s point.

In 2002 and 2003, online banking fees were extremely high. The service had only just appeared, and the major state-owned commercial banks had tolerated the legalization of third-party platforms like Alipay largely because they wanted to profit from the processing fees generated by e-commerce payments.

Two decades later, Alipay’s processing fee would be one-tenth of one percent. At present, however, it was as high as three-tenths of one percent.

In other words, for every thousand-yuan transaction completed on Taobao, Gu Cheng would have to pay three yuan in fees to the bank handling the transfer.

Historically, when Taobao was first established in 2003, its annual transaction volume amounted to only a few hundred million yuan.

By 2005, it had reached eight billion. By 2015, it stood at three trillion.

Considering that Taobao in this timeline would launch with the added advantage of Alipay from the very beginning, its growth would only be faster. Historically, Alipay did not appear until twenty months after Taobao went online.

By agreeing to let Ma Feng use Alipay free of charge, Gu Cheng was effectively subsidizing several tens of millions of yuan in bank fees every year for the next three years.

That was no small favor.

Once Gu Cheng judged that Ma Feng had fully absorbed the emotional weight of the matter, he stated his additional condition directly.

“It’s not that I can’t bear to part with those tens of millions. But since I’m paying the fees, I can’t simply ignore loopholes in Taobao’s operations that might cause those fees to skyrocket. Don’t worry—I’m not trying to interfere with the way you run the business.”

Ma Feng grew slightly tense and rubbed his hands together.

“Say whatever you like. I trust your character, Brother Gu.”

“Then I’ll be direct. I’ve been working with Old Li on AdSense lately, as you know. In the future, the greatest problem facing Internet traffic will be credibility. Once you launch Taobao and the number of merchants grows, those unwilling to pay for advertising or recommended placements will certainly find ways to fabricate orders, inflate their sales figures, climb the sales rankings, and increase their stores’ exposure.

“And fake orders generate enormous cash flow. The processing fees that Alipay owes the banks will pour out in full, while no actual merchandise transaction will have taken place. That clearly constitutes an improper and abnormal overuse of processing fees. Since I’m the one paying those fees today, it’s only reasonable for me to help you manage fake orders, isn’t it?”

Ma Feng realized that the argument made perfect sense.

Gu Cheng was paying Taobao’s processing fees. Surely that gave him the right to keep an eye on abnormal expenses.

“Then what do you intend to do?”

“I won’t interfere in the other details of Taobao’s operations. But all technical materials relating to anti-fraud algorithms, big-data collection, and the like must be shared with my Alipay company without the slightest reservation.”

It was 2002. Professor Geoffrey Hinton had not yet discovered deep-learning algorithms.

At present, Ma Feng had not even begun to think in terms of big data or algorithms.

He did not detect the trap hidden in Gu Cheng’s words at all. Instead, he felt that Gu Cheng’s proposal was entirely justified.

From Gu Cheng’s perspective, however, he had laid out one arm of his strategy through his cooperation with Old Li on AdSense, while using the other to insert himself invisibly into Ma Feng’s accumulation of Taobao’s algorithms.

In the future, whenever big-data labeling algorithms became relevant anywhere across China, would anyone still be able to stand against him?

The instant Ma Feng agreed, Gu Cheng wanted nothing more than to throw back his head and shout:

“Who else?”

Fortunately, he managed to restrain himself.

The two men happily clinked glasses. Then Gu Cheng suddenly remembered something and added casually:

“In the future, I may consign some electronic products resembling Apple’s iPod on Taobao. Remember to help me crack down on counterfeits and set aside some advertising space. Aside from things like hardware devices for carrying content products, I have no intention of running a physical-goods business, so you can rest easy.

“And your Taobao should stay away from game cards, game discs, audiovisual products, books, and similar goods. The content industry is my territory. Neither of us should reach across the line.”

Ma Feng calculated mentally. The things Gu Cheng had mentioned were, for the most part, virtual products. Although Taobao would be incomplete without that sector, it was still better than going to war with Gu Cheng.

The Ma Feng of the present was inferior to Gu Cheng in both capital and strength.

At worst, he would agree. Each of them could focus on doing what they were best at.

…

Ma Feng’s late-night visit kept him talking with Gu Cheng until very late.

In the end, Gu Cheng was starving and had no choice but to keep Ma Feng for dinner.

They opened a couple of bottles of liquor and went through several rounds.

When the atmosphere had grown warm with drink, Ma Feng put forward a somewhat rambling suggestion that had little to do with business.

“A Cheng, I know your temperament. You don’t particularly like dealing with the government. But this time, when you and Little Li lobbied China Unicom, you made use of Chief Qi’s connections. In the future, it won’t be so easy for you to remove yourself entirely from official circles.

“A few of my old friends and I have been discussing something lately. It won’t involve much money. The important thing is to show solidarity and look out for one another. Would you be interested in taking a stake? If you’re willing to join, given your status, I’ll let you hold the controlling share.”

Gu Cheng slowly drank a bowl of shark fin stewed with fish maw to sober up. At Ma Feng’s words, he set down his spoon and wiped his mouth.

“Tell me about it.”

Ma Feng had just concluded a major deal and was in a fairly good mood. He was willing to speak from the heart.

“I’ve been discussing it with Ding Sanshi, Guo Guangchang, Song Weiping, and a few others. Things have changed so rapidly over the past few years. During the Southeast Asian financial crisis, Guo and the others, who were involved in industry and investment, suffered terribly. Then the Internet crisis came along and it was our group—Ding Sanshi and the rest of us—who drew the short straw. Before that, Song and the others in real estate had also found themselves frustrated.

“If we Zhejiang businessmen always remain confined to little circles within our own industries, then sooner or later we’ll run into another downturn. One of us may stumble and never manage to get back up. Why not form a cross-industry chamber of commerce, so we can support one another and lend a hand? At least then it’s unlikely that every industry will slump at the same time.”

Gu Cheng seemed to realize something. He smiled and teased him.

“You certainly know how to pick your moment.”

Ma Feng blushed.

“Of course I do! If you’d made this proposal at the same time last year, I absolutely wouldn’t have dared. Those of us in the Internet industry were already suffering badly enough. If I’d suggested that we join forces with people in manufacturing and real estate to look out for one another, wouldn’t they have thought we were down to our last resources and begging for alms?

“It’s only because you’ve managed to make such a success of things that everyone in the industry now believes the Internet winter will soon pass. That’s why we finally have the nerve to bring it up, isn’t it?”

Gu Cheng agreed readily.

“Fine. Count me in. You can worry about the practical details. I’ll just put up the money.”

“Excellent. I’ve been waiting for you to say that. I’ve already gathered seven shareholders. Each will contribute fifty million yuan for a ten-percent stake, and we’ll establish a clubhouse to serve as the chamber of commerce. If you join, you’ll be our leader. Contribute one hundred and fifty million, and I’ll make sure you receive thirty percent. We’ll call the clubhouse the Jiangnan Club.”

The Jiangnan Club?

Gu Cheng was momentarily stunned. He realized that he had once again altered history without meaning to.

The eight original shareholders of the Jiangnan Club should have included Chen Tianqiao of Shanda Network, while Ma Feng should have been its leader.

Unexpectedly, Gu Cheng had pried Chen Tianqiao’s “Legend” away from him—and with it, his place as a shareholder of the Jiangnan Club.

Moreover, Gu Cheng was clearly more powerful than Alibaba, to the point that Ma Feng no longer dared, as he had in history, to claim the role of founder and leader.

One hundred and fifty million yuan was, of course, a trivial sum to Gu Cheng. It was like playing another hand of poker. He matched the bet without hesitation.