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Feb. 24, 2011, 6:18 a.m. EST

Alibaba.com Returns to Its Roots With New CEO

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By Loretta Chao

BEIJING—The new chief executive of Alibaba.com Ltd. urged employees to "forge ahead" following the fraud scandal that prompted his predecessor's resignation but said he needs time to map out the company's future.

Jonathan Lu 's email Wednesday offered few details on how he might alter the publicly traded business-to-business unit of Alibaba Group Holdings Ltd.,other than to say that it could work more closely with the sister Taobao consumer e-commerce site he also runs.

But Mr. Lu's move into the top job by itself marks a sharp change for Alibaba.com. His predecessor, David Wei , was an experienced executive but a relative outsider at the Chinese company. Mr. Lu, by contrast, has never run a public company but is an Alibaba Group veteran, deeply rooted in the devoted and tight-knit corporate culture created by founder Jack Ma .

Mr. Wei and Alibaba.com Chief Operating Officer Elvis Lee resigned on Monday following the discovery that about 100 of their employees had helped outside sellers create fraudulent listings on the company's site, which matches manufacturers, mainly in China, with buyers around the world. The company said the two men weren't involved in the fraudulent activities but stepped down to take responsibility for the "systemic breakdown."

The strong corporate culture of Alibaba Group, one of China's most prominent Internet companies, has made the turmoil in the executive suite all the more jarring for many of the company's tens of thousands of employees, some of whom cried when the shake-up was announced Monday. Alibaba Group's history and its emphasis on its corporate values border on a spiritual creed.

"Only through holding onto our ideals and our principles will we be able to become the pride of this era!" Mr. Ma wrote in an email to staff Monday. "If not now? When? If not me? Who?"

The soft-spoken Mr. Lu had been a hotel lobby manager and a small-time entrepreneur before joining Alibaba Group in 2000, the year after Mr. Ma, a former English teacher, founded the company in his Hu Pan Garden complex apartment in the eastern Chinese city of Hangzhou. The apartment has since taken on legendary status within the company—all major new ventures it starts spend time there—and Mr. Lu is considered a model of the company's "Hu Pan culture" of entrepreneurialism.

On Alibaba Group's intranet, Mr. Lu is known by the nickname Tie Mu Zhen, taken from a character based on Genghis Khan in the novel "The Legend of the Condor Heroes," part of a Chinese martial-arts book series that is a favorite of Mr. Ma. Characters and places in the series have been used as inspiration for the company's office décor, some of its products and as aliases for many of its employees.

In the Hu Pan Garden apartment, Mr. Lu in 2004 led the team that started Alibaba Group's online payment platform, Alipay. Taobao, the unit he now runs along with Alibaba.com, was also formed in the apartment and increasingly has become the main focus on Alibaba Group's efforts.

Mr. Wei joined Alibaba.com in 2006, after management positions at Kingfisher /zigman2/quotes/200571451/delayed UK:KGF -2.81% PLC, home-improvement retailer B&Q China and accounting firm PricewaterhouseCoopers, among others. He became Alibaba.com's CEO in 2007, on the verge of its initial public offering in Hong Kong.

Employees who have worked at Alibaba for three years can qualify as "Aliren," a company term that translates as "Ali person." Mr. Wei didn't earn that status until 2009 and didn't attain the more exalted level of "Alichen" that employees qualify for after five years. He also never worked in the Hu Pan apartment.

Mr. Wei did, however, guide the company to rapid growth after its IPO and led Alibaba.com through a change in its sales structure and other important revamps. Mr. Ma told staff this week that the resignations of Mr. Wei and Mr. Lee are "tremendous losses to the company."

Still, former Alibaba Group staffers say Mr. Wei had difficulty shedding his outsider status completely. While Mr. Ma often emphasizes that Alibaba Group's long-term aspirations are more important than immediate performance, they say, Mr. Wei was seen as prioritizing near-term profit. "The Alibaba founders are still running the business in a very entrepreneurial" fashion, which is "a lot different" from the style typical of the other big companies Mr. Wei was used to, a former Alibaba Group executive says.

Mr. Ma couldn't be reached for comment. Alibaba Group spokesman John Spelich said in an email that Messrs. Ma and Wei "never clashed and any so-called former executive who tries to suggest otherwise has ulterior motives and is being opportunistic."

Mr. Wei by email declined to comment. In a farewell email to Alibaba.com employees on Monday, he described his "path" to becoming an Aliren and said "I have come to appreciate that customer first is the primary value that has made the company what it is today." Even as a public company "we cannot be held captive to financial results" and that, "As an Aliren, I have learned that one must bravely face-up to and assume responsibility."

Mr. Lu in his message Wednesday said he believes Alibaba.com and Taobao can "join hands together and create a lot of opportunities with Taobao focusing on serving consumers" and Alibaba.com focusing on suppliers. "I will need time and more communication with the team to map out future paths," he wrote.

Taobao held a large conference on Wednesday in Beijing detailing its plans to have third-party developers make software applications for the site's marketplace, particularly for mobile devices. The company handled nearly 400 billion yuan, or about $60 billion, in transactions last year, and is growing quickly.

Taobao also said it will start a local deals service on Ju Hua Suan, or Group Bargain, the group buying section of its website. The new service will promote special deals for localized services such as coupons for restaurants, spas and movie tickets, similar to the types of deals offered by Chicago-based Groupon Inc. and competing with more than 1,000 sites in the burgeoning market.

Juliet Ye in Shanghai contributed to this article.

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