[While that’s good news for the company,
full-year results showed a more complex picture. Alibaba’s revenue for the year
grew more than twice as fast as its gross merchandise volume, a measure of
sales volume, meaning much of the rise did not come from simply selling more
stuff. Alibaba also is finding ways to squeeze more money out of vendors big
and small, either by offering new services or charging more for existing ones.]
By Paul Mozur
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Jack
Ma, the founder of Alibaba, center, in Kuala Lumpur, the capital of Malaysia,
in
March. He will host a conference in Detroit next month to help small businesses
learn
about the company. Credit Mohd Rasfan/Agence France-Presse —
Getty
Images
|
HONG
KONG — China’s vast ranks of
consumers are finding ways to spend more money online — and that’s good news
for Alibaba.
The Alibaba Group, the Chinese e-commerce
giant that a few years ago led the biggest share listing in the history of the
American stock market, on Thursday posted strong profit growth and
better-than-expected sales growth for the three months that ended in March. The
surge came as Chinese government statistics showed an increase in online retail
sales as well as stronger overall economic growth. Robust online activity has
helped others as well, with Tencent Holdings, a major rival to Alibaba,
reporting a strong rise in profit and JD.com, another rival, posting its first
profit.
Alibaba’s results offer a positive sign for
those tracking China’s efforts to transform its economy to rely less on
government spending and more on American-style consumption. But they also show
Alibaba is finding more ways to get the businesses that set up shop on its
e-commerce platforms to give it more money.
But there are challenges. The results show
Alibaba has a long way to go before it can diversify its business amid
expectations that even China’s online sales boom has its limits. And Alibaba is
increasingly dipping its toe into American politics at an uncertain time.
The
Numbers
Alibaba said its fiscal fourth-quarter profit
rose 85 percent to $1.4 billion, thanks to strong sales as well as selling some
investments. Sales across its e-commerce businesses rose 47 percent.
While that’s good news for the company,
full-year results showed a more complex picture. Alibaba’s revenue for the year
grew more than twice as fast as its gross merchandise volume, a measure of
sales volume, meaning much of the rise did not come from simply selling more
stuff. Alibaba also is finding ways to squeeze more money out of vendors big
and small, either by offering new services or charging more for existing ones.
Cloudy
Outlook
Because even China can’t grow forever,
Alibaba is hoping to find new sources of revenue. One of the most promising,
according to analysts, has been to introduce its own business providing
back-end computing to businesses — much like Amazon Web Services. While growth
in the business remains strong, it is from a small base, and some analysts have
signaled concern about increasing competition. In the quarter, Alibaba’s cloud
revenue more than doubled, to $314 million.
It has also expanded into online
entertainment and film, hoping to make use of its advertising data and
customers to become a cultural force. The company’s main online video
acquisition, Youku Tudou, has fallen behind rivals in users and time spent per
user. While in the long term it could pay off, in the shorter term heavy
investment in content could cut into Alibaba’s margins.
Over all, the businesses outside Alibaba’s
core commerce business were unprofitable in the quarter.
Alibaba Abroad
Alibaba has said this year will be the year
it pushes in earnest outside China’s borders. While the company’s core business
is still in China, some signs show that its efforts overseas are starting to
pick up steam. In a recent note the boutique investment bank China Renaissance
pointed out that Lazada, a Southeast Asian e-commerce company that Alibaba
invested in last year, now leads in market share in the six major countries in
the region. Alibaba’s primary branded overseas e-commerce site, AliExpress, has
also been picking up customers in Brazil, Russia and Eastern Europe, according
to China Renaissance.
American
Politics
In the United States things are proving more
difficult. Jack Ma, Alibaba’s founder, will host a conference in Detroit next
month to help small businesses learn about the company. The event is a part of
a follow-up to a pledge Mr. Ma made to create one million jobs in America. It
isn’t clear whether that will soften political opposition that Alibaba has faced
over counterfeit products on its platforms and a bid to take over MoneyGram, a
money transfer company.
