Bloomberg
Billionaire Jack Ma’s unhappiness with Alibaba Group Holding’s mobile shopping business may be easing.
Revenue from customers using smartphones and tablet computers surged 11-fold in the September quarter and helped China’s largest e-commerce company beat analysts’ estimates in its first profit report since its market debut. Mobile users accounted for 29% of sales across Alibaba’s retail marketplaces, compared with less than 1% in mid-2012.
The boost comes nine months after Ma said he wasn’t satisfied with progress in capturing more of the 527mn Chinese who access the Internet from handheld devices, and he called on his 20,000 employees to be “all in” on mobile. That’s showing results as Asia’s most-valuable Internet company now has 217mn active mobile users, which is more than the population of Brazil.
“We’re one of the very few companies in China that has actually generated substantial revenue from mobile,” Joseph Tsai, vice chairman of Alibaba, said on the earnings conference call. “When we look at the user, the consumer, when they come to use our mobile app, their commercial intent is extremely strong.”
At eBay Inc., mobile contributed 21% of transaction and payment volume in the September quarter, it said last month.
Alibaba is enticing customers to download its mobile applications by adding links on its website and handing out shopping credits when they click on particular links in the apps. The increase in traffic and shopping transactions makes advertisers more willing to spend money for marketing on the apps, Tsai said.
Total transactions made through Alibaba’s mobile apps reached $32bn, more than tripling from $9bn a year ago.
Another important piece of Alibaba’s strategy has been its mobile operating system, which it started offering in July 2011. Recently renamed YunOS, Alibaba will integrate the system into its cloud computing offerings, according to its filing.
Mobile e-commerce in China is expected to post annual growth of 59% between 2013 and 2017 to reach about 1tn yuan ($164bn), accounting for about 24% of online shopping, according to iResearch, a Shanghai-based Internet consultant.“Mobile utilisation is only going to increase – and people expect that experience to get even better over time,” Ken Wisnefski, founder of Internet marketer WebiMax, wrote in a report. “It is so important for businesses that want to be around in the next decade to start thinking in terms of mobile.”
Last month, Alibaba announced it was partnering with Quixey Inc. on mobile search that would allow users to find content located within applications. The companies also started a global developer programme in China to encourage the integration of its search technology.
Alibaba’s adjusted profit beat analysts’ estimates in the second quarter as advertisers spent more money. Adjusted earnings per share reached 2.79 yuan, while revenue rose 54% to 16.8bn yuan. It added 29mn mobile users in the quarter.
It was the first earnings result since Alibaba raised a record $25bn in a September 18 initial public offering that sold stock at $68 apiece. The American depositary receipts rose 3.1% to $109.37 at 11:02 am in New York on November 5, bringing their gain since the IPO to 61%.
While revenue surged, profitability was hurt by the costs to integrate newly acquired businesses, investments in mobile systems and marketing.
Alibaba is ramping up preparations for a November 11 sales event, its busiest shopping day of the year, as it competes with Tencent Holdings for China’s online shoppers.
“They are doing well on monetisation through mobile advertising,” said Cheng Cheng, an analyst at Pacific Crest Securities who has the equivalent of a buy rating on the stock. “They will likely do better on mobile going into the fourth quarter with the November 11 Singles’ Day, a very mobile- driven event.”