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Alibaba revenue set to grow 49 per cent

Alibaba Group says it is targeting revenue growth of 45 to 49 per cent for the current fiscal year, topping consensus analyst forecasts.

The guidance came from Maggie Wu, Alibaba’s CFO, speaking to investors and analysts at the company’s 2017 Investor Day. In its last fiscal year Alibaba reported revenues increased by 56 per cent, but that included consolidation of revenues from investments such as video-streaming site Youku and Southeast Asian e-commerce company Lazada. Without those additions, Wu said, last year’s growth would have been 44 to 45 per cent.

The strong growth projection was a reflection of a combination of factors, among them the resilience of Alibaba’s core Chinese e-commerce business, continuing healthy spending by Chinese consumers, user growth as well as contributions from new revenue streams coming from investments and initiatives that are having an impact on Alibaba’s top and bottom lines.

The company continues to evolve beyond its China e-commerce roots by moving into digital media and entertainment, cross-border e-commerce, local services, digital marketing and other areas, CEO Daniel Zhang told investors on the first day of the two-day gathering in Hangzhou, China.

The Alibaba Economy 

The best way to understand the 18-year-old company and its seemingly disparate businesses – Alibaba also runs China’s largest public cloud service provider, a movie production and distribution business (Alibaba Pictures), and has invested in several retailers – was to think of it as an economy unto itself, Zhang said.

“Today we have half a billion customers around the earth, we have close to 10 million small business transacting on our platforms every day, we are now moving into new areas like digital entertainment,” he said. “Together with all the partners, all the participants in the ecosystem – buyers, sellers, service providers, content providers – all together we constitute a real economy… if you look at the components of this economy, you see a very clear picture and very big synergies across these platforms, each of these business sections.”

The evolution of the company from pure e-commerce operation to a content-rich, digital-marketing “ecosystem” is changing the way analysts should assess Alibaba’s performance. Wu unveiled a new calculus that Alibaba uses to measure its so-called “take rate” from merchants and brands, saying you have to look beyond gross merchandise volume and revenue to see the broader value proposition the company offers.

“We are not just simply a distribution platform, nor a marketing platform. We provide mixed value, broader value and also transform the way business is being conducted in China,” she said. Customer service and other value-adds need to factor into the take rate, because Alibaba is far less reliant for cash flow on taking a percentage of every purchase made on its marketplaces, she said.

Meanwhile, the company’s massive amounts of data on consumer behavior and sales trends is giving merchants greater ability to find, engage with and foster relationships with consumers, Wu said. Consequently, the company is renaming a metric called “online marketing revenue” to “customer management revenue.”

“We are enabling merchants and brands to manage the consumer during their entire life cycle, from when they became aware and interested in products, then purchase and into loyalty. This represents the real business value we provide to our customers,” Wu said.

Alibaba will also start referring to “annual active consumers” instead of “annual active buyers” to reflect that Alibaba users are participating in the company’s ecosystem in a variety of ways, not simply purchasing merchandise.

“Nowadays, we see more and more people are consuming content, services, lifestyle kind of products on our platform,” Wu said.“By changing that name, it gives us, later on, the same kind of terminology to describe the growth of our other businesses, like the entertainment business.”

High growth in user engagement 

Alibaba is expanding user engagement through content such as live-streamed videos highlighting new products. The number of users sharing content, and the number of times a product page is shared, grew 80 per cent year-on-year in April. Content-driven product page views meanwhile increased more than 140 per cent year-on-year.

Wu added Alibaba’s original guidance of 48 per cent revenue growth last June was on the low side in part because the company underestimated the impact on revenues of new “relevant” content and new Alibaba technology such as marketing software that allows merchants to offer highly personalized pages to individual customers.

“We did not really factor in all of these developments and growth in content and data technology,” she said “It grew very fast and even exceeded our own expectations.”

As for this year’s FY 2018 guidance forecasting revenue growth of 45 per cent to 49 per cent, Wu said: “We have… confidence. The data, the technology we have, the whole integrated business we have built, we’re going to achieve that.”

  • Alizila is the Alibaba-funded, but independent, news resource on Alibaba Group affairs.

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