Alibaba spreads wings in bid to defy ex­pec­ta­tions of flag­ging growth

The Star Early Edition - - BUSINESS REPORT - Lulu Yilun Chen

ALIBABA Group Hold­ing fore­cast sales growth that topped ev­ery an­a­lyst’s es­ti­mate, de­fy­ing ex­pec­ta­tions that growth must slow by dint of a de­cel­er­at­ing econ­omy and its own sheer scale.

China’s largest e-com­merce com­pany fore­cast 45 to 49 per­cent rev­enue growth in the year end­ing March, sus­tain­ing a near-un­bro­ken run of 40 per­cent-plus an­nual rises and un­der­scor­ing how in­vest­ments into busi­nesses be­yond its bread and but­ter of on­line shop­ping are pay­ing off. The com­pany’s Ger­man shares rose as much as 5.2 per­cent.

Alibaba and Ten­cent Hold­ings – which dom­i­nate on­line shop­ping and so­cial me­dia, re­spec­tively – have ven­tured deeper into new ar­eas from cloud com­put­ing ser­vices to stream­ing mu­sic and video as the coun­try’s econ­omy slows. The on­line shop­ping gi­ant founded by bil­lion­aire Jack Ma is cap­tur­ing more dig­i­tal ad­ver­tis­ing spend­ing by in­cor­po­rat­ing so­cial el­e­ments such as video in its shop­ping sites.

To re­flect an in­creas­ingly di­verse cus­tomer base, Alibaba will start re­port­ing “ac­tive con­sumers” as op­posed to just buy­ers, chief fi­nan­cial of­fi­cer Mag­gie Wu said dur­ing the com­pany’s an­nual in­vestor-day con­fer­ence yes­ter­day. It’ll be­gin to dis­close “cus­tomer man­age­ment rev­enue” in­stead of just on­line mar­ket­ing to re­flect a broader base of ad­ver­tis­ing plat­forms.

“Its mar­ket val­u­a­tion has fallen be­hind Ten­cent’s re­cently, so the fore­cast could in­ject some con­fi­dence,” said

While the com­pany per­formed well, in­vestors re­main con­cerned over China’s econ­omy

Ray Zhao, an an­a­lyst at Guo­tai Ju­nan Se­cu­ri­ties.

“This will be good news for its share price, which could rise 6 to 7 per­cent based on this fore­cast,” he added.

Alibaba is spend­ing bil­lions of dol­lars on new busi­nesses in part to counter Ten­cent’s in­creas­ing dom­i­nance of on­line so­cial me­dia and en­ter­tain­ment through WeChat, a mes­sag­ing and net­work­ing pow­er­house.

Alibaba has ex­panded abroad since buy­ing con­trol of Lazada Group SA to es­tab­lish a foothold in South-East Asia. Its AliEx­press site re­mains for now the main win­dow through which it tar­gets for­eign shop­pers.

While Alibaba has out­per­formed ex­pec­ta­tions, in­vestors re­main con­cerned about a de­cel­er­a­tion in China’s econ­omy and sim­i­lar ef­forts by Ten­cent to cap­ture dig­i­tal ad spend­ing and mus­cle in on its turf.

In re­sponse, Alibaba moved into un­tapped ru­ral mar­kets and ex­plored new sources of in­come.

How­ever, most of those new busi­nesses are years away from con­tribut­ing to the bot­tom line.

Yes­ter­day, Wu said Alibaba would con­tinue to sac­ri­fice a small slice of prof­itabil­ity to help bankroll its for­ays.

Cloud com­put­ing ser­vices now ac­count for about 5 per­cent of over­all sales. The pri­or­ity re­mains ex­pan­sion for now, Wu said. – Bloomberg

PHOTO: BLOOMBERG

Bil­lion­aire Alibaba founder Jack Ma at the World Eco­nomic Fo­rum in Davos, Switzer­land, in Jan­uary. The group has moved into un­charted waters in a bid to re­main com­pet­i­tive.

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