Large investments in mobile commerce took a bite out of Alibaba Group Holding Ltd.’s second-quarter bottom line while producing large gains in its mobile penetration.
This story first appeared in the November 5, 2014 issue of WWD. Subscribe Today.
In its first filing of financial results since its historic $25 billion initial public offering in September, the Hangzhou, China-based e-commerce giant said mobile commerce volume for the past 12 months reached $95 billion. The number of monthly active users of its mobile apps, led by Taobao, expanded to 217 million from 91 million in the comparable period during 2013, a 138.5 percent increase, while mobile as a share of total volume moved up to 35.8 percent from 14.7 percent in last year’s quarter and 19 percent in the first quarter.
“With more than one-third of our China retail business on mobile, Alibaba is very much a mobile company,” said Joseph Tsai, executive vice chairman, on a conference call with Wall Street analysts.
He noted that the shift to m-commerce had led to “sustainable progress” in the company’s ability to monetize its mobile platforms. “That is because consumers who come to use our mobile apps to shop for goods and services have clear commercial intent, and we are able to effectively convert that commercial intent into purchases.”
In the three months, net income fell 38.6 percent to 3.03 billion yuan from 4.94 billion yuan in the year-ago period, or to $494 million, or 20 cents a diluted share, from $800.3 million in the 2013 period.
On an adjusted basis, earnings per share for the quarter came to 45 cents, matching analysts’ consensus estimates.
Revenues grew 53.7 percent to 16.83 billion yuan, or $2.74 billion, from 10.95 billion yuan, or $1.77 billion.
Year-ago dollar figures have been converted at average exchange. Those for the current year were converted by Alibaba at current exchange.
The initial disclosure of results in the wake of the IPO impressed investors, who sent the stock up $4.27, or 4.2 percent, to $106.07 in New York Stock Exchange trading. They hit an all-time high of $106.36 in midday trading.
Ken Wisnefski, founder and chief executive officer of Internet marketer WebiMax, felt the warm reaction to Alibaba’s numbers, despite the decline in the bottom line, could be attributed in part to its status as a “business that revolves around profits,” in contrast to a number of publicly held social media and e-commerce firms.
“Tuesday’s results made it clear that the appropriate comparison for Alibaba is Amazon, not Facebook,” he said.
But he felt that Alibaba’s experience, both inside and outside China, was drawing attention to what he described as a “tidal wave of consumers making mobile purchases on their smartphones and tablets all over the world. The main story for holiday retail is going to be mobile,” he predicted, “and how people are not only moving to making purchases through mobile devices but also making payments on their mobile devices. And Alibaba is well set up for that.”