SHANGHAI — Alibaba once again beat estimates with second-quarter results, to September 2017, of 61 percent growth in year-over-year revenue driven by their core e-commerce business and China’s continued strength in consumer spending.
“We had an outstanding quarter,” said chief executive officer Daniel Zhang. “We are seeing the early results from our efforts to integrate online and off-line with our New Retail strategy.”
The e-commerce behemoth reported revenue of 55.12 billion yuan (or $8.34 billion) for the quarter, with commerce increasing 63 percent on the year.
In the three months to September, Wall Street expected Alibaba to grow its revenue by 52 percent. Given the company’s continued exceeding of expectations, Alibaba has revised its outlook for full-year revenue growth up to 49 to 53 percent, from its earlier estimate of 45 to 49 percent.
The second-quarter results even topped an impressive first quarter, which saw a 56 percent increase in revenue and led to multiple record highs in Alibaba’s stock price in the past three months. Such a strong performance in the second quarter is unusual for Alibaba as they usually see a slower period in advance of their major Singles’ Day promotions in November.
According to eMarketer, this year Alibaba will capture 8.5 percent of the $228.44 billion global digital ad market, up from 6.5 percent in 2016. With a spend of $14.6 billion, Alibaba will overtake Google to become number two in terms of display ad revenue worldwide. Facebook holds onto the top spot for display ads with a 35.2 percent share.
“Alibaba’s worldwide display ad revenue is set to surpass Google’s this year, which is a reflection of the strength of Alibaba’s e-commerce business in China, which takes most of its revenue from display ads. The high profitability in this area allows Alibaba to reinvest these earnings to improve ad targeting,” said Shelleen Shum, senior forecasting analyst at eMarketer.
“We expect Alibaba’s core commerce business to remain the key focus as they seek to pull ahead of competition with investments in artificial intelligence to enhance the relevance of product ads to create a shopping experience better tailored to the individual. New initiatives such as live-streaming channels, videos, consumer forums and articles featuring consumer stories are features on the Taobao app that will keep the consumer engaged on its platform.”
Earlier this week, Alibaba revealed more details about its upcoming Singles’ Day festival at a press conference in Shanghai. The festival has evolved from a 24-hour spending spree to a 24-day promotional period, with 15 million products and 140,000 brands (60,000 of them international brands) on offer.
At the core of Alibaba’s retail strategy is its “New Retail” concept, which focuses on an online to off-line [O2O] strategy. For Singles’ Day, Alibaba will collaborate with 52 shopping malls to set-up high-tech pop-up stores in 12 Chinese cities and will convert 100,000 stores nationwide into “smart stores” that will offer innovations such as facial recognition payment and O2O scan-and-deliver shopping.
Singles’ Day, known as the “Double 11” festival in China, started in 2009 and has grown from selling $7.6 million in gross merchandise value [GMV] in its first outing to $17.8 billion in GMV in 2016. These figures place Alibaba at more than 18 times the size of Amazon Prime Day and 2.5 times bigger than Black Friday and Cyber Monday combined.