Looking at the Ali Business Operating System

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On the eve of the Spring Festival, Alibaba released the latest financial report for the third quarter of FY 2019 (Q18 in natural year 2018) on the evening of January 30. The revenue increased by 41% year-on-year to reach 117.278 billion yuan. The single-quarter revenue was the first among Chinese Internet companies. Realized the break of 100 billion; Tmall physical turnover increased by 29% year-on-year, exceeding the 21% online sales growth rate announced by the National Bureau of Statistics in the same period. In December 2018, Taobao’s mobile monthly active users reached 699 million, compared with 2018 The month increased by 33 million.

The profit attributable to shareholders was 33.052 billion yuan, up 37% year-on-year; operating profit for the quarter was 26.698 billion yuan, up 3% year-on-year, and the profit margin was up by 23% from the previous three quarters.

However, affected by the Sino-US trade war and the macro environment, the growth rate of revenue of 41% is the lowest value of Ali in the past three years. In 2018, the turnover of double eleven is 213.5 billion yuan, 45.3 billion more than the 168.2 billion yuan in 2017. Yuan, a year-on-year increase of 27%, but the growth rate fell by 12%.

In the quarter, Ali’s core e-commerce business revenue increased 40% year-on-year to 102.843 billion yuan, accounting for 88% of overall revenue contribution; the profit before interest and tax before the adjustment was 54.303 billion yuan, an increase of 31%.

Wu Wei, chief financial officer of Alibaba Group, said: “The profitability of the platform’s core e-commerce business, combined with the free cash flow of $7.5 billion this quarter, allows us to continue investing in other key businesses and technologies to promote the Alibaba ecosystem. Overall growth.”

Ali has made large-scale investments in four strategic areas within the quarter, including – first, hungry and word-of-mouth local life services; second, Ali Holdings’ Southeast Asian e-commerce platform Lazada; third, new retail and Tmall; , rookie – these investments generated a loss of 8.2 billion yuan, and the amount of losses decreased in this order. After including these losses, the profit before the dividend and amortization of Ali’s core e-commerce business increased by 20% in the quarter, reaching 46 billion yuan. .

Wu Wei said that the group has begun to see the effective improvement and greater synergy of these businesses in the Ali digital economy, so it will continue to invest, “In the long run, Ali will get higher financial returns from these businesses.”

In addition to the core e-commerce business, cloud computing business grew by 84% year-on-year to 6.611 billion yuan; innovation and other businesses increased by 73% year-on-year to 1.333 billion yuan; digital media and entertainment business grew by only 20% year-on-year to 6.491 billion yuan.

In early December 2018, Yang Youdong, the former president of Youku, cooperated with the police investigation due to economic problems. The president of the big Youku business group was replaced by Fan Luyuan, the new rotating president of Ali University Entertainment. Fan Luyuan issued an internal letter stabilizing the military heart, saying that Ali is a big entertainment. The determination, confidence and patience of Youku and the content industry will not change.

However, the performance of Ali Entertainment continued to be sluggish this quarter. The business revenue of this quarter was 6.491 billion yuan, which was down 20% year-on-year. The contribution to overall revenue was only 5%. The loss before interest, taxes and amortization was as high as 6.03 billion yuan. The loss rate was 93%. In the year of 2018, the total loss of Ali Entertainment was 15.56 billion yuan.

In response to the continued sluggish performance of Dawen Entertainment, in the subsequent conference call, when management was asked about the Group’s focus on KPI assessment of Dawen Entertainment, CEO Zhang Yong said that the Group focused on the growth of users of digital content services.

Cai Chongxin, executive vice chairman of Alibaba Group, further explained the status of the big entertainment business. “Because we have a wide ecosystem, we will not set up an independent KPI for the entertainment business. If the content is good, the retention rate of e-commerce users The amount of spending on e-commerce or local living services with individual users will also increase, which improves the KPIs in our other market segments. Therefore, we treat these KPIs as a whole.”

A reference data is that in August 2018, Ali launched the super-member service “88VIP”, in which Youku and Hungry promoted the growth of super-members, and the 88VIP data provided by Ali to the “Financial” reporter showed that Among every 100 88VIP users, 38 have newly opened Youku members, and 32 new members have been opened.

 

 

The signals released by the financial report are: inside, the offensive sinking market and the global market will be the main positions for Ali to continue to maintain its growth momentum; Ali’s commercial operating system will serve as an ecosystem for enabling SMEs. , more and more active in front of the stage.

[pullquote]Ali Business Operating System in the Xiaoyaozi era[/pullquote]

Ali’s commercial operating system will become the high-frequency word that Ali CEO Zhang Yong has frequently elaborated for a long time.

An Ali executive described the difference between ecology, economy and commercial operating system to the Caijing reporter. “Ecology means that Ali is a cooperative group. The economy is another description of this group. The operating system refers to Ali. The ability of merchants and partners to make their business operations smoother.”

The concept of “Ali Commercial Operating System” first appeared in the speech of Ali Investor Day Zhang Yong on September 19 last year. This is his latest summary and definition of the business value of Ali, “Diversified business scenarios in the Ali economy and The data assets formed by it are combined with the cloud computing that Ali is advancing at a high speed to form a unique Alibaba commercial operating system, which is fully empowering brands, businesses and enterprises to complete digital transformation.”

On the day of the double eleventh last year, Zhang Yong told the Caijing reporter that “ant, rookie, cloud computing, Ali mother, nails, Gaode, etc. all constitute an important infrastructure for commercial operating systems, and the evolution process in Ali. In the middle, we may have competitors in each specific field, but Ali is very unique. There is no such company in the world, not only can reach consumers directly but also can fully serve the enterprise.”

On November 26, 2018, Alibaba Cloud Group was upgraded to Alibaba Cloud Intelligent Business Group. CTO Zhang Jianfeng also served as the president of Alibaba Cloud Intelligent Business Group. After the organization upgrade, Alibaba Cloud and the intelligent capabilities of China and Taiwan will become the whole The underlying foundational capabilities of the “Alibaba Business Ecosystem”.

Zhang Yong said in his internal letter that the intelligent capabilities built by the Group in the implementation of the strategy of China and Taiwan in the past few years, including the core capabilities of machine intelligence computing platforms, algorithm capabilities, databases, basic technology architecture platforms, and scheduling platforms, will be comprehensive and Ali cloud is combined and opened to more partners to serve the whole society.

This organizational restructuring is also a further reflection of Zhang Yong’s concept of “Alibaba’s commercial operating system.” Zhang Yong believes that in the Alibaba economy, diverse business scenarios including shopping, entertainment, and local life and the resulting data assets are combined with Ali’s high-speed cloud computing to form a unique Alibaba commercial operating system. In this operating system, various business departments generate both data and data to form a large and rich organic cycle.

As of this quarter, the 2018 natural year Alibaba Cloud revenue reached 21.36 billion yuan, breaking through the 20 billion mark, an increase of about 20 times in four years. According to Ali, Alibaba Cloud became the largest cloud service company in Asia.

[pullquote]Go on and go out[/pullquote]

The financial report shows that Taobao’s annual active consumers reached 636 million, a net increase of 35 million compared with the previous quarter. This is the indicator that has maintained a growth of more than 20 million for six consecutive quarters, of which over 70% of the annual increase is active. Consumers come from sinking markets (including underdeveloped regions and rural areas), and Zhang Yong said on the investor’s day in September last year that this trend will continue. Alipay and its affiliates have more than 1 billion active users worldwide each year, demonstrating the powerful resonance effect of the Alibaba economy.

It can be seen that Ali has two new sources of active users, one is sinking the market, and the other is overseas markets, especially India and Southeast Asia.

Taobao has a lot of actions in terms of content and community. As a basic tool for business operations, Taobao Live has penetrated into the offline scenes such as fields and factories. The data shows that in the past year, Taobao live broadcast and rural Taobao have broadcast more than 150,000 agricultural products, attracting more than 400 million people to watch online.

According to Ali, in 2019, Taobao Live will launch the “Village Broadcasting” Poverty Alleviation Plan to help 1,000 farmers in 100 counties realize monthly income of 10,000 yuan, and promote the live broadcast of further online industry transformation and agricultural products. , activate a broader sinking consumer market.

It is worth noting that in December last year, Taobao’s daily specials were upgraded to daily sales, trying to get rid of the “low price” single competition point. “Daily Specials” is the shopping channel that Taobao launched on the line in 2010. The main explosions and low-priced products, goods and users are more and more combined with Tencent.

In the next three years, we will build 10,000 customized factories, upgrade from the original pure marketing platform to a new manufacturing ecosystem service platform, and improve the C2M flexible supply chain through sales forecasting and market forecasting measures to help small and medium-sized manufacturing enterprises achieve “ Digital upgrade of the three core links of production-sales-logistics.

According to Tang Song, general manager of Tiantian Special Sales, the users who sell every day are young people who are sensitive to price, mainly distributed in cities with third line and below, among which female consumers account for a relatively high proportion. He also said that in the previous pilot plant renovation, software service fees and equipment installation fees will be waived, and the factory only has to bear the basic hardware costs.

In many aspects, at the end of last year, it launched the “New Brand Plan”, aiming to create a systematic platform focusing on the growth of China’s small and medium-sized manufacturing enterprises. Through this program, it will support 1,000 factories covering various industries to help them effectively reach 3.86. Billion users, cultivating brands at the lowest cost.

A total of 1,000 factories for the “New Brand Program” have launched a series of assistance programs, including big data support, expert diagnosis, research and development recommendations, etc., and tilted traffic and recommended resources within a certain range to increase product exposure. Support its branding construction.

Daddy and co-founder Dada will be regarded as an incubator in the plan. He introduced more than 700 factories to submit applications for the “New Brand Plan” in the past two weeks, and more than 90 of them have completed live testing.

Taobao and Dieduo’s integration and digital transformation of the manufacturing side will become the focus of competition in the sinking market. Dada once said in an interview, “In the context of the overall reduction of foreign trade orders, the cost of labor and the cost of materials are getting higher and higher, The dividend period for China as a factory in the world has passed, and the transition is imperative.”

Putting its vision overseas, Ali continued to expand strongly in Southeast Asia this quarter, with a particular focus on strengthening Lazada’s role as a third-party platform, integrating Lazada’s business and technology operations into Alibaba. Zhang Yong announced at the Expo that he will import 200 billion US dollars of goods from all over the world in the next five years and will continue to invest heavily in supply chain, platform operation and cross-border logistics.

Simply sort out Ali’s major investments in India and Southeast Asia:

In Southeast Asia, Ali has control over the Southeast Asian e-commerce platform Lazada. Currently, Lazada has entered Malaysia, Singapore, Indonesia, Vietnam, Thailand and the Philippines. It has acquired the Pakistan e-commerce platform Daraz. The main business of Daraz includes Pakistan and Bangladesh. Almost all countries in South Asia, including Myanmar; the acquisition of a majority stake in the Turkish e-commerce platform Trendyol, which focuses on fashion sales; Ali’s vision fund, which is a joint venture of Softbank, led a new round of financing of Indonesian version of Taobao PT Tokopedia for $1.1 billion. US$7 billion, according to CB Insights, PT Tokopedia will be the most highly valued startup in Indonesia; Ali will invest $320 million in Thailand to build a digital center to meet the growing demand in the Thai market.

In the Indian market, Ali also invested in a number of companies in the market, including online shopping application Paytm, online grocer BigBasket, e-commerce platform Snapdeal, logistics startup XpressBees and food ordering platform Zomato.

The common feature of these two major markets is that their online sales penetration rate is very low, the demographic dividend is huge, and the growth space is huge. Zhang Yong regards it as China 10 years ago. As e-commerce grows within these countries, Ali will provide long-term support through funding and resources.

In Zhang Yong’s view, Ali’s globalization is still at a very early stage. In depicting the big picture of globalization, Zhang Yong said, “To enter a new market, we will focus on three indicators, the population base of the local market, second, the degree of mobility, the coverage of smartphone usage, and the third. In the retail industry, people in the future can be our users with only one mobile phone.”

But in these markets, Ali is not at ease.

Lazada must resist Amazon’s competition in Southeast Asia, while defending Tencent’s Shopee, Jingdong’s Tiki and local company Bukalapak; Paytm is attacking Wal-Mart in India, which invested $16 billion in Flipkart in August last year. In order to strengthen its business in India, Flipkart won the investment of Tencent in 2017, known as the “Indian version of Amazon.”

Last year’s Ali Investor Day, Zhang Yong once again shared Alibaba’s near-term goal and long-term goal – “GMV will reach 1 trillion US dollars by 2020. By 2036, Alibaba’s consumer service will increase from 640 million. To 2 billion, from the service of 10 million SMEs to 10 million profitable SMEs, the number of jobs created has increased from 36 million to 100 million.”

To achieve the two goals of the near and far, under the top-level design of the commercial operating system, “going on” and “going out” are crucial.

 

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