21st Century Economic Reporter Dong Jingyi reports from Shanghai
On the evening of November 16th, Wu Yongming, as the CEO of Alibaba Group, participated in the second quarter financial report analyst conference for the first time in the 2024 fiscal year. He detailed Alibaba's future direction, important priorities, and implementation path, and officially announced the first batch of strategic innovation level businesses. This is also Wu Yongming's first comprehensive explanation of Alibaba's strategic blueprint for the new stage of development after taking office as CEO of Alibaba Group on September 10th.
Wu Yongming stated that the driving force for industry development in the future will be the technology driven force represented by AI. Alibaba will have three important priority directions for the future: technology driven internet platform business, AI driven technology business, and global business network.
Priority "was the most frequently mentioned keyword by Wu Yongming that night. On the basis of clarifying the group's reform measures, Wu Yongming fully introduced the development strategies and priorities of each business group. Taobao Tmall adheres to the strategy of "user first" and adheres to consumption grading and pricing power; Alibaba Cloud will adhere to the principle of "AI driven, public cloud priority" and develop with a dual wheel drive of AI+cloud computing. He also announced Alibaba's first batch of strategic innovation businesses -1688, Xianyu, DingTalk, and Quark.
Today, Alibaba is facing rapid development of new technologies and new changes and expectations in the market. No matter how successful the past business model may have been, it must be turned back to zero and awaken the mindset of starting a new business, "said Wu Yongming." Alibaba is embarking on a new entrepreneurial journey and is fully prepared to fully invest in technological change
Taotian clearly prioritizes users
Taotian Group is the business sector with the highest proportion of revenue, with a revenue of 97.654 billion yuan this quarter, a year-on-year increase of 4%, accounting for 43% of Alibaba's total revenue.
Among them, the revenue of retail commerce in China was 92.56 billion yuan, an increase of 3% compared to the same period in 2022. China's wholesale commercial revenue was 5.094 billion yuan, an increase of 18% compared to the same period in 2022.
The adjusted EBITA is 47.077 billion yuan, an increase of 3% compared to 45.635 billion yuan in the same period of 2022. This growth is mainly due to the narrowing of losses in several businesses and the increase in customer management profits, partially offset by the increase in investment in user acquisition and retention as well as content by Taobao app.
During the reporting period, the number of Taobao app users, transaction buyers, and order volume continued to grow, with 88VIP members experiencing double-digit year-on-year growth, with a scale exceeding 30 million. During the Double 11 period, the platform's scale advantage further expanded, with participating merchants, transaction buyers, and order volume achieving positive growth compared to the same period last year. According to Taotian Group, the cumulative number of users visited during the entire cycle of Double 11 exceeded 800 million, reaching a historical peak.
In May of this year, Dai Shan, CEO of Taotian Group, announced the three major strategies of Taotian Group: user first, ecological prosperity, and technology driven. Analysts point out that the three major strategies aim to expand Taobao's leading advantages on the user and supply sides, forming a multiplier effect. The technological capabilities represented by AI are key levers for amplifying the multiplier effect and improving conversion rates.
In the strategic cycle for the next three years, Taobao Tmall will further clarify its business priority - user first. Focusing on putting users first, Taobao has three principles: adhering to being the "universal Taobao", adhering to consumption grading and pricing strategies, and adhering to the choice of user value for products.
Taobao will implement a multi-level market strategy and price power strategy within an app. Wu Yongming believes that as a super app, Taobao has the ability to accommodate multiple product layers and value propositions from brand to white label. Through the iteration of AI technology and operational models, Taobao will be built into a consumer app that includes diversified markets, and price power will be the core strategy for penetrating all levels of products.
Wu Yongming also emphasized that Taobao will adhere to its positioning as an internet consumer platform and "does not position itself as a retail company". As a consumer platform, the frequency of user purchases will prioritize GMV as the most critical goal, as "the frequency of purchases directly reflects the user's recognition of the consumer platform".
Alibaba Cloud adheres to AI driven and public cloud priority
In this quarter, Alibaba Cloud's revenue was 27.648 billion yuan, a year-on-year increase of 2%. Compared to the 4% growth rate of Taotian Group, 25% of Cainiao Group, 16% of Local Life Group, and 11% of Da Wen Yu Group, Alibaba Cloud's revenue growth rate was the lowest in the quarter.
According to the financial report, Alibaba Cloud continues to improve revenue quality by reducing project based contract revenue with lower profit margins. At the same time, the increase in revenue from public cloud products and services drives the optimization of profitability. Alibaba Cloud's adjusted EBITA for this quarter increased by 44% year-on-year to 1.409 billion yuan.
The financial report also revealed that it will no longer promote the complete separation of Cloud Intelligence Group, citing the recent expansion of restrictions on the export of advanced computing chips in the United States, which has brought uncertainty to the prospects of Cloud Intelligence Group. The group believes that a complete spin off of Cloud Intelligence Group may not enhance shareholder value as originally envisioned, so it has decided not to promote a complete spin off of Cloud Intelligence Group. Instead, it will face an uncertain environment and focus on establishing a model for sustainable growth of Cloud Intelligence Group.
Nowadays, the overall environment has changed, and we no longer rely on financial engineering, but on further investment to demonstrate the value of cloud business. In the future, we will seek to increase its growth, including revenue and profits, "said Cai Chongxin, Chairman of the Alibaba Group Board of Directors.
Wu Yongming stated at the financial report meeting that Cloud Intelligence Group will implement AI driven and public cloud priority strategies, and increase technology investment in AI related software and hardware fields. Through "cloud+AI", we support the intelligent transformation of various industries and create even greater opportunities for incremental growth in the era.
He judged that the computing paradigm is undergoing fundamental changes, and the world is at a technological inflection point where traditional computing is transitioning to the central position of AI computing. The future AI computing chip market in China will be very fragmented, so in the long run, the importance of cloud computing will increase for the domestic AI market
In the future, Alibaba Cloud will persist in doing two things well: first, creating the "most open cloud in the AI era" to provide stable and efficient AI infrastructure for the entire industry; The second is to create an open and prosperous AI ecosystem.
Wu Yongming also stated that he will make trade-offs between all Alibaba Cloud products and business models, reduce project based sales orders, and increase investment in public cloud core products. The cloud computing model of public cloud enables us to have stronger network effects and scale effects, helping customers provide better and more cost-effective services. Therefore, this is our growth strategy in the cloud computing market. "He said in response to investors' questions, insisting on prioritizing public cloud can reap scale effects and technological dividends in the future.
In addition, Wu Yongming stated that Alibaba Group will maintain long-term and resolute investment in Alibaba Cloud's strategic direction, while Cloud Intelligence Group will continue to operate as an independent company, adopting a CEO responsibility system authorized by the board of directors.
Announce the first batch of strategic innovation businesses
Alibaba has stated that it will continue to invest in and incubate strategic innovation businesses for the future. At the analyst conference call, Wu Yongming disclosed for the first time the selection criteria: having sufficient huge market space, unique market positioning, meeting user demand trends and the group's "AI driven" strategy, and announced the first batch of strategic innovation businesses -1688, Xianyu, DingTalk, Quark.
Wu Yongming said that 1688 is Alibaba's oldest business, serving mainstream manufacturers in China's manufacturing industry. It has a solid foundation and huge potential for secondary entrepreneurship, and is expected to expand from B2B business to small and medium-sized enterprises and consumer procurement. At the same time, it has the service capability to support cross-border transactions. Xianyu will be a lifestyle platform that carries the hobbies and fun of young consumers.
Nails and quarks have gained unprecedented imagination due to the arrival of the AI era. Everyone and enterprises will have personalized intelligent assistants, and DingTalk is expected to become the best AI intelligent assistant platform. In the era of big models, facing young people, Quark has a huge opportunity to create innovative search products
The above strategic level innovation business will be operated as an independent subsidiary in the organization, breaking the previous positioning restrictions within the group, and Alibaba will continue to invest in it on a 3-5 year cycle.
Facing the exciting AI era, Alibaba will resolutely devote itself to the technological revolution and product innovation, continue to create and incubate innovative businesses and technology products, and meet the new expectations and demands of the continuously expanding market for products and services, "said Wu Yongming.