Prior to the US stock market on November 16th, Alibaba released its quarterly financial results as of September 30th. According to the financial report, Alibaba's group revenue from July to September was 224.79 billion yuan, a year-on-year increase of 9%. This quarter's adjusted EBITA (before interest and tax) increased by 18% year-on-year, and the net profit attributable to ordinary shareholders was 27.706 billion yuan.
With the simultaneous release of financial reports, there are two quite sudden "pullbacks" - one is that due to various uncertain factors, the complete separation of Cloud Intelligence Group is no longer advancing; The second is the suspension of Hema Fresh's initial public offering plan.
No matter how successful the past business model may have been, it is necessary to go back to scratch and awaken the mindset of starting a new business, "said Wu Yongming, the new CEO of Alibaba Group, on a financial report conference call." The world will undergo tremendous changes in the next decade, with huge uncertainties and opportunities emerging at the same time. Alibaba is embarking on a new entrepreneurial journey and preparing to fully invest in technological change
Spin off and IPO plan changes, Wu Yongming redraws Alibaba's battle plan
The term 'change' has been used almost throughout Alibaba's entire year this year, and more than ever before.
In March, shortly after Jack Ma returned to China, Alibaba launched the largest organizational change in the history of "1+6+N". All qualified business groups and companies will have the possibility of independent financing and listing. A list of promising businesses for listing was quickly determined, with Cainiao, Alibaba Cloud, and Hema standing out. At that time, Alibaba was full of hope for future businesses and believed that the market was the best touchstone.
In September, Ali's personnel changes were extremely intensive and fierce, and power was further concentrated in the hands of Ali's "Eighteen Arhat" - Cai Chongxin took over as chairman of Alibaba Group, Wu Yongming served as CEO, Peng Lei, Tong Wenhong, Wang Jian and other elders returned, and Zhang Yong, who had faded out of the center of power, retreated again and again until he left Alibaba.
Undoubtedly, behind these major decisions is the presence of Jack Ma. But Alibaba's plan to spin off and go public was not smooth sailing, as evidenced by the cessation of the spin off of Alibaba Cloud and the suspension of the immediate market launch of Boxes. The market has given Alibaba a basin of cold water.
After 24 years of development, Alibaba has grown into a giant company that spans multiple fields such as e-commerce, cloud computing, life services, culture and entertainment, and continues to carry out innovative businesses. It is not easy to turn around and turn around.
Under numerous challenges, how should Alibaba choose its strategic focus?
After taking on the role of CEO of the new group, Wu Yongming has drawn a new strategic blueprint for Alibaba, officially announcing the first batch of strategic innovation level businesses: 1688, Xianyu, DingTalk, and Quark. These business organizations will operate as independent subsidiaries, breaking the previous positioning restrictions within the group, and Alibaba will continue to invest in them on a 3-5 year cycle.
Faced with various uncertainties in the future, Alibaba plans to establish a highly flexible and fast decision-making governance mechanism and incentive system, with each business line developing as an independent business unit.
Alibaba will sort out the strategic priorities of existing businesses and define core and non core businesses. For core businesses, we will maintain long-term focus and high intensity investment to ensure that our products always keep up with user needs and evolve iteratively, maintaining long-term vitality and competitiveness; For non core businesses, asset value will be realized as soon as possible through various capitalization methods.
Alibaba will also leverage its strategic incubation function and make resolute strategic investments towards the future. Wu Yongming emphasized that businesses that meet user needs and AI driven change trends will be prioritized as the first priority investment; For innovative products that are oriented towards the future, we will adhere to long-term principles and resolutely invest, with a three-year evaluation and testing cycle to cultivate new business and momentum for Alibaba towards the future.
Priority "was the most frequently mentioned keyword by Wu Yongming that night. In terms of development strategies and priorities for various business groups, in the next three years of the strategic cycle of Taobao Tmall, "user first" will be further clarified as a business priority, and a multi-level market strategy and price power strategy within the APP will be implemented. The frequency of user purchases will be prioritized over GMV as the most critical goal.
Cloud Intelligence Group will implement AI driven and public cloud priority strategies, and increase technological investment in AI related software and hardware fields. Through "cloud+AI", support the intelligent transformation of various industries and create more incremental opportunities.
Jack Ma reduces his holdings, causing Alibaba's stock price to plummet
Just before the financial report was released, the news of Jack Ma reducing his holdings in Alibaba's stock to cash out attracted widespread attention.
According to the 144 form disclosed on the official website of the Securities and Exchange Commission (SEC), Jack Ma's family trust JC Properties Limited (a British Virgin Islands company) and JSP Investment Limited (a British Virgin Islands company) plan to reduce their holdings of 5 million Alibaba founder shares on November 21, respectively.
According to Alibaba Group's closing price of $87.07 on the New York Stock Exchange on Wednesday, the reduction involved a total amount of $870.7 million. Bank of America Securities served as the broker for the Ma Yun family trust reduction.
In recent years, Alibaba has no longer disclosed Jack Ma's shareholding. The publicly available data that can be verified is that on July 2, 2020, Jack Ma's shareholding has decreased to 4.8%, below 5%, but still remains Alibaba's largest individual shareholder. In fact, since 2016, some of the funds Jack Ma has cashed out every year have been invested in his charitable foundation, entering projects such as environmental protection, healthcare, educational development, and public welfare.
However, reducing holdings at the time of the change in the spin off plan still has a significant impact on the stock price. As of the press release, Alibaba's stock market fell nearly 10% before the market, below $80 per share.
Poor growth rate of cloud business, strong growth of global business
From the financial report, Taotian Group's revenue for this quarter was 97.654 billion yuan, an increase of 4% compared to the same period last year. The core cash flow business, Customer Management Revenue (CMR) and Adjusted EBITA, both increased by 3% year-on-year. According to the financial report, Taotian Group's core performance indicators continue to grow, with both user and merchant scales expanding simultaneously. 88VIP members have seen double-digit year-on-year growth, with a scale exceeding 30 million.
In May of this year, Dai Shan, CEO of Taotian Group, announced three major strategies: "user first, ecological prosperity, and technology driven", aiming to expand Taobao's advantages on the user side and supply side, and amplify the multiplier effect with AI as the representative of technological capabilities. The specific focus of the strategy is the five major strategies set at the beginning of the year, namely live streaming, private domain, content oriented, local retail, and pricing power. This quarter, Taotian also disclosed the specific results of various strategies.
In terms of pricing power, Dai Shan stated during an analyst conference that the overall purchase conversion rate and repurchase rate of users have achieved satisfactory results, and the investment in the content ecosystem has also led to data growth on the user side.
Just last Saturday, Taotian Group, which was spun off from Alibaba, closed its first Double 11. Although it did not disclose the GMV, it stated that various refined operational data, including user size, number of orders, and merchant size, have all grown comprehensively.
The revenue of the cloud intelligence group that stopped the split this time was 27.648 billion yuan, with a year-on-year growth rate of only 2%. Alibaba explained in its financial report that it will no longer spin off its cloud business, mainly due to 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.
Cai Chongxin also provided further explanations on this during the conference call, At that time, the plan was to completely split up, mainly to reflect the value of cloud business through financial engineering. The overall environment of cloud business at that time was predictable, and we could transparently demonstrate the growth trend of the business to investors and enhance shareholder value. However, now we no longer use financial engineering, but rather hope to demonstrate the value of cloud through investment, especially in the new situation where AI driven cloud computing business needs to be more effective Multiple investment support
Compared to the slow growing cloud business, global business growth is actually more robust, with Alibaba International Digital Business Group's revenue reaching 24.511 billion yuan, a year-on-year increase of 53%. Wu Yongming pointed out that at present, the overall user penetration rate of international digital business groups is high only in Southeast Asia, Türkiye and other regional markets, and there is still huge room for growth in user penetration rate in most overseas markets.
Alibaba International Digital Business Group CEO Jiang Fan specifically mentioned the Choice business (AliExpress fully managed model), stating that its order share is rapidly increasing and will contribute more than 50% of AliExpress's volume in the future. But the Choice model is still in the investment stage, with negative profits. In the future, business growth will still be the top priority. As the business grows, we will also optimize profits at the same time
In addition to the above businesses, Cainiao Group's revenue was 22.823 billion yuan, a year-on-year increase of 25%. After adjusting EBITA, it achieved a three-digit year-on-year growth and enhanced profitability.
Thanks to the strong user demand brought by the offline economic recovery, the local living group's revenue was 15.564 billion yuan, a year-on-year increase of 16%. Hungry Mo's operating losses continued to narrow year-on-year this quarter, driving the adjusted EBITA (operating profit and loss) of the local living group to 2.564 billion yuan.
The revenue of Da Wen Yu Group was 5.779 billion yuan, an increase of 11% year-on-year. The average daily active users (DAUs) of innovative businesses such as quark and Xianyu have also significantly increased.