Ali ushered in a situation not seen in several quarters

虎嗅APP

2024-05-14 22:49Posted on the official account of Beijing Tiger Sniff APP

Produced by Tiger Sniff Commercial Consumer Group

Author|Miao Zhengqing

Visual China

On the evening of May 14, 2024, Alibaba announced its financial results for the quarter ended March 31, 2024. During the quarter, Alibaba achieved revenue of 221.874 billion yuan, a year-on-year increase of 7%.

Financial details

Alibaba's adjusted net profit for the fourth quarter of fiscal 2024 was 24.42 billion yuan, down 11% year-on-year

On the positive side, Taobao's growth rate has picked up significantly this quarter, and Alibaba's AI product monetization ability is getting stronger. During the quarter, the GMV of Taotian and international e-commerce businesses both achieved double-digit year-on-year growth, which was unprecedented in several quarters. AI-related revenue grew by triple digits year-on-year in the quarter. (Tiger sniff note: As a comparison, in the same period of 2023, Taotian's corresponding GMV decreased by a single digit year-on-year)

On the one side of the challenge, Ali made some long-term investment and policy adjustments during the quarter, which brought "paper pressure" in the short term, and it is unclear whether it can bring enough positive feedback in the long term. During the quarter, Alibaba's operating costs increased by 1% to 67% year-on-year, and the ratio of sales and marketing expenses to revenue increased by 1% to 13% year-on-year (both excluding the impact of equity incentive expenses). Driven by the increase in investment in e-commerce business and the incentive expenses of rookie employees, Alibaba's operating profit in the quarter was 14.765 billion yuan, a year-on-year decrease of 3%, but the same as in 2023, the operating profit accounted for 7% of revenue.

During the quarter, Alibaba increased its investment in cloud equipment and e-commerce business, and canceled some paid projects for Taotian merchants in the past few years. It is these actions that make Alibaba's cost pressure greater, but these "investments" are difficult to achieve direct results in the short term, and their effects need to be gradually realized in the next few months.

Taotian has picked up, driving Ali's overall recovery

During the quarter, in addition to GMV, Taotian's order volume also achieved double-digit year-on-year growth, and the overall number of active users and consumption frequency also increased significantly. From the revenue side, Taotian's revenue increased by 4% year-on-year to 93.216 billion yuan during the quarter, of which customer management revenue reached 63.574 billion yuan, a year-on-year increase of 5%. (Tiger sniff note: In the context of Taotian, customer management income generally includes advertising, commissions and other income)

There are two logics behind Taotian's GMV and order growth: first, Taotian's strategy for user retention and repurchase in the past few years has achieved significant results; Second, since 2024, Taotian's actions around merchants to "reduce burden" and "reduce costs" have increased its attractiveness to merchants.

Customer management revenue is the key revenue item of Taotian. In essence, this is a "merchant pays" income item, that is, the merchant pays more advertising fees and commissions to the platform in order to get more traffic and orders. During the quarter, Taotian's overall GMV (excluding unpaid orders) achieved double-digit growth, and the corresponding advertising fees and commission revenue increased simultaneously with the larger GMV scale, which is reflected in the financial report, that is, Taotian's customer management revenue increased by 5% year-on-year in the quarter.

It is worth noting that the growth rate of customer management revenue and GMV is not at the same frequency, that is, when the platform shows a higher GMV performance, the advertising fees, commissions and other revenues collected from the merchant side do not increase at the same frequency. One of the factors involved in this is that Taotian is deliberately reducing some of the costs. For example, the business consultants who used to have a long-term income are now free, which means that Taotian tried to adjust the operating cost structure of the merchants during the quarter.

Considering that in the first half of 2024, Taotian will launch a series of projects around users, such as use now, pay later, no return refund, etc., it can be seen that the platform itself is "urgent" for the retention of both merchants and consumers. In short, it has reached the situation of "retaining users". In this financial report, Ali did not announce the specific data on the number of merchants and users, but according to the internal information mastered by Tiger Sniff, the relevant data showed growth in 3~4 months.

From the perspective of profit, Taotian's adjusted RBITA fell slightly by 1.3% to 38.501 billion yuan during the quarter. The decrease was due to the fact that the platform added more projects to improve the user experience during the quarter, resulting in an increase in costs.

This model of giving profits to merchants and users, and improving the experience through investment, will be the established route of Taotian in the future. With Alibaba's size and strength, these cost pressures are not the core issue, but a potential challenge is whether these actions can really win back Taotian's share.

"On the one hand, can we attract more businesses to return from competitors such as Douyin; On the other hand, whether it can win back users from competitors such as Pinduoduo. For Alibaba, the current data such as the number of merchants, active users, and consumption frequency of Taotian are far more strategic than data such as revenue. A senior Internet analyst said to Tiger Sniff.

The monetization ability of AI has been enhanced, and the loss of local life has narrowed

AI is the highlight of Alibaba's financial report.

During the quarter, Alibaba's AI-related revenue achieved triple-digit year-on-year growth, and it also expanded its user base: in addition to basic model companies and Internet companies, there are also financial service providers and automotive customers.

Driven by the boost in AI revenue, Neiyun Intelligent Group's revenue increased by 3% year-on-year to RMB25.595 billion, and its adjusted EBITA increased by 45% year-on-year to RMB1.432 billion. This is also the business segment with the largest year-on-year increase in Alibaba's adjusted EBITA in the quarter.

Cloud Intelligence Group cleverly redesigned its business structure during the quarter, and they deliberately reduced projects with lower margins. Including AI, the revenue of Cloud Intelligence Group's core cloud public products (including elastic computing, databases, and AI) reached double digits year-on-year in the quarter. According to the forecast of Cloud Intelligence Group, the proportion of AI revenue is expected to continue to expand in the future.

In the local life sector, the organizational structure was adjusted during the quarter: Yu Yongfu, the No. 1 position of the local life group, stepped down.

Under the latest structure, the Board of Directors of Local Living Group consists of 5 members:

Wu Yongming, Director of Local Life Group (Director and CEO of Alibaba Group, Chairman and CEO of Taotian Group, Chairman and CEO of Cloud Intelligence Group)

Wu Zeming, Chairman of Local Life Group (Chief Technology Officer of Alibaba Group, Chairman of Ele.me)

Zhu Shunyan, Director of Local Living Group (Chairman and CEO, Alibaba Health)

Liu Zhenfei, Chairman of Local Life Group (Chairman of AutoNavi)

Lei Peng, Director, Local Living Group (Partner, Alibaba)

During the quarter, Local Life Group's revenue increased 19% year-on-year to RMB14.628 billion, while its adjusted EBITA was a loss of RMB3.198 billion, narrowing 21.2% year-on-year. The growth of orders from Ele.me and AutoNavi is the driving force behind the revenue growth of Local Life Group. One of the core reasons for the narrowing of losses is that the loss situation of Ele.me Daojia's business has been optimized.

International and rookie, deeper synergy

During the quarter, the overall revenue of Alibaba International Digital Business Group (AIDC, hereinafter referred to as Alibaba International) increased by 45% year-on-year to 27.448 billion yuan, which was the largest increase in revenue in the quarter.

The core factor that made Alibaba International's revenue grow significantly was the growth of its order volume, which increased by 20% year-on-year in the quarter. Focusing on the Gulf region, Trendyol achieved double-digit order growth in the quarter and became one of the most downloaded e-commerce apps in the Gulf region. Lazada, which focuses on Southeast Asia, has undergone a series of adjustments, and has focused on improving operational efficiency during the quarter, and the loss per order narrowed year-on-year.

After the cancellation of the listing plan, the synergy between Cainiao and Alibaba International has further deepened.

During the quarter, Cainiao's revenue increased by 30% year-on-year to 24.557 billion yuan, and the core factor of revenue growth was Cainiao's support for the cross-border logistics fulfillment of AliExpress, a subsidiary of Alibaba International.

However, due to the continuous increase in infrastructure investment such as overseas warehouses during the quarter, both Alibaba International and Cainiao are facing the challenge of losses. In the next few quarters, the balance of the two will also become a focus of continuous attention.

"Wu Ma" should focus and be younger

An Ali insider close to Wu Yongming, CEO of Alibaba Group, revealed that the word "focus" is the most commonly used word by Wu Yongming recently. "Wu Ma wants us to focus on the key things, distinguish priorities and priorities." The source revealed.

After accepting the No. 1 position in Taotian, Wu Yongming pushed the team to further focus on the "user first" strategy. Since 2024, Taotian's product side has been upgraded many times, and a large number of complicated links for merchants and users have been optimized; In terms of traffic strategy, the platform has also begun to launch some different ways to play.

For example, at the beginning of May, Taotian launched a series of free activities, and users had the opportunity to directly waive historical orders by answering questions. This game of play was actually tried by Chu Duan during the Ele.me period, and after Chu Duan was adjusted to Taotian by Wu Yongming, Chu Duan continued this game and received the support of the group's senior management. According to Taobao's internal data, the cumulative number of views and more than 100 million participants reached 2.1 billion in the two days after the event was launched.

During the quarter, the rejuvenation process of Taotian and even Ali continued.

According to insiders, around Ali's P9~P10 rank group, the group is vigorously younger. Some post-85s and post-90s generations were exceptionally promoted, or given the opportunity to lead a team.

"Some post-85 and post-90 P8 and P9 level people have been fighting alone for a long time, but after several adjustments in 2024, they will begin to become the No. 1 position in the 8~10-person team." According to an insider, the process of rejuvenation is still continuing, and some key positions in business lines have recently been replaced by a group of young middle-level positions.

But the challenges facing Taotian and even Alibaba Group are obvious.

In the domestic e-commerce sector, Pinduoduo has a strong momentum, while Douyin's content e-commerce is still strong, and the encroachment effect of these platforms is still obvious in the tracks of shoes and clothing, cosmetics, snacks, pets, etc. In the cross-border e-commerce sector, the competition between Temu, Shein and Ali International is also gradually fierce, and the war is raging from North America to Europe, from full custody to semi-custody that is about to become a trend......

The next 618 will be a critical window period for Taotian and Ali: in the most important e-commerce promotion cycle in the first half of the year, whether Taotian's reform and adjustment in the past half a year can be transformed into stronger combat power, and how much share Taotian can win back in the face of a strong counterattack of several old opponents, which will be the key examination question.

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