Ali lost another 14,000 people

City Boundary

2024-05-16 15:45Posted on the official account of Beijing Municipality

Alibaba's giant ship is moving forward with a heavy load, throwing more and more people out.

Especially after entering the era of Wu Yongming last year, this Ali veteran, who does not talk much, showed the courage to change like a strong man's broken wrist, focusing on the core of strategic development on user first and AI-driven, and focusing on this to sort out the business, continue to give resources, money, and people in line with strategic priorities, and those who do not meet will be decisively discarded, a number of business lines have been placed on the negotiation table, and employees with low cost performance have been quickly abandoned.

In the first quarter of this year, Alibaba's number of employees fell by 14,369 in a single quarter, a record high. This is the first time that Wu Yongming has experienced a complete single-quarter financial report after taking on the three important responsibilities of director and CEO of Alibaba Group, chairman and CEO of Taotian Group, and chairman and CEO of Cloud Intelligence Group.

Wu Yongming is quite satisfied with the growth of the first quarter performance, "the strategy has worked, and Ali is returning to the growth track." The key words of Ali's external communication are also growth, revenue growth, double-digit growth in GMV, strong growth in the number of purchases and frequency, Ali International increased by 45% year-on-year, Cainiao increased by 30%, and local life increased by 19%......

Under the growth, Ali is still in the deep water area, and the core performance is to increase revenue but not profits, and Ali's operating profit in the first quarter was 14.765 billion yuan, a year-on-year decrease of 3%; The net profit was 919 million yuan, a year-on-year decrease of 96%, and Ali explained that the 21 billion yuan less was due to the change in the market value of the equity investment in the listed company. However, even without taking into account investment losses, adjusted non-GAAP net profit was 24.418 billion yuan, down 11% year-on-year.

After the release of the earnings report, Alibaba fell 6% in the U.S. stock market on May 14, closing at $79.51 per share, and its total market value decreased by US$12.389 billion (about 89.4 billion yuan) to US$193.5 billion.

01. How many 54,000 people have been in two years

Alibaba, which has "rolling layoffs", has seen its number of employees decline for nine consecutive quarters.

Since the end of December 2021, when the number of employees at Alibaba reached an all-time high of 259316, the number of employees at the giant has been shrinking, and by the end of March 2024, the number of Alibaba employees has been reduced to 204891, a loss of 54,425 in just over two years.

However, previously, Alibaba's single-quarter reduction in the number of employees was in the order of thousands, and the largest in the second quarter of 2022 was only 9,241 fewer and not more than 10,000. In the first quarter of this year, Alibaba under the helm of Wu Yongming decisively opened the "scissorhands" mode, breaking through five digits for the first time, with 14,369 fewer people in one quarter, a record high, accounting for 26.4% of the total reduction in the number of employees.

"Alibaba is still reducing costs and increasing efficiency." Li Chengdong, an e-commerce analyst, told "City Boundary" that in terms of human efficiency, Alibaba is much lower than Pinduoduo.

In Li Chengdong's view, Alibaba's slimmed down business lines are not profitable businesses, and there are businesses with no growth prospects, such as Hema and RT-Mart, which are relatively heavy offline retail businesses, will definitely shrink strategically; The second is the core business line e-commerce and Alibaba Cloud, which are also being eliminated at the bottom.

Indeed, Alibaba, like Tencent, initially had a total of 100,000 employees, but in the fourth quarter of 2020, after merging with Sun Art Retail, where RT-Mart is located, it brought nearly 130,000 people at once. At that time, Alibaba was still in an upward channel, and it was very optimistic about the future, expanding its business lines more and more, and raising more and more people.

Until the end of December 2021, Alibaba's headcount had been on the rise, with a few hundred at a time and a few thousand at a time, with the only decline being in the first quarter of 2021, when Sun Art Retail had just been merged, and 600 fewer employees was normal.

However, there was a precursor to the end of Ali's good days. The first bad sign is that Ant Group, the world's largest IPO, was halted overnight on November 3, 2020, on the eve of its listing. A few months later, in April 2021, Alibaba received an anti-monopoly penalty of 18.228 billion yuan for "choosing one of the two", setting a record for the highest anti-monopoly fine in China.

Ali is going to have a hard time. Throughout 2021, Alibaba is facing a very difficult situation, in the capital market, this giant that is preparing to sprint to a trillion dollars in market value, suddenly fell, the market value shrank by nearly half in just one year, and decreased by more than 25% in 2022, and will shrink by 10% again in 2023, the stock price once fell below the issue price, and the market value was once overtaken by Pinduoduo at the end of November last year. ”

Ali did have to take a strong pill at the moment. The stock price has fallen for three consecutive years, and its market value is less than a quarter from its peak. Revenue also bid farewell to double-digit growth for the first time in fiscal year 2023 (April 1, 2022 to March 31, 2023), falling to single digits, with a year-on-year increase of only 1.83% to 868.687 billion yuan.

In order to seek change, in June 2023, Daniel Zhang, who has served as the CEO of Ali Group since 2015, has successfully led Ali to fight several tough battles, and has become the key Mr. Ali to enter the "imperial era".

Subsequently, Ali's most powerful woman, Dai Shan, was also replaced in December 2023. As one of Alibaba's "Eighteen Arhats", Dai Shan has been at the helm of Alibaba's digital business sector in China since January 2022. In March 2023, he will serve as the CEO of Taotian Group after the "one split six". When it comes to everything, she has been in charge of Ali's richest department for less than 2 years.

On the contrary, Wu Yongming's burden has been increased by yard after yard, and one person is also three CEOs. In the first quarter of this year, it was the first time that Wu Yongming experienced a complete single-quarter financial report after he took on the three major tasks, and more and more employees were thrown out of the war ship under the cost reduction and efficiency increase. An industry insider lamented that the current Ali will not raise idlers.

02. There are too many loss-making business lines

Ali really doesn't need to raise such a person, dismantling Ali's financial report found that in addition to the core business and cloud business, other businesses were losing money in the first quarter.

At present, Alibaba's revenue is divided into seven sectors, including Taotian, Cloud Intelligence, Ali International, Cainiao, Local Life, Dawen Entertainment and others, with a total revenue of 221.874 billion yuan in the first quarter, a year-on-year increase of 7%. Among them, the highest contribution is Taotian, with a revenue of 93.216 billion yuan in the first quarter, accounting for 42% of the total revenue.

Next, the 20 billion level of Ali International, Cloud Intelligence and Cainiao, the first quarter revenue was 27.448 billion yuan, 25.595 billion yuan and 24.557 billion yuan respectively, with a contribution of more than 10%, the volume of local life is 14.628 billion yuan at the level of 10 billion, and the minimum of Dawen Entertainment is only 4.945 billion yuan. Other business segments, including Sun Art Retail, Yintai, Freshippo, Ali Health, Lingxi Games, etc., had revenue of RMB51.458 billion in the first quarter, with a contribution of 21.2%.

The same is true from the perspective of fiscal year 2024, Alibaba's annual revenue is 941.168 billion yuan, a year-on-year increase of 8%. Among them, Taotian contributed 434.893 billion yuan, cloud intelligence revenue was 106.374 billion yuan, Ali International was 102.598 billion yuan, rookie was close to 100 billion yuan, local life was 59.8 billion yuan, Dawen Entertainment was 21.1 billion yuan, and other business sectors were 192.331 billion yuan.

Among these businesses, the fastest growing rate is Ali International, with a year-on-year increase of 45% in the first quarter and a year-on-year increase of 46% in fiscal year 2024, but it is not unrelated to running fast and throwing money, Ali International's loss in the first quarter expanded to 4.085 billion yuan, the loss in the same period last year was 2.171 billion yuan, and a total loss of 8.035 billion yuan in fiscal year 2024.

The second largest loss-making sector is local life, with a loss of 3.198 billion yuan in the first quarter, and the good news is that the loss has continued to narrow due to the improvement of unit economic efficiency and the expansion of scale, but it has not yet been able to achieve self-hematopoiesis.

The losses of other business segments are still expanding, ranking third in terms of losses, with a loss of 2.818 billion yuan in the first quarter and a loss of 9.16 billion yuan in fiscal 2024. And in the first quarter, the revenue growth rate of this sector also fell by 3% year-on-year.

In addition, Cainiao also granted employee retention incentives due to the withdrawal of its listing application, resulting in a loss of 1.342 billion yuan in the first quarter.

Da Entertainment, which has been crane tail, lost 884 million yuan in the first quarter and 1.539 billion yuan in fiscal year 2024, the good news is that the loss of Da Entertainment is narrowing, but the bad news is that the first quarter is the only sector with a decline in revenue among the six major sectors.

On the whole, in the first quarter, except for Taotian and Cloud Intelligence, which made profits of 38.501 billion yuan and 1.432 billion yuan respectively, other businesses were all in the red. In other words, although Alibaba has many business lines, there are not many that have the ability to self-hematopoiesis.

At the earnings conference, Wu Yongming also said that core and non-core businesses will be defined according to priorities. For non-core businesses, the value of these assets will be realized through earning as soon as possible or through a variety of other capitalization methods.

As a result, in the past year, Hema Mart, Ele.me, Sun Art Retail and other unprofitable businesses can be called stormy, not only after management changes, multiple rounds of layoffs, but also repeated news of selling.

For the current Alibaba, not only do they have to raise a lot of "children" waiting to be fed, but what is more difficult is that the core business and cloud intelligence are becoming more and more powerless to grow under the fierce market competition.

In the first quarter, Taotian's revenue increased by only 4% year-on-year, which was still due to the double-digit year-on-year growth in online GMV and order volume, the strong growth in the number of purchasers and purchase frequency, and the double-digit year-on-year growth of the number of 88VIP members by more than 35 million. Cloud intelligence revenue also grew by only 3% in the first quarter, and Alibaba explained that the revenue of core public cloud products achieved double-digit growth, but the overall revenue growth was weak due to the gradual reduction of project-based contract revenue with lower profit margins.

03, Wu Yongming was ruthless

For Wu Yongming, leading the giant ship Ali to set sail again is not only a tight schedule, but also a heavy task.

Ali's soul Ma Yun has become more frequent in the frequency of internal speeches after the split of six, especially for Taotian Group, he has repeatedly stated that at the internal communication meeting in May last year, Ma Yun said that the future of Taotian Group is: return to Taobao, return to users, return to the Internet. After Wu Yongming took charge, he also emphasized many times to be user-centric.

In the past year, Taotian Group can be described as a key reform sector of Alibaba. In order to reactivate Taotian, Ali successively sent a number of generals to sit in the formation, including Chen Weiye, the former COO of Ele.me, and Wu Jia, the head of Quark.

A lot of feedback from the consumer side is that Taobao has indeed become more "simple and crude", and some people say that the familiar Taobao is back, which is not unrelated to Taotian's series of adjustment measures.

In order to retain users, Taotian has learned from Pinduoduo on the one hand, launched a series of projects such as use first and pay later, refund only, etc., and on the other hand, it is also following the example of JD.com to solve the problem of the rookie station that has been repeatedly complained about, and realize door-to-door delivery service. Not long ago, Taobao also announced the relaunch of the web version, which is another major revision after seven years, and it is also another embodiment of Jack Ma's return theory.

In the upcoming 618, Taotian also announced that it has canceled the pre-sale system for more than ten years, and the way for merchants and consumers to participate in the event will be simpler and more direct.

As reflected in the recent interview video by Joe Tsai, chairman of Alibaba Group, Taotian is still repairing its relationship with small and medium-sized merchants, and is committed to taking the initiative to reduce the burden on merchants through measures such as fee reduction. In April this year, Alimama also launched a site-wide promotion, with the aim of mobilizing the enthusiasm of merchants and improving the sales conversion rate of merchants.

After a series of painful reforms, Taotian's GMV and order volume have achieved double-digit growth, but under a series of promotional activities that vigorously give profits to users and merchants, Taotian's profits are declining, and in the first quarter, Taotian's profits fell slightly by 1.3%. For Taotian, the pressure on profits in the short term is an inevitable outcome.

Taotian is struggling to make a U-turn, and another profitable Alibaba Cloud business is nearing stagnation in terms of growth. In fiscal year 2024, Alibaba Cloud's revenue will be 106.374 billion yuan, a year-on-year increase of only 3%. AWS, the cloud services business of another e-commerce giant, will grow by 13% in 2023.

In the year of the split of six, Alibaba Cloud's IPO was stopped, and there was a large-scale downtime after Double 11, which led to the collapse of Taobao, Xianyu, DingTalk and other software, and was once on the hot search, which once again cast a shadow on the outside world's perception of Alibaba Cloud.

From the perspective of profits, compared with Taotian's annual profit scale of 100 billion yuan, Alibaba Cloud's profit scale can only be regarded as sprinkling, with a profit of 6.121 billion yuan in fiscal 2024, and the annual profit is less than one-fifth of Taotian's quarter. However, the optimistic point is that Alibaba Cloud's profits are still growing at a double-digit rate, and Alibaba also said that it expects Alibaba Cloud's revenue to return to double-digit growth in the second half of this year.

As the two major businesses that are currently stable and profitable, Taotian and Cloud Intelligence have been the hope of Ali in the future, for Ali, who has just reorganized for a year, focusing on the core business is a certainty, and large ships can only sail forward with weight reduction.

Author | Zhang Jikang

Edit | Chen Fang

Operations | Liu Shan

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