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Home / Business / How Alibaba Makes His Money – Motley Fool

How Alibaba Makes His Money – Motley Fool



Alibaba s (NYSE: BABA) 10-quarter stretch with over 50% revenue growth was eventually concluded this quarter. However, the Chinese e-commerce giant continued to report 41% this year's revenue growth for the period – an impressive achievement.

The company's top line benefits from a number of growing businesses, including e-commerce platforms, physical stores and even a ticket ticket concert. But only three of Alibaba's business segments account for 99% of the $ 17 billion in revenue reported for the quarter. Let's take a quick look at them.

  Alibaba CEO Daniel Zhang is on stage during an Alibaba event.

Alibaba's new CEO, Daniel Zhang, is under pressure to maintain the company's revenue growth. Image source: Alibaba.

1. Alibaba's core business

It comes as no surprise that the majority of Alibaba's money comes from its core segment. In fact, the cluster of trading activities accounted for 88% of the turnover for the last period. In the three months ended December, revenue from core purchases increased by 40% year-over to nearly $ 15 billion.

However, you cannot know about the most successful e-commerce businesses under Alibaba's core business. First, it is the consumer-to-consumer market, Taobao, that allows small businesses and individuals to sell goods and has become the largest online store in China. Secondly, Alibaba owns the Tmall.com business area, which surpassed the industry in the last quarter by reporting a 29% increase in its gross merchandise value.

Alibaba's Chinese retail markets hit record 699 million mobile monthly active users, an increase of 33 million from the last quarter. At the company's last earnings call, Alibaba's new CEO, Daniel Zhang, said he believes this group of active customers is the company's most important asset. He hopes Alibaba can create more ways to make money from them in the future.

2. Alibaba's cloud business

Alibaba's cloud computing business, launched nine years ago, reported revenue of $ 962 million for the quarter. It may seem insignificant besides the $ 17 billion core business segment contribution. However, the cloud business is growing rapidly, with sales of 84% over the past year. In addition, Alibaba Cloud's revenue amounted to 6% of the company's total revenue spike for the quarter, up from 4% in the previous period.

Alibaba's ship platform now has over 50% of the market share in China. However, it claims less than 5% of the global cloud market, which Microsoft and Amazon.com dominate. To help the business grow, Alibaba said it wants to offer cloud customers more access to data and technology it uses to expand its own businesses.

3. Alibaba's media and entertainment business

Alibaba's media and entertainment business is growing slowly but surely. For the quarter, revenue increased by 20% year-over to $ 944 million. However, the segment represented only 5% of Alibaba's total turnover, down from 7% in the same period last year.

The revenue increase for media and entertainment was mainly due to mobile search and game publishing, as well as an increase in Youku subscribers, or its own version of Netflix . In the past year, Youku saw a 64% increase in average daily subscribers. However, it is still ranked by top competitors Tencent Video and iQiyi from Baidu .

This segment has become a major expense for Alibaba because it has spent billions on licensing content, as well as producing its own original shows, just like Netflix. For the quarter, the segment lost $ 878 million compared to a loss of $ 340 million in the same period last year.

The last quarter was remarkable for this segment because Alibaba increased its stake in Alibaba Pictures from 49% to 51%, giving control of the television and film production company. Last year, Alibaba Pictures was co-produced and funded Dying to Survive which ended up being the third highest-selling movie in Chinese cinema history. Alibaba hopes that the studio can help produce more content for Youku, so it can take over Tencent Video and iQiyi.

Although it is nice to see Alibaba invest in other businesses outside of trade, there is not much to worry about. China's 1.4 billion population still adapts to online store, as well as the country's middle class is expected to grow to 850 million by 2030, up from today's 300 million. In other words, the core business should be more than enough to keep it in the foreseeable future.

John Mackey, CEO of Whole Foods Market, a subsidiary of Amazon, is a member of The Motley Fools Board. Teresa Kersten, an employee of LinkedIn, a Microsoft subsidiary, is a member of The Motley Fools Board. Natalie Walters has no position in any of the aforementioned shares. The Motley Fool owns and recommends Amazon, Baidu, Netflix and Tencent Holdings. Motley Fool owns shares in Microsoft. Motley Fool has an information policy.


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