Alibaba talked about their many businesses on a recent investor day. The common trend among them all is data. They actually describe their core business as the generation of user data which can be used to fuel their retail ecosystem. Their apps are used much more frequently than you would expect of a shopping app. Their Taobao app has 40% of their active users coming back daily. On average these users are launching their app 7 times a day or 25 minutes a day, I can't imagine users opening Amazon that much.
Social selling works in China
Facebook and other social networks have tried social selling based on recommendations by friends. BABA has been successful by not connecting friends but by starting with strangers and using data to find common interests to create communities. 75% of users on the Taobao app are under 35 years old sharing information with special interest groups is a more natural way for them to talk and recommend products.
Investor questions answered
One of the major IPO questions/concerns was mobile monetisation. This is no longer an issue. Mobile take rates exceeded PC for the first time 2.8%. To put this in context Ebay's latest transaction rate was 8.4%. 75% of sales are from mobile devices.
Cloud opportunity
Also similar to Amazon BABA is growing in the cloud. Their cloud business was nearly breakeven this quarter with revenue increasing 156% year on year. Like Amazon growth is just beginning. The entire IT spend in China is $200 billion assuming 20% will be on the cloud which saves customers 25% it will be a $30 billion market BABA generated $187 million in the last quarter.
Decisive has a long position in Alibaba (BABA). The material in this article is for informational purposes only and in no way constitutes a solicitation of business or investment advice. The material has been prepared without regard to any client's or other person's investment objectives. Before making an investment decision you should consider the assistance of a financial adviser and whether any investment or service is appropriate in light of your particular investment needs.
