Alibaba’s Cloud Business Soars
The last few weeks have some top companies like Amazon and Microsoft declare positive quarterly results, much of which came from their successful cloud business segment. Yesterday, it was the turn of Chinese e-commerce giant, Alibaba, to join this bandwagon. Its revenue from sales went up by 55 percent in the last quarter, thanks to the doubling of revenue from its cloud computing division, according to a release by the company.
Alibaba’s cloud business saw a jump of 130 percent that is equivalent to about $224 million, while its overall digital business saw a jump of 302 percent, and this equates to a whopping $541 million. These huge numbers reflect the growing digital adoption among the Chinese, and is significant because it comes at a time when the Chinese economy is in a slump. Much of it can be attributed to the growth in both consumer-to-consumer (C2C) and business-to-consumer(B2C) transactions.
As more young Chinese upgrade to a tech-savvy lifestyle, there is a greater demand for digital products. It is estimated that the Alibaba group controls more than 90 percent of C2C business through its portal Taobao. Likewise, more Chinese businesses are turning to the Internet to cater to a tech-savvy population within and outside China. Since Alibaba’s T mall platform, geared for B2B transactions, account for over 50 percent of all traffic in this sector, it’s little wonder that the digital profits have soared over the last year.
Alibaba, often seen as the Chinese version of eBay or Amazon, has grown past its core e-commerce business as it has expanded to many areas including sports and entertainment. This expansion is what has given the company a solid infrastructure to tap into the growing digital needs of its customers.
That said, the core commerce unit also saw an increase of 41 percent, when compared to the same period last year. But, the core business alone cannot drive Alibaba’s business, as its customers are evolving to keep pace of the trends happening elsewhere. This is why the company’s strategy to expand across different areas has paid off. Recently, Alibaba Pictures took a minority shareholding in Amblin Partners, a Spielberg company that includes DreamWorks studios. Going forward too, Alibaba is likely to continue its expansion strategy.
Despite these positive numbers, the shares of Alibaba Holding Group fell by about three percent in trading, on the New York Stock Exchange. This fall can be partly due to the fact that the year-on-year growth was not matched by the increase in net profit. Of course, this comparison is not fair because last year, the company booked an exceptional gain due to the re-evaluation of one of its units. If this comparison is left aside, Alibaba sure had a great quarter, and it is poised for greater growth in the coming months too, as its mobile users increased by 23 million in this quarter alone. This means, Alibaba has more than 450 million mobile users, and it is up to the company now to monetize this huge customer base by providing them the right social and digital experiences.