Alibaba Replaces CEO, Addresses Hiring Freeze

BabaChinese ecommerce giant Alibaba has replaced CEO Jonathan Lu, effective May 10.

Announced Thursday during its fiscal fourth-quarter earnings call, the company revealed incumbent COO Daniel Zhang would be promoted to CEO while Lu will continue on as vice chairman of the board of directors.

Zhang, an eight-year Alibaba vet and original founding member, has held top management positions across the company.

"He has the confidence of our entire team as we embark on the next stage of growth through this management transition," said Joe Tsai, executive vice chairman of Alibaba, during the earnings call. "We feel it is important to invest in and strengthen our talent to build the commerce infrastructure of the future."

Alibaba Chief Financial Officer Maggie Wu also called attention to the company's reported hiring freeze, whose motivations she claimed were taken out of context. While some reports claimed founder and Chairman Jack Ma credited the freeze to Alibaba's growing "too quickly," Wu said it is not the first time the company has pulled back the reins on new hiring.

"We had almost no new net adds in headcount in 2012, and our GMV [gross merchandise volume] growth was 62% that year," she said. "At that time,we enacted the same policy [in headcount] to encourage efficiency and innovation and our policies this year will be the same."

Alibaba noted 39% growth in revenue for its commerce retail business to US $2.1 billion, which it credits to growth in online marketing service and commision-based revenue (it does not break out media sales figures). Beyond Alibaba's core transactional business, it applies ecommerce data to RTB-enabled reach extension. Alibaba has also invested in Chinese ad platform AdChina, which strengthened Alibaba's data management capacity for brand advertisers.

Overall, Alibaba's growth appeared strong. Total GMV in its China retail marketplaces was US$97 billion, a 40% increase over last year. Total number of annual active buyers in the China retail marketplaces was 350 million, a 37% increase from 255 million the year earlier.

Mobile continued to surge for Alibaba with total mobile GMV exceeding US$49 billion, a 157% increase year over year. Alibaba recorded 289 million monthly active users for its mobile commerce apps, a 24 million net increase, or 77% YOY increase. It credited its strength in mobile to demonstrating its ability to attract users with strong commercial intent.

"We grew our active buyers, especially in rural areas, and expanded key categories and updated our infrastructures," Zhang said. "We made a big push for our mobile Taobao app this year and expanded and diversified our customer base." He said that Alibaba's Tmall marketplace has pioneered cross-border commerce and attracted major global brands and retailers to the platform.

Although Alibaba's mobile investments have not left its PC pay-for-performance business unscathed (Zhang noted additional decreases in CPCs), he said the drop-off has been offset by  growth in commission revenue and increased marketing spend in mobile promotions on Tmall.

Alibaba's product development expenses increased as a percentage of revenue (representing 17% or US$491 million compared to 10% of revenue last year) primarily due to the increase in share-based compensation expenses, which the company claims were offset by a reduction in royalty fees paid to Yahoo upon completion of its initial public offering.

 

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