Alibaba Sees Flux In Ad Formats And Softening Sales In Mobile Shift

aliearnDespite Alibaba’s 28% revenue growth to $3.2 billion in Q1, the Chinese ecommerce giant experienced its slowest growth rate in sales over the last three years.

This stall might be partially attributed to growing pains as Chinese consumers move from desktop to mobile.

Alibaba’s total gross merchandise volume rose 34% to $108 billion (compared to 40% growth last quarter), missing some analysts’ expectations of 38-39% growth.

While Chinese consumers buy in a desktop environment, they aren't fully transacting on the mobile web, though the mobile app is a different story.

“We are having tremendous success attracting consumers to transact on mobile apps and will continue to develop sophisticated products to help advertisers monetize mobile traffic,” said Daniel Zhang, CEO of Alibaba during the company’s earnings call Wednesday.

Mobile accounted for 55% of total transactions this quarter, increasing mobile revenue by 125% to $60 billion. It added 18 million monthly active users for its mobile apps since last quarter to reach 307 million MAUs. 

Despite Chinese consumers’ rapid adoption of mobile, personalized mobile ads are trailing. Additionally, mobile formats – while growing – still command lower rates compared to Alibaba’s strong pay for performance desktop ads business.

CFO Maggie Wu said she expects marketers will eventually sink more dollars into mobile marketing.

“We do observe how personalization narrows down the product pool and impacts our bidding business,” she said. “We’re more focused on buyers and their behavior because they use both. They search and click on mobile and get transactions done on PC.”

Wu also noted the uptake in mobile advertising may not always be linear, given seasonality and other factors that change each quarter, such as “Single’s Day” in China when mobile sales typically skyrocket.

Eventually, Alibaba expects mobile monetization rates to equal or surpass PC rates, Wu said.

Alibaba also hopes to establish its Tmall marketplace as a place where Western brands can expand their Chinese ecommerce operations.

Alibaba revealed Wednesday its first partnership with a US department store: Macy’s. It will, through a joint venture with Macy’s China Limited, launch an online store on Tmall to bring Macy’s merchandise to Chinese shoppers.

In recent months, Alibaba has hosted flash sale promotions on Tmall and integrated marketing programs for consumer packaged goods brands like Unilever.

In other news, Alibaba on Monday invested $4.6 billion in leading Chinese electronics retailer Suning in exchange for 19% stake in the company. The company described the deal as an “omnichannel” effort to unite 1,600 brick and mortar stores, a developing online store on Tmall and mobile apps.

 

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