Alibaba financial report teleconference record: will increase investment in the field of globalization and increase consumer base


Tencent technology on May 13, Alibaba released the fourth quarter financial report (the first quarter of 2021), in which the revenue was 187.395 billion yuan, up 64% year on year. In terms of the number of users, the number of active consumers in China’s retail market was 811 million, an increase of 32 million on a month on month basis, and the number of mobile users was 925 million, an increase of 23 million on a month on month basis. According to the financial report, Alibaba’s net loss attributable to common shareholders was 5.479 billion yuan (US $836 million), with a net loss of 7.654 billion yuan (US $1168 million), mainly due to the above-mentioned anti-monopoly fines. Excluding the impact and other items, the non GAAP net profit was RMB 26.216 billion (US $4.001 billion), up 18% year on year.
After the financial report was released, Alibaba CEO Zhang Yong and CFO Wu Wei attended the conference call to interpret the latest performance and answer questions from analysts.
JPMorgan analyst: in terms of investment, the management mentioned the reinvestment of incremental profits. Will there be zero profit growth? What are the key areas of investment? The management takes a prudent attitude towards investment and will adopt KPI and other methods. How can we measure the return on investment?
Wu Wei: in the performance announcement, we mentioned that profit increment should be fully invested. Investors will ask whether they want profit or growth? Does full investment mean zero profit? In fact, for Ali, profit and growth are not contradictory. In the past few years, a very small number of companies have been able to invest in potential growth areas and achieve profit growth at the same time. I think there is still a lot of market potential, including core business and other fields. There are also a lot of value in core business.
I think it’s very stupid for Ali’s long-term investors to just protect profits. There are many competitors who are constantly putting into the market with huge losses. And our hot areas, the value we can create and the resources we already have, give us no reason not to invest. We don’t guarantee the growth, balance or decline of profits. Our investment is disciplined, which will be reflected in the customer’s score. So it comes down to long-term profit growth or revenue growth.
In terms of different business areas, it currently includes core business areas, new retail, community services, international business, local services and logistics. In terms of investment, we hope to get the results, such as the growth of the number of users, the improvement of user stickiness, and businesses getting value from our services.
Zhang Yong: in terms of investment, we mainly adopt three strategies. Whether it is domestic demand, globalization or high-tech integration, we will make investment, because we see huge incremental opportunities in these three areas. In the field of domestic demand, first of all, China’s AAC (annual active users) has reached 890 million. In China’s broad consumer market, the total number of various platforms in Ali’s ecosystem is 890 million, which is our latest figure. But in fact, according to the purchase frequency, how can we turn 890 million users into not only AAC but also monthly purchase users, even daily purchase users, There is great potential in this. China’s largest and most powerful consumers and consumers with different levels of ability are all on our platform. How can we increase such frequency? This is a very important perspective.
At the same time, although we have 890 million annual customers in China’s domestic demand market, in fact, there is still a huge population space in the vast number of low-level cities and rural areas. As we said, in last fiscal year, we increased 84 million customers in China’s retail market, and 70% of them came from low-level areas. We think that such space is still very large, We will still add new users. We hope to take the lead in purchasing 1 billion users in China in the coming fiscal year, which is also our second investment area.
In addition to the growth of consumers and the growth of consumption frequency, the growth of businesses includes reducing the burden of businesses and reducing the operating costs of businesses. We have also introduced a series of measures for long-term growth and sustainable growth, some of which have been announced. We are making efforts in succession, hoping to give businesses a more relaxed operating environment, This is also a direction of our investment.
In addition to these, we also have infrastructure construction and logistics system construction in the field of domestic demand, including the construction of supply chain and purchasing and marketing. These are for the long-term value discovery of users and the satisfaction of users’ needs. We will continue to work hard. We will have corresponding goals and KPIs to monitor our progress in these aspects.
In the field of globalization, we are glad to see that AAC overseas has reached 240 million. We will continue to invest in increasing our overseas consumer base. We hope to double this number in the next few years.
In the field of technology, especially cloud computing, this is an opportunity of the times, so we will increase our investment in core technologies, especially cloud computing and big data. These investments not only involve the cloud, but also the investment in science and technology, the consumption experience of the next generation, and the technology of logistics, We firmly believe that such technological investment will benefit both the growth of domestic demand and the progress of globalization.
Jeffrey analyst: my first question is to know the prospect of CMR in the next year. We also see that the CMR figures are relatively solid. What’s the prospect of CMR in fy22? In particular, what is the trend of take rate? The second question is about the competition pattern. Ali has a wide range of products, rich varieties and strong science and technology. How can we give full play to these advantages to better enter low tier cities?

Wu Wei: as for the growth of CMR, we also reported that the year-on-year growth of CMR in this quarter is 24%. If we look at the past quarters, there has been a relatively strong growth, especially considering the high base, I think there is still a potential to maintain a high growth in the future. This part of the revenue is actually the budget of business expenditure, in order to purchase some services, Our take rate is 4%. We provide some sales, marketing and brand building services and charge fees. There is room for further improvement in this aspect. Of course, there are other channels to provide services for businesses.
Over the years, our take rate has been improving. We will also increase support for businesses. In the last conference call, we have mentioned some of the measures, such as exempting businesses from some charges, and investing in our platform infrastructure and other support measures. Therefore, we can see that the value we created for businesses has not been realized actively and rapidly. Our customer management revenue accounts for about 43% of the total revenue. If we look at the previous few years, the figure was as high as 78%, so our CMR is growing rapidly, but at the same time, the proportion of total revenue continues to decline. I think this trend will continue. The reason is that we are now implementing the multi engine growth strategy. Emerging businesses are booming, and the percentage of total revenue is also increasing.
Let me correct the figure just mentioned. The growth of CMR 24% is for the whole fiscal year. In fact, the quarterly growth is 40% year-on-year.
Zhang Yong: let me answer the second question, how to use technology to enhance our competitiveness. Ali always thinks that technology is the key, and we are very proud to have such a strong ability of technology development, and can constantly integrate the new technology developed into the actual operation in the competitive market environment. In terms of domestic consumption, a big problem is how to constantly obtain new customers and how to retain consumers in the market. On the one hand, we mainly make use of our technical advantages to make good matching and grasp the needs of consumers. Now our product supply is very rich and the user base is very huge. We rely on fully automated AI driven matching technology to continuously improve and optimize the conversion rate.
On the one hand, it can increase the transaction volume, and at the same time, it can meet the more diverse needs of more different customers, which is the first. Second, after acquiring new consumers, another key consideration is how to maximize the life cycle value of each customer. There are a lot of cross sales. Therefore, we will build a portrait of each user, understand his needs, and combine the characteristics of different products to continuously provide new products and services for this customer, Personalized customization.
The advantage of technology creation lies not only in the operation of consumers, but also in other fields. For example, in the field of logistics, technology is very important for rookies. Relying on technology, intelligent data-driven logistics and operation network can be built, so as to provide the best service for domestic and international businesses. Similarly, cloud technology is also the key. We also mentioned in the written speech just now that we are constantly investing in cloud technology. Cloud products are not only benchmarked against the core cloud products of domestic and international competitors, so as to ensure that the products are at the best level of similar products.
(continuously updated…)