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HONG KONG — China’s vast ranks of consumers are finding ways to spend more money online — and that’s good news for Alibaba.
The Alibaba Group, the Chinese e-commerce giant that a few years ago led the biggest share listing in the history of the American stock market, on Thursday posted strong profit growth and better-than-expected sales growth for the three months that ended in March. The surge came as Chinese government statistics showed an increase in online retail sales as well as stronger overall economic growth. Robust online activity has helped others as well, with Tencent Holdings, a major rival to Alibaba, reporting a strong rise in profit and JD.com, another rival, posting its first profit.
Alibaba’s results offer a positive sign for those tracking China’s efforts to transform its economy to rely less on government spending and more on American-style consumption. But they also show Alibaba is finding more ways to get the businesses that set up shop on its e-commerce platforms to give it more money.
But there are challenges. The results show Alibaba has a long way to go before it can diversify its business amid expectations that even China’s online sales boom has its limits. And Alibaba is increasingly dipping its toe into American politics at an uncertain time.
Alibaba said its fiscal fourth-quarter profit rose 85 percent to $1.4 billion, thanks to strong sales as well as selling some investments. Sales across its e-commerce businesses rose 47 percent.
While that’s good news for the company, full-year results showed a more complex picture. Alibaba’s revenue for the year grew more than twice as fast as its gross merchandise volume, a measure of sales volume, meaning much of the rise did not come from simply selling more stuff. Alibaba also is finding ways to squeeze more money out of vendors big and small, either by offering new services or charging more for existing ones.
Because even China can’t grow forever, Alibaba is hoping to find new sources of revenue. One of the most promising, according to analysts, has been to introduce its own business providing back-end computing to businesses — much like Amazon Web Services. While growth in the business remains strong, it is from a small base, and some analysts have signaled concern about increasing competition. In the quarter, Alibaba’s cloud revenue more than doubled, to $314 million.
It has also expanded into online entertainment and film, hoping to make use of its advertising data and customers to become a cultural force. The company’s main online video acquisition, Youku Tudou, has fallen behind rivals in users and time spent per user. While in the long term it could pay off, in the shorter term heavy investment in content could cut into Alibaba’s margins.
Over all, the businesses outside Alibaba’s core commerce business were unprofitable in the quarter.
Alibaba has said this year will be the year it pushes in earnest outside China’s borders. While the company’s core business is still in China, some signs show that its efforts overseas are starting to pick up steam. In a recent note the boutique investment bank China Renaissance pointed out that Lazada, a Southeast Asian e-commerce company that Alibaba invested in last year, now leads in market share in the six major countries in the region. Alibaba’s primary branded overseas e-commerce site, AliExpress, has also been picking up customers in Brazil, Russia and Eastern Europe, according to China Renaissance.
In the United States things are proving more difficult. Jack Ma, Alibaba’s founder, will host a conference in Detroit next month to help small businesses learn about the company. The event is a part of a follow-up to a pledge Mr. Ma made to create one million jobs in America. It isn’t clear whether that will soften political opposition that Alibaba has faced over counterfeit products on its platforms and a bid to take over MoneyGram, a money transfer company.
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