alibaba group-from strength to strength august 4 2017 · 3 august 5, 2017 deborah weinswig,...

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DeborahWeinswig,ManagingDirector,[email protected]:917.655.6790HK:852.6119.1779CN:86.186.1420.3016Copyright©2017TheFungGroup.Allrightsreserved.

Alibaba Group:

From Strength to Strength—Anoverviewofthebusinessunitsoftheworld’slargeste-commercecompany

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TableofContentsExecutiveSummary.............................................................................................................3

CoreCommerce...................................................................................................................5Taobao—C2CRetailE-Commerce.......................................................................................................................6Tmall—B2CRetailE-Commerce........................................................................................................................10Juhuasuan—ASalesandMarketingPlatformforFlashSales...........................................................................131688.com—China’sOnlineB2BWholesaleMarketplace.................................................................................15AliExpress—GlobalB2COnlineMarketplace....................................................................................................18Alibaba.com—GlobalOnlineWholesaleMarketplace......................................................................................20Lazada—South-EastAsiaBasedE-CommercePlatform....................................................................................22

DigitalMediaandEntertainment.......................................................................................24AlibabaPictures—DigitalMediaandEntertainment........................................................................................25Xiami—Music-StreamingPlatform....................................................................................................................28AlibabaSports—B2BSportsandE-SportsPlatform..........................................................................................30YoukuTudou—VideoContentPlatform...........................................................................................................32UCWeb—MobileInternetServices..................................................................................................................34

InnovativeInitiatives.........................................................................................................36DingTalk—EnterpriseMessagingPlatform.......................................................................................................37YunOS—Cloud-BasedOperatingSystem..........................................................................................................40AutoNavi—DigitalMap,NavigationandLocation-BasedServices....................................................................43AlibabaHealth—OnlineHealthcarePlatform...................................................................................................46

Others–LocalServicesandEnablingFunctionsofCommerce.............................................48Koubei—O2OLocalServices.............................................................................................................................49CainiaoNetwork—AffiliatedLogistics...............................................................................................................51AntFinancial—OnlineFinancialServicesProvider............................................................................................53Alipay—Third-PartyOnlinePayment................................................................................................................56AlibabaCloud—ProviderofCloud-ComputingServicestoBusinessesandEntrepreneurs..............................60Alimama—Data-DrivenMarketingTechnologyPlatform.................................................................................62

Appendix...........................................................................................................................65Alibaba’s25OperationUnits............................................................................................................................66

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ExecutiveSummaryAlibabawasestablishedin1999asabusiness-to-business(B2B)portalconnectingChinesemanufacturerstooverseasbuyers,essentiallymakingiteasytodobusinessanywhere.Thegrouphassincegrowntobecomethelargeste-commercecompanyintheworldintermsofgrossmerchandisevolume(GMV).ForthefiscalyearendedMarch31,2017,AlibabahadaGMVof¥3.8trillion(US$0.43trillion)and454millionannualactivebuyersonitsmarketplaces.

Inthisreport,weprovideanoverviewofAlibaba’sdifferentbusinesssegments,andhowtheyallworktogetherusingitsplatformsandbigdatatechnologytoenablesmallenterprisestocompetemoreeffectively.

Vision—“BorninChina,GrowfortheWorld”:ExecutiveChairmanJackMahasalong-termvisionforthecompany:hewantsAlibabatobecomeatrulyglobalcompany,providingsolutionstorealworldproblemsandusinge-commercetohelpglobalizationbymakingtrademoreinclusive.Thecompany’slong-termstrategicgoalistoserve2billionconsumers—one-thirdoftheworld’stotalpopulation—andtosupporttheprofitableoperationof10millionbusinessesonitsplatformsby2036.Byfiscalyear2020,AlibabaexpectsGMVtomorethandoubletoreachUS$1trillion.

Alibaba—initforthelonghaul:Thegroup’sphilosophyistobuildlong-termstrategicvalueanddrivesynergiesforitsglobalbusinessthroughorganicgrowthandstrategicacquisitions.TechnologyhasbeenthedrivingforcebehindthephenomenalgrowthoftheAlibabaeconomy,andwillcontinuetodriveitgoingforward.Thegroupcontinuouslyincubatesnewbusinessunits,allowingthemtogaintractionandtogeneratesustainablecashflow.

AnoverviewofAlibabaGroup:Sinceitsfounding,thegroup’soperationshavebeenanchoredincorecommerce,whichstillaccountsfor72%oftotalrevenuesinfiscalyear2017.Thecompanyhassincemovedintonewareassuchasdigitalentertainmentandlocalservicesthroughinvestmentsandorganicgrowth.Ourdiscussionisbasedonthebroadcategoriesofcorecommerce,digitalmedia&entertainment,innovationinitiatives,localservicesandenablingfunctionsofcommerce.

Source:alibabagroup.com

AlibabaisChina’slargeste-commercecompanywithavisiontobeatrulyglobalcompany.

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Corecommerce:Corecommercereferstothecombinationofretailandwholesalecommercebusiness.TherehavebeentwonotableshiftsinAlibaba’sretailcommerceplatforms:first,fromitsoriginsasamarketplacetobecomingasocialcommerceplatform,allowingconsumerstohavefunexploring;andsecond,itsmovefromonlinetooffline,providingconsumerswithaseamlessomnichannelexperience.

Units:Alibaba.com,1688.comTaobao,Tmall,AliExpress,Lazada,Juhuasuan

Digitalmedia&entertainment:Thissegmentwasestablishedwiththeaimofmakingtheshoppingexperiencemoreenjoyableforconsumers.Alibabaseesstrongsynergiesbetweencommerceandentertainment.Thus,ithasbeenbuildingitscontent-generationecosystemandleveragingitsmediaassetstotransformcommerceandbringnewusersanddatatotheAlibabaecosystem.Thedigitalmediaandentertainmentsegmentprovidesvideos,movies,newsfeeds,music,sports,literatureandgamestoconsumers.

Units:YoukuTudou,UCWeb,AlibabaSports,AlibabaPictures,Xiami

Innovativeinitiatives:ThissegmentincludesserviceofferingsthataimtoexpandAlibaba’secosystemandfosterasenseofcommunity.

Units:YunOS,AutoNavi,DingTalk,AlibabaHealth

Others—localservicesandenablingfunctionsofcommerce:ThissegmentcomprisesthekeyinfrastructureofAlibaba’secosystem.Technologiessuchascloudcomputing,payments,logisticsandlocalserviceswhichpenetrateeveryfacetofconsumers’dailylives.


Units:Koubei,CainiaoNetwork,Alipay,AntFinancial,AlibabaCloud,Alimama

TheAlibabaecosystemexpandedintoareassuchasdigitalentertainment,innovativeinitiatives,localservicesandinfrastructurethroughinvestmentsandorganicgrowth.

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Core Commerce

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Taobao—C2CRetailE-Commerce

Source:world.taobao.com

BusinessOverviewTaobaoisChina’slargestconsumer-to-consumer(C2C)onlinemarketplace.Sellerspostitemsonvirtualshopsforbuyerstobrowseandpurchaseusingthird-partypaymentproviderAlipay.Buyerscansearchandcompareproducts,andcommunicatewithsellersontheTaobaowebsiteormobileapp.

Revenuemodel:Taobaodoesnotchargeasalescommission,butderivesrevenuefromitsvalue-addedservices(suchasstorefrontdesign,marketingandpromotionalactivities).

StrategyandValuePropositionTaobaoisChina’slargestC2Csaleschannelandstrivestobealifestyledestinationforconsumers.

Easeofsettingupstores:AsimpleregistrationprocessandminimalinitialcostsmakeiteasyforsmallbusinessesandindividualmerchantstosetupstoresandstartsellingonTaobao.

Infrastructure:TransactiononTaoboarefacilitatedbyAlipay’spaymentinfrastructureandCainiaoNetwork’slogisticsandfulfillmentcapabilities.

Consumerprotectionagainstcounterfeits:ConsistentwithAlibaba’slong-termstrategytoriditsplatformsofcounterfeits,Taobaoleveragesbigdatatechnologytodetectcounterfeitproducts.AlibabahasjoinedforceswithChineselawenforcementauthoritiestoarrestandsueTaobaouserssellingcounterfeits.TheescrowfunctionofAlipayletsconsumersdecidetopayforitemsonlyiftheyaresatisfiedwiththeproducts.

TaobaoisChina’slargestconsumer-to-consumer(C2C)onlinemarketplaceoperatedbyAlibaba.

TaobaoleveragesAlibaba’secosystem,enablingmerchantstosellthroughsocialcommercewithtechnologiessuchasAI.

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AIandthebigdata-drivenuserexperience:Taobaoempowersmerchantswithartificialintelligence(AI)andbigdatatechnology.Bigdataapplicationsincludethefollowing:IntelligentMerchantMechanism,IntelligentRecommendation,IntelligentPersonalAssistantandIntelligentMarketing.DianxiaomiisanAIcustomerservicechatbotdesignedtohelpsellersautomatetheircustomerserviceanddealwithcustomerrequests.

Source:dianxiaomi.com

Retail-tainment,communityandcontent:TaobaoleveragesAlibaba’secosystem,enablingmerchantstosellthroughsocialcommerce.SomeexamplesofsocialcommerceopportunitiesforTaobaosellersinclude:TaobaoGuang(aplatformforfemaleuserstosharephotosandfashionadvice);TaobaoLive(aplatformformerchantstopromotetheirproductsthroughlivebroadcasting);andgroupbuyingwithAiTaobaoandYitao,amongothers.Alibaba’svideoportal,Youku,anditsowninstant-messagingappAliWangWang,helpTaobaosellersincreaseconversion.

Source:alimarket.taobao.com

Taobaohasapenetrationrateofover95%inChina’sC2Conlineretailmarket.

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Empowerinnovation:Taobaoisinitselfanecosystemforinnovativeandentrepreneurialmerchants.TheTaobaoMakerFestivalisaneventthatshowcasesinnovativeproductsandconnectsentrepreneursandconsumers.

Long-taileffect:TaobaoboaststhewidestproductbreadthanddepthamongallChineseC2Cmarketplaces.

KeyMetricsGMVtransactedonTaobaoMarketplaceinthefiscalyearendedMarch31,2017was¥2,202billion,ayear-over-yearincreaseof17%,accountingfor58%oftotalGMVtransactedonallAlibaba’sChinaretailmarketplaces.

TogetherwithTmallandJuhuasuan,Alibaba’sannualactivebuyersreached454millioninthefiscalyearendedMarch31,2017.

PeersTaobaohasapenetrationrateofover95%inChina’sC2Conlineretailmarket,accordingtoareportbyJPMorgan.EachNetandYmatou,twocompetitors,arelesspopularandbothmorefocusedonsellingforeignproducts.

EachNet,introducedin2003,isamarketleaderinonlineauctionsinChina.

Source:eachnet.com

Ymatou,establishedin2009,isacross-bordere-commerceplatformforB2CandC2Cproducts.

Source:ymatou.com

WeexpectTaobaotocontinueitsshifttoalifestyledestinationplatform.

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OutlookTaobaoasalifestyledestination:WeexpectTaobaotocontinueitsshiftfromatraditionalonlinetransactionsplatformtoalifestyledestinationplatformconsistingofconsumermediaandacommunity.China’sC2Ce-commercemarkethasbeenshrinkingasconsumersturntoB2Cplatformsforhigh-qualityproducts.WeexpectTaobaotoremainacentralcommunitywhereChineseconsumerscanengageandtransact.

Figure1.TheChangingCompositionofChina’sOnlineRetailMarket

Source:Analysys

9%19%

26%36%

42%48% 53% 55%

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2009 2010 2011 2012 2013 2014 2015 2016

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Tmall—B2CRetailE-Commerce

Source:tmall.com

BusinessOverviewTmallisChina’slargestbusiness-to-consumer(B2C)platformconnectingglobalbrandsandretailerswithChineseconsumers.Tmalloffersaplatformforbrandstosell,buildtheirbrandimageandenhancetheconsumerexperience.Itwasestablishedin2010andnowhasover10,000brandsonitsplatform.

Revenuemodel:Tmallchargesmerchantsanannualservicefee.Aswell,foreachtransaction,itchargesacommissionfeebasedonthecategoryofproductsold.

StrategyandValuePropositionHelpbrandsunderstandChineseconsumers:Tmall’stech-enabledtoolshelpbrandsunderstandandeffectivelytapChina’sfast-growingandincreasinglydiverseconsumerbase.Between2016and2021,China’sconsumptionisforecasttoincreasebyUS$1.8trilliontoreachUS$6.1billion,accordingtoBCG.

Consumerengagementthroughinnovativetechnologies:Alibabahelpsbrandsengagewithconsumersthroughtechnologiessuchasbigdata,augmentedreality(AR)andvirtualreality(VR).DuringitsannualSingles’Dayshoppingfestivalin2016,TmalllivestreamedagalaeventandintroducedtheVRBuy+channeltoincreaseconsumers’connectionwithbrands.MerchantsonTmallcanusetheplatform’sbigdatatopresenttargetedproductrecommendationsandadvertisingtoconsumers.

TmallisChina’slargestbusiness-to-consumer(B2C)platformandalsohasTmallGlobal,across-bordere-commerceplatform.

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Superiorbrandexperiencethrougheffectivemarketing:TmallletsbrandsconnectdirectlywithconsumersbyleveragingAlibaba’smediaassets.TheB2Cplatformhostsyear-roundconsumerfestivals,suchasSingles’Day,Double12andTmallSuperBrandDay.GMVonSingles’Dayreached¥120billionin2016.

Emphasisonquality:TmalliswellpositionedtobenefitfromChina’sconsumptionupgradeandincreasingdemandfortrustedandhigh-qualitygoods.RetailersmustgothroughavettingprocesstoopenastoreontheplatformandTmallhaszerotoleranceforcounterfeits.Tmallprovidesclearlydefinedpoliciesforordershipmentandreturnshandling.

Thego-tochannelforcross-bordere-commerce:TmallGlobal,Tmall’scross-borderretailplatform,housestheflagshipstoresofinternationalbrands,enablingthemtoselltoChineseconsumers,regardlessofwhethertheyhaveaphysicalpresenceinthecountry.

KeyMetricsSome75%ofconsumerbrandsontheForbesTop100mostvaluablebrandslisthaveapresenceonTmall,asofMarch2017.Approximately200millionviewerstunedintoTmall’sSingles’Dayin2016,almostdoublethe110millionviewerswhowatchedtheSuperBowl.

PeersAsanintegratedB2Cmarketplace,Tmallhadclosetoa58%shareofChina’sB2Conlineretailmarketin2016,followedby26%forJD.com.

Incross-bordere-commerce,TmallGlobalcompetesprimarilywithJDWorldwideandAmazon.cn.

Source:amazon.cn

Tmallcompeteswithvariouse-tailersacrossdifferentverticals.Forexample,itcompeteswithVIPShopfordiscountluxury,SuningandGomeforelectricalappliancesandDangdangforbooks.

Tmallhelpsbrandsengagewithconsumersthroughtechnologiessuchasbigdata,augmentedreality(AR)andvirtualreality(VR).

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Figure2.ChinaB2CE-CommerceMarketShare,2016

Source:Analysys

OutlookApivotalroleinspearheadingAlibaba’sNewRetail:TmallwillleadtheimplementationofAlibaba’sNewRetailinitiativebyintegratingonlineandphysicalretailthroughdatatechnology.WeexpectNewRetailtobeanothergrowthdriverforbothTmallandChinae-commercegoingforward.

Globalization:Alibabaisspearheadingtheefforttomakeglobaltrademoreinclusiveandtoremovebarriersandenablesmall-andmedium-sizedenterprises(SME)tosellglobally.

Figure3.ChinaB2CE-CommerceMarketSizeandYear-over-YearGrowth,2009–2016

Source:Analysys

22 103224

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Tmall57.5%

JD.com26.2%

VIPShop3.6%

Suning2.5%

Others10.2%

TmallwillplayapivotalroleinspearheadingAlibaba’sNewRetailinitiativesbyintegratingonlineandphysicalretailthroughdatatechnology.

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Juhuasuan—ASalesandMarketingPlatformforFlashSales

Source:ju.tmall.com

BusinessOverviewJuhuasuanisaleadingdailydealsmarketplacewithinAlibabathatservesasanalternativeavenueforTaobaoandTmallmerchantstomarkettheirproducts.Juhuasuanusesflashsalesandpromotionstoacquirenewcustomersandraisebrandawareness.Itwasestablishedin2010andwasintegratedwithTmallattheendof2016,yetoperatesunderitsowntradename.

Revenuemodel:Juhuasuanchargesbrandsaone-timefeeandcommissionforproductlisting,typically1%–5%ofthetransactionvalue.Eachproductisdisplayedandsoldfortwodays.Juhuasuanalsochargesbrandsforadvertisingservicessuchasplacingadsonitshomepage.

StrategyandValuePropositionAmarketingplatformthathelpsmerchantsachievebetterresults:Throughpromotionalcampaigns,Juhuasuanhelpsmerchantsbuildbrandawareness,launchnewproductsandreachnewcustomersthroughpromotions.JuhuasuanfitswellwithChineseconsumers’preferenceforgroupbuying,andhasperformedwellduringshoppingfestivalssuchasChineseNewYear,Singles’DayandDouble12.

Competitivepricingandqualityservice:Juhuasuanisselectiveabouttheproductsitonboards,andprovidescustomerserviceanddeliveryforusers.Itselectsproductsbasedontheirhistoricalsalesandservicerecords.Themerchantneedstoguaranteeaproduct’spricingisthelowestfor30daysbeforeandafterthepromotion.About70%oftheproductsofferedonJuhuasuanareneworpopularproducts.

Customer-centricproductsandserviceofferingsasacompetitiveAdvantage:JuhuasuanoffersawiderrangeofcustomizedproductsandservicescomparedwithTmallandTaobao.Inthepast,ithasoffereduniqueofferingssuchasdiscountedinsurance,afootballlotteryandluxurycruises.

Juhuasuanusesflashsalesandpromotionstohelpbrandsacquirenewcustomersandraiseawareness.

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Shareconsumeranalyticsdatawithmerchants:Juhuasuansharescomprehensiveconsumeranalyticswithitsmerchants,whichisvaluableforretailerswhoarebuildingtheirfranchiseanddevelopingproductsforChineseconsumers.

MetricsJuhuasuanhas30millionuniquevisitorsdaily.Some900productsand50brandsaredisplayedonthesiteeachday,asofMarch2016.

ThecompositionofJuhuasuan’sGMVin2016was:fashionandapparel(32.8%),electronics(21.9%),groceries(18.6%),brandeditems(11.6%)andothers(15.1%).

Source:jusp.tmall.com

OutlookStrategicimportanceofmarketingintheNewRetailera:Juhuasuanisexpectedtoplayasignificantroleinhelpingmerchantstotransitiontoe-commerce.ItwasintegratedwithTmallinaninternalreorganizationinDecember2016,whichwillmakesellingandmarketingonTmallseamless—brandswilllaunchnewproductsthroughTmallandlaunchmarketingcampaignsthroughJuhuasuan.

Furtherexpandintocross-bordere-commerce:Juhuasuan’spriorityistobethemosteffectivechannelforinternationalbrandstoenterandlaunchnewproductsontheChinesemarket.JuhuasuanwillgiveprioritytooverseasbrandsthatarenewtotheChinesemarket.Withtheinclusionofoverseasbrands,itwillhelptoexpandthebreadthanddepthofitsproductofferings.

PeersJuhuasuan’speergroupconsistsofC2BsocialcommerceplatformssuchasPingduoduo,JuanpiandJumei.

Goingforward,JuhuasuanwillgiveprioritytooverseasbrandsthatarenewtotheChinesemarkettohelpthementerandlaunchnewproductsintheChinamarket.

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1688.com—China’sOnlineB2BWholesaleMarketplace

Source:1688.com

BusinessOverview1688.comisanintegratedB2Bplatformthatconnectslocalbuyersandsellersfortradeofgeneralmerchandise,rawmaterials,andindustrialandchemicalproducts,amongothers.Launchedin1999,itisapioneerinChina’swholesaleB2Bmarket.

Revenuemodel:1688.comchargesanannualmembershipfeeaswellasfeesforvalue-addedservices(suchaspromotionalandadvertisingfees,andordermatchingfees).

Source:cxt.1688.com

1688.comisanintegratedB2Bplatformthatconnectslocalbuyersandsellersfortradeofvariousmerchandiseandrawmaterials.

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StrategyandValuePropositionEffectiveonlinesourcingchannelformerchants:1688.comservestheupstreamvaluechain,whichincludesretailersandmerchantsonTaobao.Thekeycharacteristicsof1688.comareattractivepricesandhighertransactionvolume.Itiscommonforbuyerstobuythesameproductatafractionofthepricewhenpurchasinginbulkfrom1688.com.

Value-addedmembershipservicesforsuppliers:1688.comprovidesmembershipservicessuchasexhibitionspotsatconferences,advertising,dataanalyticsandotherfunctionsthroughChinaTrustPass.Italsoprovidesadvertisingservicessuchaspay-for-performance(P4P)marketingandkeywordsauctions.

Source:cxt.1688.com

Community:1688.comprovidesanonlinecommunityformerchantsandsupplierstoshareadviceandfieldqueries.ItisChina’slargestB2Bsourcingplatform,givenitsfirst-moveradvantage.

Metrics1688.comhadover961,000payingmembersasofMarch31,2017,and230millionsuppliers,asofMarch31,2016.

Approximately60%ofitsordersarefrombusinessesoutsideAlibaba’se-commerceplatformssuchasTaobaoandJuhuasuan.

PeersPeersof1688.com’sB2Be-commerceplatformincludeHC360,makepolo,GlobalSourcesandDHGate.

1688.comisChina’slargestB2Bsourceplatform,givenitsfirst-moveradvantage.

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Source:hc360.com

OutlookContinueddigitalization:1688.comwillcontinuetodrivemorevaluecreationforSMEsthroughdigitalization.1688.comaimstobecomeChina’smost-efficientSMEtradingplatformwithinthreeyears,andChina’sNo.1SMEtradedata-sharingplatformwithinfiveyears.

Figure4.China’sB2BE-CommerceMarket,2016

Source:iResearch

48%

6%5%5%

36%Alibaba

GlobalResource

JQW

DHGate

Others

Alibabaaccountsfor48%ofChina’sB2Be-commercemarket.

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AliExpress—GlobalB2COnlineMarketplace

Source:aliexpress.com

BusinessOverviewAliExpressisaninternationalB2CmarketplaceforoverseasconsumerstobuydirectlyfrommanufacturersanddistributorsinChina.Itwaslaunchedin2010andisthethird-largestEnglishonlineshoppingwebsiteglobally,coveringover200countriesandoperatingin16locallanguages.

Revenuemodel:Registrationisfree.AliExpresschargesmerchantsanannualfeeanda5%commissionforeachtransaction.

StrategyandValuePropositionExpediteddeliverysupportedbyadataintelligentnetwork:OrdersplacedonAliExpressaredeliveredbyCainiao’scross-borderfulfilmentanddeliverynetwork.Cainiao’sopendatatechnologyplatformissupportedbyautomation,smartdevicesandAI,andhasledtoincreasedefficiency.Forexample,deliverytimeinRussiasawa20%improvementinfiscalyear2017.

Tech-enabledtoolsforeffectiveselling:AliExpresshasasuiteofappsforpayment,translationandcommunicationtohelpChinesemerchantsinteractwithoverseascustomersmoreeffectively.

Retailwithentertainment:AliExpresshasintegratedentertainmentelementsintotheplatformtoenhanceconsumers’shoppingexperienceandtheirinteractionwithbrands.ConsumerscantuneintoAliExpressLIVEtointeractwithcewebritiesandbrandswholivestreamtheircontent.Livestreamingisalsousedduringshoppingfestivalsforbrandstoengagewithconsumers.

KeyMetricsAliExpresshadmorethan100millionoverseasbuyersfrom220countriesandregions,asofApril2017.

OnSingles’Day2016,AliExpresshandled35.8millionorders,ayear-over-yearincreaseof68%,covering230countriesandregions.

Thetop-fivemarketsbytransactionvalueforAliExpressare:Russia,theUS,Spain,Brazil,FranceandtheUK.AliExpressisoneofthemostpopularcross-bordere-commercemarketplacesinRussia.

AliExpressisaninternationalB2CmarketplaceforoverseasconsumerstobuydirectlyfrommanufacturersinChina.

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Thetop-fiveproductcategoriesbytransactionvalueare:fashionandaccessories,phones,cosmeticsandhealth,computers,jewelryandwatches.

PeersPeersincludeAmazonandeBay.

AmazonisthelargestonlineretailmarketplaceintheUSbytotalsales.Ithassellersfrommorethan130countriesandcustomersin185countries.

Source:amazon.com

eBayisanonlineC2CandB2Cplatformthatoperatesinapproximately30countries.

Source:ebay.com

OutlookStrengthenbrandbuildingandglobalizationefforts:ThefuturestrategyofAliExpressistoservemorecustomersgloballytoalignitselfwiththemissionofAlibaba.AliExpressaimstofurthersupportChinesemerchants’expansioneffortsoverseasinareasincludingmarketing,brand-building,logistics,financialandvalue-addedservices.

AliExpresswillplayaprimaryroleinsupportingthegroup’soverseasexpansionefforts.

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Alibaba.com—GlobalOnlineWholesaleMarketplace

Source:alibaba.com

BusinessOverviewAlibaba.comisChina’slargestglobalonlinewholesalemarketplaceandistheinternationalversionof1688.com.Alibaba.com,whichisinEnglish,servesbuyersfromover200countriesbyconnectingthemwithsuppliersinChina.Combined,1688.comandAlibaba.comarethebiggestdomesticandinternationalB2Bwholesalemarketplacesglobally.

Revenuemodel:Alibaba.comdoesnotchargeacommission.Itgeneratesrevenuefrommembershipfees,marketingservicesandvalue-addedservices.

StrategyandValuePropositionAneffectivechannelfordomesticsupplierstoexporttotherestoftheworld:Alibaba.comhelpsdomesticsuppliersentertheinternationalmarketthroughproductlistings,promotionalcampaignsandordermatching.

Digitizingglobaltrade:Throughsolutionsandpartnerships,OneTouch,anaffiliatedimportandexportservice,providesimport/exportbusinesssolutionssuchascustomclearance,value-addedtax(VAT)refundsandothervalue-addedservices.Alibaba.comhaspartnershipswithdomesticthird-partylogisticsprovidersandinternationalplayerssuchasUPS,Fedex,Maersk,DHLandKuehne+Nageltoboostcross-borderlogisticsoperations.

Source:home.kuehne-nagel.com

Alibaba.comisChina’slargestglobalonlinewholesalemarketplaceandhelpsdomesticsuppliersentertheinternationalmarket.

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Qualityassuranceforglobalbuyers:Alibaba.comlaunchedtheTradeAssurancePrograminordertocreatetrustandattractoverseasbuyers.Buyersareeligibleforrefundsrelatedtoqualityissues.AlibabaOneTouchvetssuppliersthatwishtoparticipate.

Financingsupportenabledbydatatechnology:“e-CreditLine”providestradefinancingtosmallbusinessesbuyingandsellingonAlibaba.com.Thecreditfinancingdecisionispoweredbyanautomatedcreditscoringsystemthatisabletograntfullapprovalwithin24hours.

PeersAlibaba.comisthelargestB2BmarketplacegloballyintermsofGMV.Ithas18millionbuyers,followedbyThomasNetintheUS(1.8millionbuyers),TradeIndiainIndia(1.6millionbuyers)andEC21inSouthKorea(1millionbuyers).

Source:thomasnet.com

MetricsAsofMarch31,2017,Alibaba.comhasover141,000payingmembers.

OutlookGlobalization:Alibaba.comwillplayapivotalroleinsupportingtheElectronicWorldTradePlatform(eWTP)initiativepromulgatedbyChairmanJackMa.ThevisionofeWTPistolowertradebarriersforSMEsandmakeglobaltradefrictionless.


Alibaba.comprovidesvalue-addedservicessuchasqualityassuranceforglobalbuyers,tradefinancingtosmallbusinessesbuyingonitsplatform.

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Lazada—South-EastAsiaBasedE-CommercePlatform

Source:lazada.com.my

BusinessOverviewLazadaisane-commerceplatformfocusedonSouth-EastAsia,withoperationsinSingapore,Indonesia,Malaysia,thePhilippines,ThailandandVietnam.Itoperatesamarketplacemodelthatallowsthird-partyretailerstoselltheirproductsontheLazadaplatform(since2013)andalsosellsinventorydirectlytocustomersfromitsownwarehouses.

LazadawaslaunchedbyRocketInternetin2012andiscurrently83%ownedbyAlibaba.

Revenuemodel:Lazadaderivesrevenuesprimarilyfromcommissions.Itchargesa2%paymentfeeandacommissiononproductssoldonitsmarketplacethatrangesfrom0.5%to12%.Otherrevenuestreamsincludeadvertising.

StrategyandValuePropositionAne-commerceleaderinSouth-EastAsia:LazadagivesAlibabaexposuretotherapidly-growingSouth-EastAsiae-commercemarket,withouthavingtobuildasitefromthegroundup.Onlineshoppingaccountsforlessthan5%oftheregion’sretailsalescurrently,andthisshareisexpectedtoincrease.B2Conlineretailsalesareestimatedtoincreaseatacompoundannualgrowthrateof17.1%toUS$25billionin2020fromUS$11billionin2015,accordingtoFrostandSullivan.

SynergiesbetweenLazadaandAlibaba’secosystem:ThecooperationbetweenAlibabaandLazadahasbeenmutuallybeneficial,helpingbothplayerstotapintoanexpandedcustomerbase,broadeningtheirproductrangeandcapabilities.LazadahasonboardedTmallbrandstoitsmarketplaceandenableditsmerchantstosellthroughTaobao,increasingthechoiceofbothconsumersandmerchants.Lazada’slogisticscapabilitiesarestrengthened,asitcannowtapintoCainiaoNetworkforlogisticsservices.

Lazadaisane-commerceplatformfocusedonSouth-EastAsiathatiscurrently83%ownedbyAlibaba.

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KeyMetricsLazada’sGMVfortheDouble12shoppingfestivalin2016wasUS$40.5million.

PeersLazadaisthedominante-commerceplayerinSouth-EastAsia.OtherlocalplayersincludeTokopedia,anIndonesianonlineC2Cmarketplacelaunchedin2009,andShopee,aTencent-backedplatformbasedinSingapore.Otherglobalmarketplacesarealsointerestedinenteringthemarket.JD.comannouncedplanstoexpandtoThailandbeforetheendof2017.AmazonhasalsobeenreportedtobeplanningtoenterSouth-EastAsia.

Source:tokopedia.com

Source:shopee.sg

OutlookGlobalexpansionstrategy:Alibaba’sstrategyistotransformLazadaintoaglobalmarketplacefromaSouth-EastAsiamarketplace.Lazadaisalsofocusingonaddingsmallermerchantstoitsonlinemarketplace.ThisispartofAlibaba’slong-termvisiontoreachGMVofUS$1trillionby2020andtoincreaseitsrevenuecontributionfromoutsideofChinato50%

LazadaisthelargestinSouth-EastAsia’sfragmentede-commercemarket.

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Digital Media and Entertainment

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AlibabaPictures—DigitalMediaandEntertainment

Source:alibabapictures.com

BusinessOverviewAlibabaPictures(AliPictures)isthemovieproductionanddistributionarmofAlibaba.Itproduces,investsinanddistributesmoviesandTVprograms,andoperatesanonlineticketingplatforminChina.InvestedinbyAlibabain2014,AliPicturesismajorityownedbyAlibabaGroupandtradesontheHongKongStockExchangeundertheticker1060HK.

Thefourmainareasofoperationare:1)moviestudio,contentcreationandproduction;2)Internet-basedmarketinganddistribution;3)entertainmente-commerce;and4)international.

Revenuemodel:AliPicturesgeneratesrevenuefromcommissionsandservicefeeschargedonmarketingandticketingforthird-partyfilms(75%ofitsrevenuein2016),boxofficeincomefromitsproprietaryfilmproductions(23%ofrevenue)andothers(2%ofrevenue).

StrategyandValuePropositionFullcoverageofthefilmindustryvaluechain:TheoperationsofAliPicturesspantheentirefilmindustryvaluechain,fromfinancingandproductionoffilmstomarketing,distributionandticketing.

Platform-orientedapproach:AliPicturesaimstocreateanintegratedO2Oplatformfortheentertainmentindustrybyconnectingtheofflinecinemacircuitandonlinedistribution.AliPictureshasastrategiccooperationagreementwithAlibabaforthreeyearstopoolresourcestoco-developcontent.

ThecooperationletsitleveragetheassetsoftheAlibabaecosystem:

• AlibabawillgrantexclusiverightsofworkfromAlibabaLiterature,AlibabaGamingandYoukutoAliPictures.

• Alibaba’smediaassetssuchasthevideostreamingsiteYoukuTudou,OTT(subscriptioncontentbusiness)TmallBoxOfficeandTaobaoonlineticketingTaoPiaopiaocanhelpmakecontentdistributionmoreeffective.

• Alipaycanmakepaymentforcontentmorestreamlined.

AliPicturesisthemovieproductionanddistributionarmthatismajorityownedbyAlibabaandtradesas1060HK.

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Internationalpresence:AliPicturesaimstoproducecontentforaglobalaudience.ItinvestedinAmblinPartnerstoco-produceanddistributemovies,andhaspartnershipswithHollywoodstudiossuchasParamountPicturesandSkydanceMedia.AliPicturesisalsocommittedtodevelopingitsbusinessinIndiaandhasbeenconnectedtoseveralinvestmentsthere.

Digitalmarketinganddataanalytics:ConsumerdataandinsightsgeneratedfromtheAlibabaecosystemwillsupporttargetedmarketingeffortsforAliPictures.Furthermore,Alibabaalsoinvestedinfilmdataanalyticsandcontentdistributionplatformstoincreaseuserengagementandmarketshare.

FocusonIPandmade-for-Internetcontent:AliPictureswillfocusonInternetdramasasthekeygrowtharea,giventherapidgrowthofonlinevideostreaming,whichwillbecomeanimportantchannelforcontentdistribution.IthasbeeninvestinginaplatformtoprovideonlinemoviecontentcreatorswithopenIPsandresources.AliPicturesalsooperatesYulebao,aC2Bfilmproductionplatform,toprovideresourcesforfinancing,licensingandmarketing.

Source:taobao.com

KeyMetricsAliPictures’onlineticketplatformTaoPiaopiaohadover25millionMAU,asofJune2016,andthedailymaximumnumberofticketssoldreached3million.

Source:dianying.taobao.com

ItssoftwaresolutionYKSEhasover1,000theatreclients,amongwhich,60%haveannualboxofficerevenuesofover¥10million.

AliPicturesaimstoproducecontentforaglobalaudience,havinginvestedandpartneredwithoverseasstudios.

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PeersAliPictures’peersincludeChina’slargestfilmcompanies,suchasAMCEntertainment,HuayiBrothers,TencentPicturesandcinemaoperatorWandaCinemaLine.

Source:huayibrothersent.com

OutlookStriveforsustainableprofitability:AliPictureswillseekasustainableprofitmodelandhigh-qualityproductionstodrivefurthergrowth.China’sboxofficerevenuein2016was¥46billion,thesecond-largestmoviemarketaftertheUS,andisestimatedtoreach¥86billionin2018,accordingtoiResearch.However,Chineseboxofficegrowthhasbeendeceleratingfollowingthejumpinbox-officerevenuesin2014and2015,whichwasattributabletolower-pricedticketsononlineplatforms.

Investforgrowth:AliPictureshasbeenexpandingitsfilmecosystemthroughacquisitionsinfilmandTVproduction,distributionandticketing,whichwebelievewillincreaseitscompetitiveness.Thecompanyhasaninvestmentfundaimedatbuildingassetsacrossthefilm-productionchain.RecentinvestmentsincludetheDadicinemachaintostrengthendistribution;produceranddistributorBonaFilmGroup;filmfinancinggroupHeheFilm;AmblinPartners;anddigitalmarketingplatformDamai.

Filmco-productionswithoverseasstudios:AliPicturesisexpectedtoleadco-productionwithHollywoodandinvestmentsinforeignfilms,followingitsstrategicpartnershiponco-productionwithStevenSpielberg’sAmblinPartners.

AliPictureshasbeenexpandingitsfilmecosystemthroughacquisitionswhichwebelievewillmeaningfullyincreaseitscompetitiveness.

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Xiami—Music-StreamingPlatform

Source:xiami.com

BusinessOverviewXiamiisamusic-streamingplatformunderAlibaba’smusicdivision.Itwasfoundedin2006,acquiredbyAlibabain2013andintegratedwithTiantiantoformtheAlibabaMusicDivisionin2015.

Revenuemodel:Xiamiearnsfeesfromadvertisingandpaidsubscriptionsforitsmusic-streamingservices,similartoSpotify.

StrategyandValuePropositionGlobalstrategicpartnerships:Xiami,partofAlibaba’smusicdivision,hasinternationalanddomesticlicensingpartners,includingUniversal,BMGandK-PoprecordlabelSMEntertainment.

Useoftechnologytofostercommunity:TheXiamiplatformprovidessupporttoindependentChinesemusiciansandhelpsthemgetdiscovered.

Platformapproach:XiamiisabletoleverageAlibaba’sassets,whichcovermarketingandadvertising,payments,e-commerce,etc.

PeersPeersaremajormusic-streamingplatformsinChina,whichincludeNetEaseCloudMusic,QQMusic,SogouMusic,KugouMusic,KuwoMusic,BaiduMusic,YinyueTai,etc.

Xiamiisamusic-streamingplatformownedbyAlibaba.

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Source:mp3.sogou.com

MetricsXiamiMusichasover14millionMAU,asofSeptember2016,accordingtoQuestMobile.TheXiamiMusicmobileapphasbeeninstalledon9milliondevices,asofDecember2016.

OutlookStructuralgrowthstory:China’smusic-streamingindustryisforecasttogrowrapidlythroughto2020,accordingtoAnalysys.Thestructuralgrowthtrendisprimarilydrivenbyconsumers’increasingwillingnesstopayforhigh-qualityaudiocontent,risingincomelevelsandwidespreadaccesstocloudstorageand4G/5Gnetworks.

Policysupport:XiamiwillcontinuetobenefitfromtheChinesegovernment’sculturaldevelopmentstrategytosupportmultimediacontent.

Licenseinfringementremainsariskformusic-streamingplatformsinChina.Xiami’sservicesweresuspendedbrieflyin2015,asitwasembroiledinmusiccopyrightdisputeswithregulators.Xiamihasproactivelymitigatedtheriskbyobtaininglegalrightsformusiccatalogs.

XiamiMusichasover14millionMAU.

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AlibabaSports—B2BSportsandE-SportsPlatform

Source:alisports.com

BusinessOverviewEstablishedin2015,AlibabaSports(Alisports)developsandoperatessportsIP,sportingevents,e-sportscontests,sportingvenues,sportsmerchandiseandacquisitionsofselectedmediarights.

Revenuemodel:Alisportsiscurrentlyfocusedonscalingupandexpandingthereachofitsinfrastructure.Basedonitsbusinessnatureandvision,weexpectittoderiverevenueinthefuturefromcommissionsfromAlisports’onlineplatformandadvertisingincomefromsportingevents.

StrategyandValuePropositionDigitalizeandcreateaplatformforChina’ssportseconomy:Alisports’visionistodigitalizethetraditionalsportsindustrybyleveragingAlibaba’sdigitalassetsanduserdata.Alisportswillintegratethegroup’sassetsine-commerce,media,marketing,video,entertainment,cloudcomputingandAI,witheventmanagement,IP,businessdevelopment,ticketing,etc.,ofthetraditionalsportingindustry.

DevelopIPforforeignandhomegrownsportingcontent:AlisportsdevelopsandacquiresChineseandinternationalsportsIP,whichweviewasakeycompetitivestrength.Alibabapurchasedexclusivebroadcastingrights,aftertheendofnationalsportschannelCCTV5’srightstosportseventtransmissionandbroadcastsin2014.

Strategicpartnershipsformajorsportstournaments:Alisportshaspartnershipswithmajorinternationalsportsassociations—includingtheInternationalBoxingAssociation(AIBA),WorldRugby,IeSF(Internationale-SportsFederation)—topromoteandhosteventsinChina,aswellasbroadcastingrightsfortheFIFAWorldCup,NFLGames,OlympicGamesandLPGA.

AlisportsdevelopsandoperatessportsIP,sportingevents,e-sportscontests,sportingvenues,sportsmerchandiseandacquisitionsofselectedmediarights.

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PeersPeersincludeWandaSportsandTencentSports.WandaSportsisoneoftheworld’slargestsportscompaniesfollowingaseriesofacquisitions.

Source:sports.qq.com

MetricsAlisportsstreamedthe2016RioOlympicsviaYouku,Alibaba’svideostreamingportal,underalicensingagreementwithChinesestate-ownedCCTV.Asmanyas380millionviewersstreamedtheOlympicGamesthroughAlisports.

OutlookBeneficiaryofpolicysupport:China’sStateCouncilsetatargetthat,by2025,thesportsindustrywillhaveanoutputvalueof¥5trillion.Alisportsaimstobothprovideanonlineplatformforthetraditionalsportsindustryandtodigitalizeandupgradetheindustry.

E-sportsasamajorgrowthdriver:AlisportslaunchedtheWorldElectronicSportsGames(WESG)inMarch2016tofacilitatedevelopmentofe-sportsIP.AlisportsaimstoexpanditsofflineeStadium(venuesfore-sportstournaments)networkto10,000inthemediumterm.

Source:2017.wesg.com

Sportscommunityplatform:Alisportsaimstocreateanonlineplatformthatintegratespeople,associations,eventsandsponsors.

E-sportswillbeamaingrowthdriverforAlisports.

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YoukuTudou—VideoContentPlatform

Source:c.youku.com

BusinessOverviewYoukuTudouistheleadingoperatorofvideo-streamingservicesinChina.Theplatformenablesuserstosearch,viewandsharevideocontentacrossmultipledevices.ItwasformedfromthemergerofYoukuandTudouin2012,andwassubsequentlyacquiredbyAlibabain2015.TheYoukuBusinessDivisionispartofAlibaba’sDigitalMedia&Entertainmentarm.

Revenuemodel:YoukuTudouderivesasubstantialpartofitsrevenuesfromonlineadvertisingandpaidsubscriptions.YoukuTudoualsoworkswithAlibaba’sotherassetsforcontentgenerationandtrafficacquisition.

StrategyandValuePropositionGathersuseranalyticsforbettertargeting:Viewers’dataonYoukuisintegratedintoAlibaba’se-commerceplatformandhelpscreateprecisecustomerprofilesfortargetedadvertising.

Contentcreationandpartnerships:YoukuTudouhasdigitalcontentpartnershipswithDreamWorks,UniversalPictures,SonyPictures,ParamountPicturesandLionsgatetostreamtheirmoviesthroughTmallBoxOffice.

AcornerstonetoAlibaba’se-commercemediaecosystem:BrandscanleverageYoukuTudouforbrandingandmarketing,andtointeractwithcustomers.YoukuTudouhascreated“webisodes”onTaobaotousestorytellingtoboostsalesonTaobaoandtocombinevideoadvertisingandshopping.

MetricsYoukuTudouhas30millionpayingviewers,asofDecember2016.

YoukuTouduisChina’sleadingvideo-streamingservicesandispartofAlibaba’sDigitalMedia&Entertainmentdivision.

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PeersYoukuTudou’speersareChina’sleadingonlinevideoplatformssuchasiQiYi,Sohu,MangoTVandTencentVideo.

Source:iqiyi.com

OutlookPlatformstrategy:YoukuTudouwillplayakeyroleinAlibaba’sstrategyofbuildingan“e-commercemediaecosystem”,whichaimstoconnecte-commerceplatformswithmediaandletbrandsreachconsumersthroughdigitalchannels.YoukuTudouwillbecomethe“lifestylechannel”forAlibaba’se-commerceplatforms,togetherwithSinaWeiboandmobilebrowserproviderUCWeb.

Contentgeneration:YoukuTudouwilldistributeandgeneratecontenttohelpmakeAlibabaaleadingdigitalcontentproviderinChina.Alibaba’sgoalistoreach2billionconsumerswithitsservicesby2036,bycontinuingtoexpandbeyonde-commerceintoentertainment,mediaandsports.AlibabaisasponsoroftheOlympicGamesthroughto2028,andthegamesareexpectedtobestreamedonYoukuTudou.YoukuTudouhasexistingpartnershipsoncontentgenerationwhichitcanleverage.

OnlinedistributionchannelforAlibaba’smediaandentertainment:YoukuTudouisakeydistributionchannelforAlibaba’smediaandentertainmentunit.China’sonlinepaidvideomarketwasvaluedat¥9.6billionin2016,anincreaseof90.8%yearoveryear.Accordingtoasurveyin2016,82%ofChineseprefertowatchnewfilmsononlinevideoplatforms,morethanthe66%whoprefertogotocinemas.

Alibaba’sgoalistoreach2billionconsumerswithitsservicesby2036,bycontinuingtoexpandbeyonde-commerceintoentertainment,mediaandsports.

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UCWeb—MobileInternetServices

Source:uc.cn

BusinessOverviewUCWeboperatesUCBrowser,oneofthemostpopularmobilebrowsersglobally.SimilartoGoogleChromeandAppleSafari,UCWebhasbothmobileandPCversions.UCWebwasfoundedin2004,andacquiredbyAlibabain2014,aspartofthe“cloud+terminal”businessstrategy.

UCBrowserhastransformedintoaleadingcontentdistributionplatformfromitsoriginsasamobilebrowser.ItsportfolioincludesUCBrowser(mobilebrowsingservice),UCNews(contentdistributor),9Apps(Androidappstore)andUCUnion(mobiletrafficandmonetizationplatform).

Revenuemodel:Theprimaryrevenuesourcesarefromadvertisementsandpartnershipswithnetworkoperatorstotrackanalytics.

StrategyandValuePropositionLocalizationstrategy:UCWebhasalocalizationstrategy.IthasalargeuserbaseinChina,andcontrolsmorethanhalfoftheIndianandIndonesianmarkets.Thebrowsersupports12languagesinordertoserveitsgrowinginternationaluserbase.9Apps,itsmobileappdistributionplatform,wassetupin2013andallowsAndroidusersgloballytodownloadapps.

Ecosystempartnerships:UCWebhaspartnershipswithandprovidesdistributionchannelsforcompaniessuchasVodafone.Ittakesadvantageofitsownservernetworkstodelivertargetedadvertisingandcontenttousers.

Pairingcontentdistributionwithsophisticateddataanalytics:UCWebisevolvingintoamoreintelligentplatformthatintegratesuserdataanalyticsandmultimediacontent.Itanalyzesusers’location,agegroup,genderandintereststoprovidetargetedcontent.

ContentcreationandaconnectortotheAlibabamediaecosystem:UCBrowserconnectsuserstotheAlibabamediaecosystemofe-commerce,musicandvideostreaming,andsocialnetworks.UCWebhascontentpartnershipswithonlinemediaportalssuchasSinatoextenditsreachtomoreconsumers.Mediaportalsandpublisherscancreate“contentstores”

UCWeb,whichoperatesUCBrowser,wasacquiredbyAlibabain2014.

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onUCBrowsertohousetheircontent.UCoperatesWe-Media,anopenplatformwhichallowsinternationaluserstopublishandpostcontent.UCalsoestablishedthe¥1billionW+fundtorewardcontributorsinChina.

KeyMetricsUCBrowserhasover252millionMAUsglobally,asofSeptember2016accordingtoQuestMobile.ItisthelargestmobilebrowserinIndia,witha57%marketshareandover100millionMAUsin2016.83%ofitsusersarebelowtheageof35,andover60%liveintop-tiercities.

PeersUCBrowser’sdomesticpeers(mobile)includeQQbrowser,Baidu,360andSogou.

Source:mb.qq.com

Globally,UCBrowser(desktop)isrankedthirdwithan8%marketshare,behindChrome(52%)andSafari(15%),accordingtoStatCounter.

OutlookFurtherrampupdigitalcontentgeneration:UCWebwillbesteppingupitscontent-generationeffortsbypartneringwithmoremediaoutlets,inadditiontopayinguserswhocontributecontent.WiththeuseofbigdataandAI,UCWebwillhelpimprovedistributionoftargetedcontent.

Overseasexpansionstrategy:UCWebaimstomakeUCWe-Mediathego-toplatformforcontentconsumptionandcreationinIndiaandIndonesia.UCWebhassetupaninvestmentfundofRs200crore(overUS$30million)tostrengthenuser-generatedcontent(UGC)inIndiaandIndonesia,andnewsdistributionthroughUCNews.In2017,itplanstoaddmorethan30,000self-publishersandbloggerstoitsplatform,andpursuemoretie-upswithIndianentertainmentchannelsandmoviemakersforexclusivecontentreleases.

Furtherinvestmentsintechnologyandplatforms:UCWebislookingatinvestmentsinupstreamanddownstreamareasincontentgenerationanddistributioninIndia,includingthoseengagedinlocal-languagecontent.

UCWebisfocusedonoverseasexpansionwithinvestmentinIndiaandIndonesia.

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Innovative Initiatives

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DingTalk—EnterpriseMessagingPlatform

Source:dingtalk.com

BusinessOverviewDingTalkisanenterprisemessagingplatformaimedatimprovingB2Bcommunicationsandcollaborationforsmall-andmedium-sizedenterprises(SME)andorganizationsinChina.DingTalkwasfirstlaunchedin2015andiscurrentlytheNo.1rankedenterprisemessagingappinChina.

TheDingTalkmobileappprovidesenterprisefunctionssuchasgroupandpersonalinstantmessaging,videoandvoiceconferencecalling,e-mailandcloudstorage.Italsosupportsinternalandexternalbusinesscollaborationsthroughfunctionssuchassmartreportforms,attendanceandapprovaltrackingsystems,etc.

Revenuemodel:DingTalkiscurrentlyofferedfreeofcharge.

StrategyandValuePropositionEquippedwithfunctionstoincreasetheefficiencyofSMEs:DingTalkwascreatedtoincreasetheefficiencyofSMEsinChina,andwasdesignedwithuniquefunctionsthatmaketheapppopularamongcorporateusers.Forexample,DingTalkreturnsalistofstaffwhohaveorhavenotseenacertainannouncement.ThesefunctionsdifferentiateDingTalkfromitscompetitorssuchasEnterpriseWeChatandYonyou.

LeveragesAlibaba’splatformtogeneratevalueforusers:DingTalkprovidesmanyvalue-addedservicestoitscorporateusers,thankstoitssynergieswiththerestofAlibaba’splatforms.InMarch2017,DingTalkprovided¥1billioninsubsidiestoitscorporatesusersintheformofshoppingcouponsonTmall,etc.ThisstrategyshouldhelpDingTalkincreaseitsmarketshare.

DingTalkisanenterprisemessagingplatformaimedatimprovingB2BcommunicationsandcollaborationforSMEinChina.

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Endorsementfromgovernmentauthorities:OrganizationsinthepublicsectorinChinaareDingTalk’sfifth-largestclientcategory,asofMarch2017,whichshouldhelptomarkettheappeffectively.TheHangzhouEconomicandInformationTechnologyCommissionopenlyendorsedDingTalkbyencouragingotherdepartmentstousetheapptoimplementthegovernment’s“Internet+Administration”initiative.

PeersDingTalk’speersinthemanagementandcollaborationapplicationspaceinChinaincludeEnterpriseWeChat,Yonyouand263Cloud.

Source:yonyou.com

Source:263.net

KeyMetricsDingTalkhasreached3millioncorporateusers,asofFebruary2017.

DingTalkhas3millioncorporateusersasofFeb2017.

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Figure5.DingTalkSWOTAnalysis

S • Stronginfrastructuresupport• StrongR&D,professionalexperience• LeadingpositioninSaaSecosystembuilding W • Inconvenientbackendstatisticsfunction

O • Strongdemandforcollaborationplatform• RapidgrowthofSMEs T • Intensecompetition

• FragmenteddomesticSaaSmarket

Source:Analysys

OutlookHugepotentialinChina’scorporateSaaSmarket:Thecorporatesoftware-as-a-service(SaaS)marketinChinaisintheearlystagesofdevelopmentandisstillfragmented.WeexpectDingTalktodominateChina’sSaaSbusinessservicesindustryinthefuture,giventhesupportofAlibaba’sstrongdatatechnologyandcloud-computingcapability.

Expansionintootherverticals:DingTalkwilllikelyexpandfurthertootherapplicationsinordertobringmorevaluetoenterpriseusers.

RevenueopportunitiesforDingTalk:WeexpectDingTalk’sfuturerevenuemodeltoeitherbebasedonvalue-addedservicesorasubscriptionmodelsimilartootherSaaSappsintheUS.

Figure6.China’sSaaSMarketAnalysis

Source:iResearch

• Developmentofcloudtechnologyhasbegun

• Adequateprofessionalresources

• Corporateshavegraduallybeguntoacceptcloudservice

• Thepotensalmarketishuge

• TheonlineeconomyinChinawasworthover¥1.5trillion,asof2016.

• SaaSispreferredbycorporatesforitslowcost

• Govermentpolicyhasendorsedcloudcompusngandinternetstrategy Policy

Economy

Technology

Society

Alibaba’sdatatechnologyandcloud-computingcapabilitywillbeabletosupportthedominanceofDingTalk.

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YunOS—Cloud-BasedOperatingSystem

Source:yunos.com

BusinessOverviewYunOS(alsocalledAliyunOS)isanInternetofThings(IoT)operatingsystemthatbringscloudfunctionalitytoIoTandmobiledevices.ItwasfirstintroducedbyAliCloudin2011.

YunOSwasbuilttoworkinacloudenvironment:devicescansynchronizedatafromthecloudanduserscanaccessapplicationswithouthavingtodownloadtotheirdevices.

Revenuemodel:Alibabadevelopsandsellscloud-basedservicesonYunOS.ItdoesnotchargelicensingfeestohardwaremanufacturerswhoinstallYunOSontheirproducts.Instead,Alibabasharesintherevenuesderivedfromtheseproductsanditscloudservices.Themorepopularaservicebecomes,thefasterthesystem’suserbaseexpandsandthehighertherevenueshareforYunOS.

StrategyandValuePropositionHighlycompatibleandIoTfocused:Comparedtootherdomesticoperatingsystems,YunOSemphasizescompatibilityandtheconceptof“connectingallkindsofdevices.”YunOScanbeadoptedinsmartphones,smartcars,wearables,smart-homeappliancesandothersmartdevices.YunOSisanopensourceoperatingsystemthatallowsthird-partydeveloperstobuildtheirownservices.

Source:yunos.com

YunOSisInternetofThings(IoT)operatingsystemsthatbringcloudfunctionalitytoIoTandmobiledevices.

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CriticalmassinChina:YunOSisthesecond-largestoperatingsystemforsmartphonesinChinaandisaheadofAppleiOS.YunOS-installedsmartphonescomprisedanestimatedmarketshareof14%oftotalshipmentsinChina,asoftheendof2016.

Extensiveusecases:YunOSisusedtoenhanceconsumers’shoppingexperiencebothatphysicalstoresandonline.Forexample,theYunOS-poweredvirtualmirrorwithface-recognitionalgorithmallowsuserstoseetheeffectsofdifferentcosmeticsusingsoftware.

KeyMetricsYunOShasover70millionmobilephoneusersandover100milliontotalusersacrossallplatforms,asoftheendofMay2016.

Anestimated100millionYunOS-poweredsmartphoneswereshippedin2016,accordingtoStrategyAnalytics.

YunOSisthesecond-most-popularsmartphoneOSinChina,witha14%marketshare,asoftheendof2016.Androidhasoveran80%marketshare,whileiOShasa6%marketshare.

PeersYunOSisaheadofitsdomesticpeersintermsofIoToperatingsystem.Otherdomesticpeersinclude:

TencentOperatingSystem(TOS+)isanOSforconnecteddevicessuchasTVsandwearables.

Source:bbs.tos.cn

FreemeOS,byDroiTechnology,isanAndroid-basedOSforbothsmartphonesandwearabledevices,launchedin2012.TheOScurrentlyhas95millionusersglobally.

MIUIisanAndroid-basedsmartphoneandtabletcomputerOSdevelopedbyXiaomi.ItmainlysupportsXiaomiproducts,andisalsoopenforotherbrands.TheOScurrentlyhasover200millionusers.

YunOSisthesecond-largestoperatingsystemforsmartphonesinChinaandisaheadofAppleiOS,withover70millionmobileusersasofMay2016.

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Source:miui.com

BaiduYi,theAndroid-basedOSdevelopedbyBaidu,wassuspendedin2015.

EUIisanOSdevelopedbyLeTVforsmartphones,TVs,automobilesandsmartdevices.

OutlookAlibabawilllikelycontinuetodevelopanintegratedIoToperatingsystemtogenerateadditionalrevenuestreams.

Thegoalistobecometheindustrystandard:Alibaba’sgoalisforYunOStobecometheindustrystandardfortheglobalsmartdeviceindustryaswellasthe‘go-to’operatingsystemforChina’ssmartdeviceindustry,accordingtoaYunOSproductdirector.

HugepotentialforIoTinChina:China’sIoTmarketisexpectedtoreachUS$121.5billionby2022,representingacompoundannualgrowthrate(CAGR)of41.1%between2016and2022.Theprimarygrowthdriversareincreasingindustrialautomation,mainstreamadoptionofcloudcomputingandincreasingmobileinternetpenetration.

Expansionintodifferentproductverticalsthroughpartnerships:AlibabahasbeenworkingwithinternationalhardwaremanufacturerssuchasHPandIntelon“YunOSBook”tablets.ItiscooperatingwithSharp,Haier,LenovoandSkyworthtoproducesmartTVswithYunOSinstalled.Alibaba’sRX5SUV,an“InternetCar”withbuilt-inYunOSwithSAICMotor,wasreleasedinJune2016.Thesmartcarisabletocommunicatewithothervehicles,andbusinessesandcanfindparkingspaces,locategasstationsandpayforserviceswithAlipay.

Overseasexpansion:ThenextstageofgrowthforYunOS-poweredmobiledevicesisurbanChinaandoverseas.TheglobalOSmarketisledbyAppleandGoogle.Currently,YunOSismainlyinstalledonlower-endsmartphones.AnypushtoexpandoverseaswillrequirestrongtechnicalfeaturesandincreasedR&Ddeployment.

Alibaba’sgoalisforYunOStobecometheindustrystandardfortheglobalsmartdeviceindustryaswellasthe‘go-to’operatingsystemforChina’ssmartdeviceindustry

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AutoNavi—DigitalMap,NavigationandLocation-BasedServices

Source:autonavi.com

BusinessOverviewAutoNaviisadigitalmapandnavigationsolutionsproviderinChinathatwasestablishedin2001andacquiredbyAlibabain2014.AutoNaviisanoperatingpartnerofGoogleMap,BingMapand360MapintheChinesemarket,andthedataproviderforAppleMaps.TheAutoNavisystemsupportsfunctionssuchasARvisualnavigation,3Dlandscape,cloudsync,real-timetrafficconditions,offlinenavigation,etc.

Revenuemodel:Thebasicnavigationfunctionisfreeofcharge.Thenavigationappmainlygeneratesrevenuefromvalue-addedservices:

• CommissionearnedfromLBSservices:Theappprovideslocation-based-services(LBS)toserviceproviderssuchascar-hailingcompanyDidiChuxing.AutoNaviearnscommissionsfromconnectingserviceproviderswithusers.

• Advertisingincome:AutoNaviauctionsadvertisementspotsinsideitsapptobusinesses.

StrategyandValuePropositionIncreasedaccuracyofLBSthroughuser-generatedcontent:AutoNavicapturesusers’drivingpatternsinreal-time,poweredbybigdataandcloudcomputing.AutoNavialsocollaborateswithpoliceandtransportadministrationofficestocapturedatarelatingtotrafficincidents,whichincreasestheaccuracyofthereportingofreal-timeroadconditionstoover90%.AutoNavicollectsusers’datatoprovidepersonalizedofflineservicesandrecommendnearbyrestaurants,gasstations,entertainmentfacilities,etc.AutoNavihashaditscoresystemonAliCloudsinceJanuary2016.

Constantlyenhancecapabilitiestocreatevalueforusers:AutoNavihasextendedthemodesoftransportavailableontheapptofiveafterincludingtrainsandcycling.Itisalsocustomizingsolutionsbasedoneachuser’spreferenceandspendingpatterns,andhasbeenactiveinpartneringwith

AutoNaviisadigitalmapandnavigationsolutionsproviderthatwasacquiredbyAlibabain2014.

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othercompaniestoextenditsbusinessscope.AutoNaviwillgeneratemapsforautomateddrivingprojectsunderpartnershipswithGermanautomobilesupplierBoschandChinese-languageinternetsearchproviderBaidu.

Increaseentertainmentvaluewithcelebrityvoicenavigation:AutoNaviprovidesvoicepromptedturn-by-turnvoicenavigationthatisrecordedbycelebrities,includingTaiwaneseactress,LinChi-lingandChinesecomedianGuoDegang.AutoNavisawa230%increaseinfirst-timeuserswhenthisfunctionwasreleased.

PeersMobilenavigation:AutoNaviandBaiduMaparethetop-twonavigationappsthatdominatethedomesticmarket.

Source:BaiduMapIOSApp

Figure7.ChinaMobileNavigationUserPenetrationRate,asof3Q2016

Source:Analysys

MetricsAutoNavihad29millionmonthlyactiveusers,asof2016.

6.0%

6.2%

8.9%

42.8%

71.5%

0% 20% 40% 60% 80%

TianyiNavigason

TencentMap

ChinaMobileMap

AutoNavi

BaiduMap

AutoNavihad29millionmonthlyactiveusers,asof2016.

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OutlookDominanceinthedomesticmarket:WebelieveAutoNaviwillcontinuetoleadinthedomesticmappingmarket,givenitssuperiorservicequalityandreal-timetrafficinformationpoweredbybigdata.

Source:auto.amap.com

Futureplans:AutoNaviisdevelopingamodeltopredictfuturetrafficconditions.Beyondnavigationandtrafficdata,futureareasoffocus—knownasits“FourVehiclesStrategy”—includeinternetofvehicles,auto-drivemaps,trafficbigdataandopenplatformservice.WeexpectAutoNavitopursuefurtherstrategicpartnershipopportunities.

PolicysupportforChina’sautonomousvehiclemarket:Chinaaimstohaveautonomousvehiclesontheroadby2021.ThepolicyopensanewopportunityforAutoNavisinceatrafficdatabaseandcompletenavigationfunctionsarekeyelementsofanautonomousvehicle.ThecompanyhasalreadyenteredintoapartnershipwithGermany’sRobertBoschonautonomousvehicledevelopment.Weexpectfurtherstrategiestobeimplementedtoincreasethecompany’spresenceintheautonomousvehiclemarket.

AutoNavi’ssuperiorservicequalityandreal-timetrafficinformationpoweredbybigdataallowittoleadinthedomesticmarket.

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AlibabaHealth—OnlineHealthcarePlatform

Source:alihealth.cn

BusinessOverviewAlibabaHealthInformationTechnology,orAliHealth,isthehealthcarearmofAlibabathatwasformedfromitsacquisitionofCitic21CNin2014.Thecompany’sobjectiveistousetechnicalcapabilitiestoimprovehealthcareservices.AliHealthhasanonlinehealthinsurancejointventuretobuildanonlinecommunityfortheChinesehealthcaremarket.ThecompanytradesontheHongKongStockExchangeundertheticker241HK.

AliHealth’smainrevenuestreamusedtocomefromtheoperationoftheChinaDrugAdministrationOnlineSystem,anonlinedrugtrackingandpharmacyonlinesystemthatletsuserstrackdrugproductionanddistributioninformation.However,thesystemwassubsequentlysuspendedin2016.

StrategyandValuePropositionCreatevalueacrosstheentiremedicalindustrychain:Alibabaaimstoconnectpatients,pharmaciesanddoctorsbybringinghospitalservicesonlineandtobuildaninternetpharmacythroughAliHealth.AliHealthhasintroducedtheAliHealthmobileapptoprovideonlinehealthconsultationservicesbyhealthcareprofessionals.

Affordablehealthcareaccessibletoall:AliHealth’smissionistomake“goodhealthachievableatthefingertipsofall”anditsvisionistoprovide“fair,affordableandaccessiblemedicalandhealthcareservicesto1billionpeople.”Inpursuitofthismission,AliHealthhasstrivedtodeveloppharmaceuticale-commerce,intelligentmedicineandproduct-trackingsystemservices.

AliHealthisthehealthcarearmofAlibabaaimstousetechnicalcapabilitiestoimprovehealthcareservices.

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PeersBaiduDoctorisanonlineplatformthatletspatientsbookmedicalappointmentswithdoctorsinlocalhospitals.BaiduDoctorhasanAI-poweredchatbottosendresponsesonbehalfofdoctorsafterthedoctorshaveverifiedtheinformation.

TencentDoctorconnectsdoctorsandpatientsthroughitsinstantmessagingappWeChat.Registereddoctorsandmedicalorganizationscanprovidepaidmedicalconsultationservicesthroughtheplatform.

Source:doctor.qq.com

KeyMetricsAsofMarch2017,morethan5,000enterprisesfromthedrug,foodandnutritionalsupplementindustrieshadsigneduptojoinAliHealth’sMaShangFangXinplatform,whichoffersproduct-trackingservicesforqualityassurance.MorethanhalfofthepharmaceuticalmanufacturersinChinahavesignedup.

OutlookAliHealthwillneedtofindasustainablebusinessmodelandworkwithdifferentstakeholderstoalignwithpolicyinitiatives.

China’spromisingdigitalhealthindustry:Overthelongterm,Chineseauthoritieswilllikelysupporttheonlinehealthcaremarkettoalleviatetheburdenonthepublicsystem.Pharmaceuticale-commerceinChinaisatanascentstageofdevelopment,comprisingapproximately3%ofpharmaceuticalsalesinthecountry,withhugepotentialforfurthergrowth.

Regulatorysupport:AliHealthwillneedtofindasustainablebusinessmodelandworkwithdifferentstakeholderstoalignwithpolicyinitiatives.TheChinesegovernmenthasimplementedanumberofhealthcarereforminitiativestoencouragetieredmedicalconsultationandtreatment,andfordoctorstopracticeatmultiplelocations

Morethan5,000drug,foodandnutritionalsupplemententerpriseshavesigneduptojoinAliHealth’splatformthatoffersproduct-trackingservicesforqualityassurance.

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Others–Local Services and Enabling Functions of Commerce

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Koubei—O2OLocalServices

Source:koubei.com

BusinessOverviewKoubeiisanopenplatformforcustomersandmerchants,andasearchenginethatprovidesinformationonlocalservicessuchasrestaurants,fooddelivery,movieticketing,shopping,travelling,etc.KoubeiwasformedfromajointventurebetweenAlibabaandAntFinancialServicesin2015andisintegratedwithinAlipay.

Revenuemodel:Koubeidoesnotchargeservicefeestomerchantsonitsplatform.Ittakespartofthecommissionthatthird-partymarketersreceiveforsuccessfullypromotingamerchant’sservicestoconsumers.

StrategyandValuePropositionEmpowersbothonlineandofflinemerchants:Koubeiempowersmerchantswithpayment,marketing,customerserviceanddataanalyticsfunctionstohandletheirday-to-dayoperations.Ithelpslocalmerchantsretaintheirexistingclientsandattractnewcustomers.Forexample,Koubeioffersdealsandcouponstoencourageuserstospendatphysicalstores.

LeveragesAlibaba’secosystem:VariousfunctionswithinAlibabahelpdrivetraffictoKoubei,includingtheTaobaomobileapp,Alipay,AutoNavi,WeiboandUCBrowser.Forexample,KoubeiusestheAutoNavimaptechnologytorecommendlocalmerchantssuchasrestaurants,supermarketsandconveniencestorestousers.Alipayservesasachannelforpayment,loyalty,promotionsanddatacollectionfromusers.

Enliststhird-partymarketerstoonboardmerchants:Koubeirecruitsmarketersthroughthe“Koubeike”programtoonboardlocalmerchantsandrestaurantstotheKoubeiplatform.Theseinterestedthird-partymarketersearnacashcommissionandcoupons,andKoubeibenefitsfromagrowingmerchantbase

ArrayoftechnologiesembeddedinKoubei:Koubeihelpslocalmerchantscreatevirtualstoresforconsumerstobrowsethroughmerchandise,payandreceivediscounts.Consumerscanaccessthevirtualstorebyscanningthemerchant’sQRcode.TheKoubeimobileappalsointegratesARtechnologyinordertoletuserseasilydiscoverlocalservicesintheirvicinity.

KoubeiisajointventurebetweenAlibabaandAntFinancialthatofferasearchengineforcustomersandmerchants.

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PeersDianping(⼤众点评)isalocalservicesappbackedbyTencentthatcurrentlydominatesChina’sO2Oindustry.

Source:dianping.com

Ele.meisaFooddeliveryservicebackedbyAlibabaandTencentthataimstodigitalizethecateringindustry

KeyMetricsKoubeihas1.5millionthird-partyserviceproviders,handlinganaverageof15milliontransactionsdaily,andhasapresencein120cities.

Koubeigenerated¥73.1billion(US$10.5billion)inpaymentvolumetransactedthroughAlipayduringthequarterendingDecember2016,representinga52%increaseoverthepriorquarter.

OutlookCompetitivedomesticO2Omarket:KoubeifacescompetitionfromthemarketleaderDianpinginthedomesticmarket.AccordingtoTrustdata,thetotalturnoverofthefourlargestChina’slocallifeserviceO2Obrandswas¥550trillion.Meituan-Dianpingaccountedfor44%,followedbyKoubei’s31%.Koubeiwilllikelyneedtospendontrafficacquisitioninordertowinmarketshare.

Overseasexpansion:Online-to-offlinee-commerceplatformKoubeihelpedboostsalesatoverseasphysicalstoresduringtheDouble12festivalin2016.Over70,000physicalretailersin16countries—includingduty-freeshops,supermarketsanddepartmentstores—participatedinthefestivalthroughKoubei.

Supportsthegroup’sNewRetailstrategy:KoubeiwillplayanimportantroleinimplementingAlibaba’sNewRetailstrategyastheplatformdirectsonlinetrafficoffline,boostingofflinestoresales.UserscansearchforlocalmerchantsusingKoubeiandthenvisitthestorestotakeadvantageofpromotions.

Koubeihas1.5millionthird-partyserviceprovidersandgenerated¥73.1billioninpaymentvolumeonAlipayinthequarterendingDecember2016.

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CainiaoNetwork—AffiliatedLogistics

Source:global.cainiao.com

BusinessOverviewCainiaoNetworkisanasset-light,logisticsdataplatformthatdrivesefficiencybyconnectinge-commercecompanieswithlogisticscompaniestoprovidefulfilmentonalargescale.Cainiao’splatformspansdelivery,warehouse,pick-up,andruralandcross-borderlogistics.Cainiao’slogisticsplatformincorporatesover20logisticsfirmsgloballyandleveragesbig-datatechnology.CainiaoNetworkwasestablishedin2013andisa47%-ownedlogisticsaffiliateofAlibabaGroup.

Revenuemodel:CainiaoNetworkgeneratesrevenuefrombusinessone-commerceplatformsandlogisticscompanies.

• E-commercebusiness:CainiaoNetworkchargesservicesfeesforprovidingstorageanddistribution,cross-bordertransportationandacomprehensivelogisticsservice.

• Logisticscompanies:CainiaoNetworkchargescommissionstologisticscompaniesforprovidinglogisticssolutionsbasedonitsbig-datasystemandlogisticscloud.

StrategyandValuePropositionAlignedtothegroup’sholisticapproachtocommerce:CainiaoNetworkfulfilsthelogisticsaspectofAlibaba’sholisticandtechnology-drivenapproachtocommerceforitsstakeholders.Inaddition,Alibabaisabletoaddarevenuestreamfromitsthird-partylogisticsnetworksbychargingservicefees.

Advantagesofaplatformapproach:Cainiao’sdata-drivenlogisticsplatformhasseveraladvantagesoverthetraditionallogisticsmodel,asitintegratesexistinglogisticsresourcesandempowerspartnerswithincreasedlogisticsefficiency.Theplatformapproachgivesstakeholdersadegreeofcontrolwithouthavingtodeveloptheirownlogisticsoperationsin-house.

Speed:CainiaoNetwork’sgoalistodeliveranywhereinChinawithin24hours,andworldwidewithin72hours.Theplatformadoptsstandardizede-shippinglabelstoreduceorder-processingtimeandasmart-routingservicebasedontheanalysisofreal-timeaggregatedindustrydeliverydata.

Cainiaoisanasset-lightlogisticdataplatformthatconnectse-commercecompanieswithlogisticscompaniesthatprovidefulfillmentservices.

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Value-addedservices:Theplatformenablesmerchantstooptimizedemandvolatilityandseereal-timeinformationondeliveryoptions,pricesandtime.Alibabaprovidesdataintelligenceandforecastsparceldemandvolatilitybyanalyzingconsumertransactiondata.ConsumersareabletotrackdeliveriesontheirmobileTaobaoapp,whichfulfilstheirdemandforconvenience.

PeersCainiaoNetwork’sdomesticpeersinclude:

Self-ownedlogisticsnetwork:JDLogistics,SuningLogistics,Amazon.cn

Source:wuliu.suning.com

Networkoflogisticsproviders:PinjunExpress

KeyMetricsCainiao’snationwidefulfilmentnetworkhassevenregionalhubstoservedeliverycoverageofover2,700countiesanddistricts,asofMarch2017.Foritsglobalfulfilmentnetwork,itcovers224countriesandregionswithover100overseaswarehousesandover60cross-borderpartners,asofMarch2017.

OutlookRisingdomesticlogisticsdemand:Theriseofe-commercehasdriventhegrowthofChina’slogisticsindustry,andbroughtwithitoperationalchallenges.InChina,anaverageof57millionpackagesweredeliveredeachdayin2015(vstheUSaverageof35million),whichisexpectedtoincreaseto145millionby2020.ThetimingofpromotionalactivitiessuchasSingles’Daycausesaspikeinlogisticsdemandandburdenslogisticspartners.

Increasingefficiencyandreducingcosts:Bybuildinganintelligentandsharinglogisticsmodel,CainiaoNetworkaimstolowerthecostoflogisticsasapercentageofGDPto5%inthefuture,fromthecurrentlevelof16%.Alibabaplanstousetechnologytofurtherreduceinefficiency,forexample,throughtheadoptionofcloudservices.

Cainiaoaimstolowerthecostoflogisticsbybuildinganintelligentandsharinglogisticmodel.

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AntFinancial—OnlineFinancialServicesProvider

Source:antfin.com

BusinessOverviewAntFinancialisanonlinefinancialservicesproviderandanaffiliatecompanyofAlibaba.ItwasrenamedfromAlipayin2014.ItsvisionistoleveragethepoweroftheInternetandbigdatatoprovideanecosystemofinclusivefinancialservicestoSMEsandindividuals.Tothisend,AntFinancialoperatesfiveprimarylinesofbusiness:

• Paymentproducts:Alipay

• Wealth-managementproducts:Yu’ebao,Zhaocaibao.

• Financing:AntCheckLater,AntMicroLoan,MYbank

• Insurance

• Third-partycreditrating:SesameCredit

AntFinancialhasalsopartneredwithleadingfinancialinstitutionsincludingBankofChina,ChinaConstructionBank,AgriculturalBankofChinaandtheIndustrialandCommercialBankofChina.IthasalsopartneredwithO2Olocalservicestoprovidepaymentservices.

RevenueModel:TheprimarysourcesofrevenueforAntFinancialinclude:

• CommissionsandinterestreceivedfromAlipay

• Servicefeesfromwealth-managementproducts

• Interestincomefromindividualandcorporateloans

• Premiumincomefrominsuranceproducts

StrategyandValuePropositionNetworkeffectsandahugeuserbase:AntFinancialbenefitsfromahugeuserbasewhichservesasthefoundationofitsbigdata,andprovidesanedgeindevelopingandlaunchingnewservices.Thereare520millionregisteredAlipayusers,asofMarch2017.

Leadingbreadthandscaleacrossthefinancialservicesspectrum:AntFinancialpossessesstate-of-the-arttechnologiestopoweritsfinancialproductsandcontinuouslyimproveusers’experience.Forexample,theMYbankloansystemautomatesloandecisions;ZhemaCreditcreatespersonalcreditscoresbasedonanindividual’sprofilegatheredbybigdata;

AntFinancial,anaffiliateofAlibaba,isanonlinefinancialservicesproviderthataimstoprovideanecosystemofinclusivefinancialservicestoSMEsandindividuals.

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andAntFinancialCloudisanopenplatformbasedonAlibabaCloudinfrastructureandcustomizedforfinancialpurposes.

Focusedonservingindividualsandsmallbusiness:AntFinancialisfocusedonprovidingequitableaccesstofinancialservicesforthoseindividualsthatareunderservedbytraditionalfinancialinstitutions.ThisstrategyofinclusivefinanceenablesAntFinancialtogaintractionamongitstargetgroupsquickly.

TailwindformobilepaymentproviderasChinagoescashless:AntFinancialiswellpositionedtobenefitfromChina’sentryintothecashlessera.NotonlydoesAlipayhavethelargestshareinthemobilepaymentsmarket,itsgoalistobringChinaintoacashlesserawithinfiveyearswiththeestablishmentofacashlessalliance.Alipayhasestablishedpartnershipswithretailerssuchasairports,restaurants,supermarketsandtransporttosupportmobilepaymentwiththeaimtopenetrateeveryfacetofcompanies’activities.

PeersAntFinancial’speersinclude:

Domestic:JDFinance,Tencent’sWeChatPay,commercialbanks

Source:pay.weixin.qq.com

Overseas:Paypal

Source:paypal.com

AntFinancialiswellpositionedtobenefitfromChina’sentryintothecashlessera.

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KeyMetricsAntFinancialserved520millionannualactiveusersanditsstrategiclocalpartnersserved112millionannualactiveusersglobally,asofMarch2017.

OutlookBrandedasatechfincompany:AntFinancialplanstofocusonbuildingatechfinplatformtoconnectconsumersandsmallbusinesseswithfinancialinstitutions.AntFinancialisdrivinginnovationssuchastheshiftfrompasswordstobiometricsIDinordertomakepaymentsmoreconvenientandsecure,andtheuseofblockchainsincharitabledonationsandinsurancetobuildtrust.

Continuetostrengthenruralfinance:AntFinancialcontinuestopushforexpansioninruralareasaspartofitsinclusivefinancestrategy.Thecompanyprovidesloansforfarmersandcooperateswithagricultureandstockbreedingcompanies.AntFinancialwillalsointroduceruralsupply-chainfinancesolutions,O2Olocalservicesandadigitalizedloanplatformtoitsruralfinancestrategy.

Globalization:AntFinancialaimstoincreasetheproportionofitsoverseasusersto50%withinfouryearsanditsentireglobaluserbaseto2billionwithinnineyears.Thecompanyisactivelyincreasingitsglobalpresencethroughoverseasinvestmentsandpartnerships.

Figure10.AntFinancial’sRecentPartnershipsandInvestmentActivities

Source:360doc/FGRT

Date Event

August2016 PartnershipwithIngenicoGroupinFrance

July2016 LaunchedAlipay+projectinSingapore

June2016 InvestmentinAscendMoneyinThailand

May2016 CooperationwithUberglobally

November2015 InvestmentinK-BankinKorean

September2015 InvestmentinCathayFinancialHoldingsinTaiwan

September2015 InvestmentinPaytminIndia

AntFinancialisdrivinginnovationwithtechnologysuchasbiometricIDandblockchain.

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Alipay—Third-PartyOnlinePayment

Source:alipay.com

BusinessOverviewAlipayisaleadingthird-partyonlinepaymentappdevelopedbyAntFinancial,anAlibaba-affiliatedcompany.Foundedin2004,AlipayprovidespaymentandescrowservicesfortransactionsonAlibabaplatforms.Alipayhassinceexpandedtootherverticalssuchasutilitybillpayment,onlineshoppingandfinancialproducts,includingpersonalloans,insurance,investmentfunds,etc.AlipayleadsChina’sthird-partypaymentmarketwitha53.7%share,inthefirstquarterof2017.

Revenuemodel:Alipayhasthreeprimarysourcesofrevenue:

• Interestincome:InterestincomecanbeearnedwhileproceedsoftransactionsaretemporarilydepositedinAlipay.

• Commission:Alipaychargesacommissiontomerchants.

• Advertisementfees:Alipayalsorentsadvertisingspaceonitsapp.

StrategyandValuePropositionGoaltoprovideinclusivefinancialservices:AlipayaimstoexpandaccesstofinancialservicestotheunbankedandunderbankedbymakingtraditionalbankingservicesaccessibletoallChineseandinternationalcitizens.Todothis,Alipayhasdevelopedarangeofservicesonitsplatform,startingwithanescrowfunctionthatinstillstrustbetweenconsumersandmerchantsandruralfinance.

Asingleplatformthataggregatesmultiplefunctionalities:InitiallydesignedtofacilitatetradesonAlibaba’smarketplaces,Alipaynowaggregatesarangeofservicesonitsplatform—includingonlinepaymentprocessing,digitalwallets,investmentproducts,dailyservicesforlocalamenitiesandmoneytransfers—intoasingleplatform.

Alipay,whichprovidespaymentandescrowservicefortransactions,isaleadingthird-partyonlinepaymentappdevelopedbyAntFinancial.

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• Investmentinfunds

Figure8.AlipayPlatform—SampleUses

Source:Alipaycompanywebsite

Leveragingbigdatatechnology:Alipayhasbeenpenetratingintomanyconsumptionscenariosandtouchpointstogenerateamorecomprehensiveprofileofitscustomers.Giventhehugevolumeoftransactionsitprocesses,AlipaycanfillthegapwhereamaturesystemforassessingconsumercreditriskislackinginChina.ConsumptionpatternscapturedbyAlipaytranslateintoSesameCreditscorestodetermineusers’creditworthiness.

AnimportantroleinNewRetail:Alipaywillplayakeyroleindirectingtrafficfromonlinetoofflineandgainingaccesstouseranalytics.AlipaydemonstrateditsprowessinsupportingphysicalmerchantsduringtheDouble12shoppingfestivalin2016.AlipayalsobuiltARtechnologyintoitsplatformfortheSpringFestival2017.ItdevelopedanewARgame,which,similartothesuccessfulPokémonGogame,alloweduserstohuntandopene-hongbao(digitalredpackets),whichgavethemaccesstoprizes,monetaryrewardsorexclusivecontent.AlipayhasalsobeenintegratedasapaymentoptionatthedepartmentstoresofBailianGroupandIntimeRetail,bothofwhicharestrategicpartnersofAlibaba.

Globalexpansion:Alipayisexpandingoverseasthroughacquisitionsandorganicgrowth.ThegroupacquiredSingapore-basedpaymentservicehelloPayin2017tofacilitateitse-commercebusinessLazadainSouth-EastAsia,andisintheprocessofacquiringUS-basedMoneyGram,theworld’sleadingmoneytransferservice,tofurtherincreaseitspresenceintheUSandinremittance.Thedealisexpectedtocloseinthesecondhalfof2017.AlipayhasexposuretotheChineseoutboundtravelmarketthroughitspartnershipswithoverseasmerchants,suchasHarrods,Selfridges,DFS,Macy’s,Nordstrom,etc.

Partnershipswithforeignbrandsonline:Alipayhasformedpartnershipswithoverseasmerchants,includingfashionandluxurye-commercesites,toserveChineseconsumers.TheePassprogram,establishedbyAlibabain2014,makesiteasierforChineseshopperstobuyforeigngoods,paythroughAlipayandshipusingAlibaba’sgloballogisticsnetwork.

EscrowPayment

BankingAccount

Transckons

Financing&InvestmentLifeServices

• Real-timemoneytransfer

• Foreignexchangetransactions

• MedicalConsultationRegistration

• UtilitiesBillPayment

Alipaywillplayakeyroleindirectingtrafficfromonlinetoofflineandgainingaccesstouseranalytics.

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PeersAlipay’sdomesticpeersinclude:• Tenpay(财富通):Tencent,whosepaymentinfrastructuresupports

WeChatPay,isthesecond-largestplayerafterAlipay.Asattheendof1Q17,Alipayhasa53.7%marketshareandWeChatPayhasa39.5%marketshare.

Source:tenpay.com

• ChinaUnionPay:AmajorbankcardschemeinChina.Itisthethird-largestpaymentnetworkgloballyafterVisaandMasterCard,intermsofvalueoftransactionsprocessed.

Source:cn.unionpay.com

Alipay’soverseaspeersinclude:• ApplePay:Apple’smobilepaymentanddigitalwallet

Source:apple.com/apple-pay

Tenpay,ChinaUnionPayandApplePayarethethreemajorpeersofAlipay.

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MetricsAlipayhas520millionactiveusersandsettled200milliontransactionsdaily,asofMarch2017.In2017,72%ofGMVonAlibaba’sChinaretailmarketplaceswassettledthroughAlipay.

OutlookThefuturegrowthofAlipaywilllikelybedrivenbyoverseasexpansionandcross-industrycollaboration,giventhehighpenetrationofmobilewalletsinChina.Some65%ofallmobileusersinChinausetheirphonesaswallets,thehighestpenetrationglobally,accordingtotheMinistryofIndustryandInformationTechnology.

Overseasexpansion:AlipayaimstoexpanditsglobalpresencetoallowChinesetouriststospendmoneyabroadbyusingAlipaytopayforpurchases.Alipay’soverseaspartnersincludeduty-freeretail,paymentprocessorsandluxurydepartmentstores.AlipaywillplayanimportantroleinAlibaba’sgoaltohelp1millionUSsmallbusinessesentertheChinesemarket.Therearecurrently7,000USbusinessesonAlibaba’splatforms.AlipayraisedUS$4.5billioninApril2016toexpanditsglobalpresencetenfold,bypartneringwith1millionofflinemerchantsoverthenextthreeyears.

Growththroughcross-industrypartnershipsandinvestments:WeexpectAlipaytocontinuetogrowitspaymentsecosystemthroughpartnershipsandinvestmentsincompanieswithwhichithassynergies.

Figure9.Alipay’sPartnershipsandInvestmentActivitiesSince2016

Event Date

PartnershipwithUber March2016

PartnershipwithSamsungPay March2016

InvestmentinMyntinthePhilippines February2017

InvestmentinKakaoPayinKorea February2017

AcquiredhelloPayinSingapore April2017

BidonMoneyGramintheUS April2017Source:FGRT

Regulatorybarriers:Alipaywillinevitablyencounterforeignregulationsasitexpandsoverseas.Theseregulatoryregimesmaybecomplexandrequireextensivetimeandresourcestoensurecompliancewithlocalregulations.

ThefuturegrowthofAlipaywilllikelybedrivenbyoverseasexpansionandcross-industrycollaboration.

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AlibabaCloud—ProviderofCloud-ComputingServicestoBusinessesandEntrepreneurs

Source:cn.aliyun.com

BusinessOverviewAlibabaCloud(AliCloud)isengagedinthedevelopmentofplatformsforcloudcomputinganddatamanagement.AliCloudoffersacompletesuiteofcloudandbig-dataservices,aswellasbusinessessolutionsingaming,e-commerce,IoT,mediaandotherindustries.

Revenuemodel:AliCloudchargesdifferentlevelsofpricingforitsproducts,andthepriceincreaseswiththesizeofthecapacitypackage.Prepaidandpay-as-you-gopaymentmethodsareavailable:prepaidcaterstolong-termusersandpay-as-you-gochargesusersforthefunctionsanddurationofusage,andoffersmoreflexibility.

StrategyandValuePropositionLeaderinthedomesticIaaSmarket:AliCloudistheNo.1publicinfrastructureasaservice(IaaS)providerinChina,withamarketshareofover50%.Thecompanyhascontinuouslymadetechnologicalbreakthroughsinprovidingever-highercomputingcapacity.TheMITTechnologyReviewrecognizedAlibabaGroup’s“Pay-With-Your-Face”systemandreinforcementlearningtechniqueinits2017toptechnologieslist.

Creatingvaluebysupportingotherbusinessunits:AlibabaGroup’svariousbusinessunitsbenefitfromthedevelopmentofitscloud-computingarmAliCloud.AliCloudpowersandincreasestheefficiencyofe-commerce,media,marketingandotheroperations.Forexample,AliCloudhelpedprocesshugesalesvolumesonitsannualshoppingfestivalSingles’Dayin2016,whichrecorded175,000transactionspersecondatitspeak.

Democratizingcloudservicesforstartupecosystemsandpublicservices:AliCloudhasbeenmakingAItechnologymoreaccessibletobusinessesandorganizationsthroughitsmachine-learningplatform.TraditionalbusinessescanmakeuseofAliCloud’sETprogram—includingIndustrialBrain,MedicalBrainandCityBrain—tosolvecomplexproblemsacrossdifferentindustries.AliCloud’sglobalstartupprogram,Create@AlibabaCloud,supportsstartupswithitssuiteofcloud-computinginfrastructureservices.In2017,the

AliCloudisengagedinthedevelopmentofcloudcomputinganddatamanagement.

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programwillbeexpandedtocoverMainlandChinaand12overseasmarketsandregions.

Globalexpansion:ThenumberofAliClouddatacentersgloballyincreasedto14,aftertheopeningoffournewdatacentersin2016—inDubai,Europe,AustraliaandJapan—asastrategicmovetoexpandglobally.ItisplanningtobuildnewdatacentersinMalaysia,IndiaandIndonesiathisyear.Thecompanyhasformedpartnershipswithforeignenterprises,suchasestablishingajointventurewithSoftbankinJapan.Alibabaalsoenteredintoa12-yearpartnershipwiththeInternationalOlympicCommitteetoprovidecloudservicestoOlympicevents,withthegoaltoimprovetheefficiencyoftheOlympicGamesthroughbig-dataanalytics.

PeersIaaSCloud:AlibabaCloudisthelargestcloudinfrastructureservicesproviderinChina,andiscurrentlyrankedfifthintheglobalcloudmarketintermsofcloudsales,accordingtomarketresearchfirmCanalys.

By2020,AlibabaCloudisforecasttotake7.8%oftheglobalpubliccloudmarket,whileAmazonWebServices,MicrosoftAzure,IBMandAlphabetInc(GoogleCloud)areexpectedtoaccountfor69.1%.

Source:azure.microsoft.com

MetricsAliCloudhasover874,000payingcloudcustomers,asofMarch2017,andatotalof2.8millionusers.

Infiscalyear2017,AliCloudgenerated¥6.7billioninrevenues,accountingfor4%ofthegroup’stotalrevenues.

OutlookSeekfurtherdomesticandoverseasgrowth:InordertocompeteeffectivelywithAmazonWebServicesandMicrosoftAzureintheglobalmarket,weexpectAliCloudtocontinuetostrengthenitsglobalexpansionandlocalizationefforts.ItintroducedaprogramcalledAliLaunch,whichencouragesthird-partytechcompaniestosellsoftwarebasedontheAliCloudinfrastructure.Theaimoftheprogramistodiscovermorerevenueopportunities.

Furtherextendcloudcoveragetomoreverticalsandindustries:WeexpectAliCloudtofurtherexpanditscoveragetomoreindustrieswithnewproductssuchasETIndustrial,CityandMedicalBrains.

AlibabaCloudisthelargestcloudinfrastructureservicesproviderinChina,andiscurrentlyrankedfifthintheglobalcloudmarketintermsofcloudsales.

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Alimama—Data-DrivenMarketingTechnologyPlatform

Source:alimama.com

BusinessOverviewLaunchedin2007,AlimamaisaplatformthatprovidesmerchantsandbrandswithonlinemarketingservicesonAlibaba’smarketplacesandthroughthird-partymediaoutlets.

Alimama’svariousmarketingproductsinclude:

• TaobaoAdNetworkandExchange(TANX):Areal-timeonlinemarketingexchangethatautomatesthetransactionofadvertisinginventory.

Source:tanx.com

• Datamanagementplatform(DMF):Aplatformthatallowsmarketerstoidentifytargetedaudiencegroupsthroughbigdatabyimprovingdigitaladvertisingefficiency.

• TaobaoZhitongche(淘宝直通⻋):AmarketingservicethatreturnspersonalizedproductrecommendationsonAlibaba’smarketplaces—Taobao,TmallandJuhuasuan—fromkeywordsearchestoattracttargetedgroups.

Alimamaisadata-drivenplatformthatprovidesmerchantsandbrandswithonlinemarketingservicesonAlibaba’smarketplacesandthroughthird-partymediaoutlets.

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Source:zhitongche.taobao.com

• Diamond(智钻):AmarketingplatformthatdisplayscustomizedbannersandvisualadvertisementsacrossAlibaba’splatforms.Thecoverageofthemarketingplatformreachesover80%oftheentiredomesticonlineshoppingcustomerbase.

Source:zuanshi.taobao.com

Revenuemodel:Alimamamainlyderivesrevenueusingtwomethods:cost-per-thousandimpressions(CPM)andcost-per-click(CPC).

• CPM:Theservicefeeiscalculatedaccordingtothenumberofpeoplethattheadvertisementreaches.

• CPC:MostservicesarechargedonCPCbasis—abusinesspaystheservicefeeaccordingtothenumberoftimesacustomerclickstheadvertisement.

StrategyandValuePropositionHighlyaccuratetargetedadvertisingsupportedbybigdata:AlimamaleveragesthehugevolumeofdatacollectedbyAlibaba’secosystemtoaccuratelydisplaymarketingcontenttoconsumers.Thisincludestransactiondataonitsmarketplaces,paymentdataonAlipay,logisticsdatafromCainiaoNetwork,userbehavioraldatafromitsmediaentertainmentproperties,etc.Alimama’sdata-drivenbrandmarketingproduct,DharmaSword,helpsbrandstobettertargettheirintendedaudiences.

AlimamaleveragesthehugevolumeofdatacollectedthroughAlibaba’secosystemtoaccuratelydisplaymarketingcontenttoconsumers.

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UniMarketingplanforadvertisingacrosschannels:Alibaba’sUniMarketingstrategyhelpsbrands’marketingcontentreachconsumerseffectively.Alimama’sUniMarketingplanusesAlibaba’sbigdataoruserprofilestohelpbrandsreachpotentialbuyersacrossallmarketingchannels.AlimamacooperateswithvideoplatformssuchasYoukuTudou,socialandcommunicationappssuchasWeibo,MomoandDingTalk,Internet-basedservicessuchasUCWebandAutoNavi,andsearchengines.

PeersBaiduPromoteisapay-for-performanceonlinemarketingserviceintroducedbyBaidu.ThemarketingservicehasgainedinpopularityfromthehugetrafficofBaidu,China’sNo.1searchengine.

TencentSocialAdsisTencent’sadvertisingbusinesswhichemploysitsvarioussocialnetworksasmarketingchannels.

JDJZTisJD.com’sdigitalmarketingplatformthatwaslaunchedin2014.Thecompanyalsofeaturesmarketingsolutionsbasedonbigdata.JZTiscollaboratingwithTencenttolaunchaprogramtoprovideanintegratede-commerceandsocialnetworkplatform.

Source:jzt.jd.com

KeymetricsThetotalnumberofAlimamausershasreached600million,asof2016,accordingtoCaixin.

OutlookHigherchannelintegration:Alimama’sfuturestrategywillbepremisedonhelpingbrandswithdigitaladvertisingacrosschannels.UniMarketingwillplayanimportantroleunderNewRetailindeliveringconsumer-centric,data-drivenadvertisingforonlineandofflinemerchants.

Expandthroughpartnerships:Weexpectretailers’demandfordata-drivenadvertisingtoincreaseandthatAlimamawillfurtherexpandthroughpartnerships.

AdvancementofAlimama’sdigitaladvertisingtechnology:Alimamacanoptimizepricingthroughmachinelearningandoptimallymatchsupplyanddemand.

Alimamafuturestrategywillbetohelpbrandswithdigitaladvertisingacrosschannels.

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Appendix

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Alibaba’s25OperationUnits1. NetworkDivision

2. ClientServicesDivision

3. AlimamaAdvertisingDivision

4. ShoppingSearcheTaoDivision

5. TmallDivision

6. LogisticsDivision

7. Liangwuxian(oo.tmall.com)Division

8. OnlineTravelDivision

9. CategoryOperationsDivisions

10. DigitalContentDivision

11. GeneralAdministrativeDivision

12. ConsumerServiceDivision

13. InteractiveDivision

14. MobileStrategyDivision

15. AlibabaInventoryManagement(AliWangwang)andAppsDivision

16. MusicDivision

17. GroupBuying(Juhuasuan.com)Division

18. LocalDealsDivision

19. DigitalPlatformsDivision

20. InformationPlatformDivision

21. AlibabaMobileOS(yunos.com)Division

22. AlibabaCloudComputingDivision

23. B2BChinaDivision

24. B2BInternationalDivision

25. B2CInternationalDivision

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DeborahWeinswig,CPAManagingDirectorFGRTNewYork:917.655.6790HongKong:852.6119.1779China:86.186.1420.3016deborahweinswig@fung1937.comEsmePauAnalystZaneYangResearchAssistantMatthewLeeResearchAssistant

HongKong:2ndFloor,HongKongSpinnersIndustrialBuildingphase1&2800CheungShaWanRoad,KowloonHongKongTel:85223004406London:242-246MaryleboneRoadLondon,NW16JQUnitedKingdomTel:44(0)2076168988NewYork:1359Broadway,18thFloorNewYork,NY10018Tel:6468397017FungGlobalRetailTech.com

alibaba group-from strength to strength august 4 2017 · 3 august 5, 2017 deborah weinswig,...

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