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Alibaba Beats Slowdown In China; Beats Estimates For Sales And Earnings

Alibaba Beats Slowdown In China; Beats Estimates For Sales And Earnings
The slowing down of the Chinese economy was offset by the Chinese tech and e-commerce giant Alibaba Group Holding Ltd in terms of sales and earnings driven by an overhauling of its shopping recommendations.
In the three months ended in March, the company revenues reported was 1.8% more than the estimates at 93.5 billion yuan ($13.6 billion). The company also topped projections for 6.5 yuan for as adjusted earnings-per-share at 8.57 yuan. The company expects at least a 33% jump in sales in the current year to reach over 500 billion yuan.
Even as the company is investing more in diversified businesses such as cloud computing, Alibaba has developed a much better understanding of e-commerce consumers and is generating money from recommendations based on their preferences. Following this strategy, Alibaba has not only been able to generate more sales compared to the traditional search and recommendation strategy, but has also helped it to boost its capacity to sell targeted advertising to advertisers for its primary Taobao platform. In the face of renewed increase trade tensions between the United States and China which threatens to further slowdown the second largest economy of the world, this strategy has helped the company to enhance its revenue growth.  
“The results were really good, especially given how the macro economy hasn’t been that great," said Steven Zhu, an analyst with Pacific Epoch in Shanghai. “It’s a great sign that core e-commerce was growing strong.”
The results helped Alibaba stocks to maintain their position at the New York even as there was a drop in the broader market.
In the year ended March, the company reported an increase of 51% in its revenues to 376.8 billion yuan which was towards the lower end of the spectrum of its forecast of between 375 and 383 billion yuan.
A 54% jump in revenues was posted by the core commerce business of the company at 78.9 billion yuan. On the other hand, there was a 31% increase in the revenues from customer management of Alibaba and this business unit includes services advertising and fees charged to merchants. Zhu said that this figure indicates more merchants are being lured to spend more because of the recommendation-based ad business.
According to an April 18 HSBC report, in April, an ad product known as “super recommendations” was began to be tested by Alibaba’s main shopping app Taobao. This new feature prompts merchants and advertisers to use text, graphics and short videos for marketing activities of their products for a number of new personalized recommendation feeds which includes “guess you like it” which is a product display based on the browsing and purchase history of consumers; the “good stuff here” which is a shopping guide; and live-streaming showrooms.
Alibaba expects that the Chinese market would open up more and hence is pushing forward with its expansion plans even as trade representative from US and China decided to continue with talks.
“As part of the trade negotiations, China will be importing a lot more," Vice Chairman Joseph Tsai told an earnings call. “We are floating into the direction of the tide, rather than going against it.”

Christopher J. Mitchell

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