Alibaba looks to ‘strategic innovations’ at 1688, Xianyu, DingTalk and Quark for growth, as cloud spin-off falls through
- Alibaba has sharpened its focus on a wholesale marketplace, second-hand goods trading platform, office chat app, and search and cloud storage solution
- The four businesses will operate as independent subsidiaries, as they undergo ‘strategic-level innovation’ to drive Alibaba’s AI and global ambitions
Alibaba Group Holding is banking on four new business pillars to drive growth in the coming decade, according to CEO Eddie Wu Yongming, as the Chinese e-commerce giant bolsters its strategy after shocking investors with its decision to shelve the spin-off of its cloud unit.
As part of that shift, Wu highlighted the company’s first batch of businesses that would undergo “strategic-level innovation”. They include online wholesale marketplace 1688, second-hand goods trading platform Xianyu, office collaboration and app development tool DingTalk, and search and cloud storage product Quark.
“The strategic-level-innovation businesses that I have listed above will, in organisational terms, operate as independent subsidiaries and will not be constrained to their previous positioning within the group, enabling them to face the larger market with their own strategies,” Wu said on the call on Thursday.
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Alibaba, which also owns the South China Morning Post, had previously said it planned to turn its cloud business – a promising growth area for the company – into an independent, publicly-listed entity at some point next year.
Among the four businesses played up by Wu, Xianyu saw daily active users jump more than 20 per cent from last year in the September quarter, while Quark’s daily active users were up by over 35 per cent during the same quarter, Alibaba’s financial report showed.
Meanwhile, growth of Alibaba’s core businesses have slowed down. Taobao and Tmall Group, the company’s core e-commerce unit, registered a 4 per cent rise in revenue in the three months ended September 30, while revenue from the Cloud Intelligence Group increased 2 per cent.
The overall results of Alibaba’s recent quarter were “not good”, said Li Chengdong, founder and chief analyst at Beijing-based e-commerce consultancy Dolphin.
“The decline of its core e-commerce business is a problem,” Li said. “Alibaba is facing fierce competition in the domestic e-commerce business from players like Pinduoduo and Douyin because the [web] traffic situation has changed.”
International business and Cainiao Logistics were Alibaba’s bright spots during the quarter.
“Strong growth of these two businesses is expected to continue because of Alibaba’s ongoing investment and innovations in logistics and supply chain solutions, as well as global digitalisation trends,” said Zhu Keli, founding director of the China Institute of New Economy.
“The development prospects of these two businesses will largely determine Alibaba’s future growth potential and market position,” he said.
