Good day, ladies and gentlemen. Thank you for standing by. Welcome to Alibaba Group's September quarter of 2019 results conference call. At this time, all participants are on listen-only mode. After management's prepared remarks, there'll be a Q&A session. I would now like to turn the call over to Rob Lin, Head of Investor Relations of Alibaba Group. Please go ahead.
Hello, everyone, and welcome to Alibaba Group's September quarter 2019 results conference call. With us are Daniel Zhang, Executive Chairman and CEO, Joe Tsai, Executive Vice Chairman, Maggie Wu, Chief Financial Officer. This call is also being webcast from our IR section of the corporate website. A replay of the call will be available on our website later today. Let me quickly cover the safe harbor. Today's discussion will contain forward-looking statements. These forward-looking statements involve inherent risks and uncertainties and may cause actual results to differ materially from our current expectations. For detailed discussions of these risks and uncertainties, please refer to our latest annual report on the Form 20-F and other documents filed with the U.S. SEC.
Any forward-looking statements that we make on this call are based on assumptions as of today, and we do not undertake any obligation to update these statements except as required under applicable law. Please note that certain financial measures that we use on this call, such as adjusted EBITDA, adjusted EBITDA margin, marketplace core commerce adjusted EBITDA, non-GAAP net income, non-GAAP diluted earnings per share or ADS, and free cash flow are expressed on a non-GAAP basis. Our GAAP results and reconciliation of GAAP to non-GAAP measures can be found in our earnings press release. Unless otherwise stated, the growth rate of all data metrics mentioned during this call refers to year-on-year growth versus the same quarter last year. With that, I would now turn the call to Joe.
Thanks, Rob. Thank you all for joining us. In past earnings calls, we have kicked off company management remarks with my overall observations on strategic issues or macro trends. Starting this quarter and going forward, Daniel Zhang, who has assumed our Executive Chairman role, will deliver the overall strategic and macro state of affairs as well as his usual discussion of business operations. I will continue to make myself available for Q&A after our prepared remarks. Daniel, please go ahead.
Thanks, Joe. Hello, everyone, and thank you for joining our earnings call today. In September, Alibaba just celebrated our 20th anniversary. We truly appreciate our shareholders' support in the past years. Today, I'm honored to speak to you in the role of the Executive Chairman of Alibaba Group for the first time. I would like to take this opportunity to share my thoughts about the opportunities and our strategy over the next several years. Our mission has not changed since day one. It is to make it easy to do business anywhere. Today, our consumers, merchants, and partners are entering a new journey in the digital era. We will continue to create value for them by leveraging the power of data technology to make it easy to do business for them anywhere for the decades to come.
We have set a goal for the near term to serve over 1 billion consumers and achieve at least CNY 10 trillion consumption by FY 2024. Geopolitical uncertainties have placed additional pressure to global growth. We believe this is both a challenge and opportunity for the Chinese economy, finding more opportunities in such an uncertain environment is the key to our business and strategy. I would like to point out two long-term developments that are in Alibaba's favor. One is 2C, the other is 2B. In terms of this 2C, we see great potential in domestic consumption as an important driver for Chinese economy. The overall size of consumption keeps growing with increasing penetration of digitalization. Specifically, China retail sales reached around CNY 30 trillion in the first nine months of 2019, growing at 8.2% year-over-year.
This outpaced the overall GDP growth at 6.2%. More importantly, online e-commerce is still the key driver of China consumption, growing faster at 17%. We are growing even faster than the overall online e-commerce sector. Alibaba is the only platform to meet the diverse range of consumers' demands in physical goods, local consumer services, and digital entertainment. As we disclosed on our Investor Day, these three consumer-facing businesses as a whole already served 730 million unique consumers in the Alibaba digital economy. Over the next several years, we will continue to grow our user base and at the same time drive user synergy by enabling merchants to cross-sell products and services in the digital economy. Our New Retail strategy further enlarged our addressable market. We aim to enable the digital transformation of brands and retailers, empowering them with better technology and consumer insights to better serve their customers.
Another secular growth driver is enterprise digitalization. IT spending in China for internet companies amounts to around $80 billion, while the spend for public sectors and the various industries is over $300 billion, according to our estimate. This represents huge opportunity for enterprise-facing business. We leverage Alibaba's cloud computing technology and big data insights to empower the enterprise. The adoption of cloud services in China will be driven by not only the need of lower IT costs, but also by digital transformation of business models and processes. As a digital technology company, we are uniquely positioned to provide businesses with more intelligent and cost-effective cloud services. We call our solutions for enterprises as Alibaba Business Operating System, as we provide not just technology infra services, but rather business-as-a-service solutions. I will turn to the highlights of this quarter. We had another outstanding quarter with excellent business performance.
We enjoyed robust revenue growth of 40%, as we capture significant growth opportunities to reach an increasingly wide group of Chinese consumers. During the quarter, we continued to invest in user experience and technology solutions to create tremendous benefits for our customers. We have delivered solid profit growth for the quarter, benefiting from measures to improve our operating efficiency. For China Retail Marketplaces, our strategy is very clear and unchanged. We want to add value to consumers and sellers through consumer segment, product enrichment, and platform innovations. This strategy has provided us the ability to scale and grow our consumer base. In September 2019, our China Retail Marketplace had 785 million mobile MAUs, a quarterly net increase of 30 million. Our annual active consumers grew 19 million to 693 million. Consumers are the core of Alibaba's digital economy. They want choices that are relevant, and their spending preferences are dynamic.
Today, we are China's only e-commerce platform that offers the broadest and the deepest range of goods and services to Chinese consumers. We will further strengthen our suppliers in branded, imported, direct source, and long-tail products. During the quarter, we see strong user engagement and stickiness as reflected by higher buying frequency and accelerating order growth. We also noticed the spending of our new users from less developed areas, which is about CNY 2,000 in their first year on our platform. This is a result of our diversified and comprehensive product supplies, as well as targeted recommendations to connect the right product with the right consumers. In Alibaba digital economy, we also provide services and entertainment to our 730 million annual active consumers across the platforms.
We see still low penetration for Youku and Local Services users in the digital economy if we compare the overlap of consumers across the platforms. Thus, we see huge opportunity in terms of synergies between these groups. We are identifying and executing new initiatives to convert the users from our China Retail Marketplaces to users of the Local Services and the digital entertainment platforms. We believe these platforms will add tremendous value to the digital economy. Local consumer service segment adds more consumption use cases, introduces more merchants, and creates an on-demand delivery network that benefit more location-based commerce use cases. Digital media and entertainment segment provides a portfolio of quality content that resonates within Chinese consumers, and thereby creating opportunities in digital advertising, memberships, and cross-selling within Alibaba's digital economy. Let's turn to our cross-border and international businesses.
In September, we acquired NetEase import e-commerce platform Kaola. Tmall Global and Kaola platforms have relatively low consumer overlap. We will integrate areas such as technology, procurement, and supply chain to achieve optimization. The Kaola app will continue to operate independently. In Southeast Asia, Lazada is showing solid operational performance with order growth more than doubling for the fourth consecutive quarter. In the case of the Indonesian market, order growth more than tripled. Lazada's key priority is to maintain strong user growth and user engagement in the coming year. Our cloud computing business continues to execute strong growth. Revenue grew 46% year-over-year to CNY 9.3 billion, primarily driven by an increase in average revenue per customer. Alibaba Cloud serves customers from a broad range of industries beyond internet and media. Based on the most recent available data in August, 59% of China A-share listed companies are customers of Alibaba Cloud.
The reason why we are widely recognized by the market is that we have developed proprietary technology and solutions, which makes us different from other players in the China market. To conclude, we have a proven track record of innovation in the past 20 years. In the coming decade, we will continue to innovate with the goal of fulfilling our mission and keep investing for the long term. Now, I turn the call over to Maggie, who will walk you through the details of our financial results.
Thank you, Daniel. Thank you all for joining us. We had another strong quarter. For today's call, I will start by going over financial highlights and end with how we view the coming quarters. Let me go over the financial highlights. In the September quarter 2019, we delivered another strong quarter of user growth, with mobile MAUs reaching 785 million, up 30 million compared to our June quarter. User engagement continues to improve, with mobile DAU growing faster than MAU. In the first six months ended September, the Taobao app DAU growth accelerated as a result of healthy organic traffic growth, effective user targeting, and increasing engagement with interactive and entertainment features. For the September quarter, annual active consumers on our China retail marketplace reached 693 million, which increased by 19 million compared to our June quarter.
The increase in consumer growth reflected our continued penetration in both developed and less developed areas in China, as we launched more effective consumer segmentation initiatives. These initiatives have been well received by consumers, as evidenced by accelerating order growth from higher purchase frequencies. Our total revenue grew 40% year-on-year to CNY 119 billion in the September quarter. Excluding the effects of consolidated acquired businesses, revenue would have grown at 37% year-on-year. Still very strong growth. The increase was mainly driven by robust growth of our China commerce retail business and Alibaba Cloud. We are very pleased to see that our operation is running in a very efficient way. Costs and expenses are very well controlled while our business has been continuously growing fast. Let's turn to our business segments. Our Core Commerce segment continued to be very strong. Core Commerce revenue grew at 40% year-on-year to CNY 101 billion.
The fundamentals of our China retail business continue to be strong. Customer management revenue grew 25% in the quarter, which primarily reflected the increase in the average unit price per click and, to a lesser extent, the volume of paid clicks. Commission revenue increased by 24% year-on-year, primarily due to the growth in Tmall physical goods GMV. China retail others, which is mainly these new retail businesses like Hema, Tmall Import, grew at 125% year-on-year. This quarter we acquired and consolidated Kaola. This is starting from September. For our international retail segment, revenue was CNY 6 billion , which grew at 35% year-on-year. Revenue growth was driven by AliExpress and Lazada's growth. For Lazada, as Daniel has mentioned, it continued to perform well. For the fourth consecutive quarter, it achieved over 100% year-on-year order growth, reflecting strong consumption demand in apparel, accessory, and FMCG categories.
AliExpress revenue growth remains strong due to increased the number of consumers and robust GMV growth. As an update, on October 9th, we completed the formation of a social commerce joint venture in Russia with local partners. In terms of the financial impact, AliExpress businesses in Russia will be deconsolidated next quarter because we own just less than 50% of the JV. For our local consumer services, revenue grew 36% year-on-year to CNY 6.8 billion. The robust revenue growth was primarily driven by strong order volume and increasing user order frequency. We have also been penetrating into new markets in less developed areas with strong growth potential. During the quarter, GMV from less developed areas grew 45%. Local consumer service segment is strategic to Alibaba Group, and we're committed to invest in the business and create long-term value.
We're focused on increasing average spending per consumer, as well as acquiring new users by leveraging assets within the Alibaba digital economy. In the quarter, about 39% of new food delivery customers came from Alipay mobile app. The potential for further penetrating users in Alibaba digital economy is significant, as only 25% of our annual active consumer from our China retail marketplace have used our local consumer services. We're going to continue to take a targeted and systematic approach to investing in this business. Let's look at profitability. In our commerce segment, we continue to generate strong marketplace-based core commerce adjusted EBITDA. Compared to a year ago, we have increased adjusted EBITDA by CNY 10 billion, while the losses in four strategic areas only increased by CNY 1.2 billion.
This reflects our targeted approach to allocate resources in key strategic growth areas, while also systematically optimizing costs and improving efficiency. After incorporating these losses, our core commerce adjusted EBITDA grew strongly at 29% year-on-year to CNY 38.6 billion. Cloud Computing revenue increased by 64% year-on-year to CNY 9.3 billion. This is primarily driven by increase in average revenue per customer. Adjusted EBITDA was a loss of CNY 521 million, reflecting small widening losses versus the same quarter last year because we continue to invest in talent and technology infrastructure. Revenue from Digital Media Entertainment business increased by 23% year-on-year to CNY 7.3 billion. Excluding the consolidation of Alibaba Pictures, revenue would have increased 8% year-over-year. Despite industry rationalization and tighter regulations on content, we continue to enrich our portfolio with original content that appeal to Chinese audiences.
During the quarter, Youku was able to launch popular drama and variety shows with high viewership that resulted in 47% year-on-year growth in average daily subscribers. Adjusted EBITDA for DME was a loss of CNY 2.2 billion, which narrowed year-on-year as we continue to focus on cost efficiency and ROI for content spending. Revenue from innovation initiatives and others increased by 14% year-on-year to CNY 1.2 billion. Adjusted EBITDA for innovation initiatives was a loss of CNY 1.9 billion. The increase in loss was primarily due to our investment in technological research and new business initiatives, such as DingTalk, Tmall, AliGenie, DAMO Academy. Look at the free cash flow and CapEx. Our business continued to show strong profitability and cash flow. As of September 30th, cash equivalents, and short-term investments were CNY 235 billion.
For September quarter, free cash flow was CNY 30.5 billion, which is $4.3 billion, which increased by 90% year-over-year. The increase in free cash flow was due to our robust profitability growth, timing of capital expenditure spending, and less content cost. Let's quickly go over the major items that impact GAAP and non-GAAP net income calculation. GAAP net income during the quarter was CNY 70.7 billion, up 288% year-on-year. The year-over-year increase was primarily due to a one-time gain of CNY 69.2 billion recognized upon the receipt of the 33% equity interest in Ant, partly offset by impairment charges and net losses from changes in fair value relating to certain investments in goodwill. Excluding these gains and losses and certain other items, our non-GAAP net income would have increased by 40% year-on-year. Looking ahead.
Last year this time, Daniel and I spoke about our commitment to deliver robust revenue growth and healthy, sustainable profit growth. We have delivered. In the first six months of fiscal year 2020, our revenue grew 41% that outpaced global technology peers, and at the same time, we achieved 36% adjusted EBITDA growth. We were able to achieve these results by achieving robust growth of active consumers, enhancing user experience, and generating operating efficiencies through synergies within the Alibaba economy. Looking into the second half, we will continue to execute our strategy. Specifically, we will be very focused on three things. Number one, improving user experience, which will result in higher engagement and customer spend. Number two, aggressively reinvesting our discretionary profits in strategic areas to further our competitive advantages. Number three, leveraging the synergies of Alibaba economy to achieve operating efficiencies.
We believe a commitment to invest and deepen our moat will ensure robust revenue growth and deliver healthy profit growth in the long term. Now let's turn to Q&A session. Thank you.
Thank you.
Operator, we're ready.
Yes, thank you. Ladies and gentlemen, we'll now begin the question and answer session. If you wish to ask a question, please press star one on your telephone and wait for your name to be announced. If you wish to cancel your request, please press the pound or hash key. To give more people the opportunity to ask questions, please keep yourselves to no more than one question at a time. Once again, to ask a question, please press star one on your telephone keypads. Your first question comes from the line of Alicia Yap of Citigroup. Please go ahead.
Hi, good evening. Thanks for taking my questions. Congratulations on the strong quarter. My questions is related to the upcoming Singles' Day this year. Does management view this as any big difference than the previous year? For example, in terms of the countries and the platforms that will be participating in the event, and in terms of product category, any specific product that management believes will be a big traction for consumer? It also seems like there will be so many platforms are throwing more discount to consumer this year. Do you think that the consumption demand will be there to absorb the spending and allow all the platforms to win and gain? Any colors on the upcoming events will be helpful. Thank you.
Thanks. This is Daniel. Let me answer this question. I think everybody understand that we are approaching to the 11th Singles' Day. It's the 11/11/11 day. After the past 10 years' efforts, first of all, I think this November 11 has become a consumers' shopping day, and people widely recognize that shopping day, and that's why we have a very organic momentum for the consumers to enjoy that day. People are ready to shop on that day. Basically, this is a habit people form in the last 10 years. The other side of the coin is the supply. After 10 years' efforts, and all the merchants, all the brand companies, retailers, they are actively preparing for this upcoming shopping day, shopping festival. They will provide the best products with the best price and services to the consumers.
Commercial-wise, they view this as more like a commercial Olympic Games, and everybody want to be the champion in their sector. That's why we get the momentum from both demand and the supply side. This year, actually, we have many new and tailor-made products for this Double 11. We even work with many brand companies to tailor-made products exclusive for Double 11, but with limited edition. This is not only a shopping day, but also a marketing day for brand to market their brand and also engage the new customers. In terms of the market, I think not only China, but also our cross-border and international marketplaces, Lazada and AliExpress, all of them will participate this shopping festival. We localize the operations to meet the local demand of the customers.
We do see the synergies in terms of the product supply, because most of the supply from China can be consumed by the people in other markets as well via cross-border export. We apply many new technologies into this Double 11 preparation. So far, we see a very good progress in terms of the warm-up activities. Via the interactive features we created in our mobile Taobao app and other mobile apps in Alibaba ecosystem, so far we have achieved a very good user engagement for this upcoming shopping festival. We are ready for that day, and we will do all we can do to make sure we have another success on that day. Thank you.
Thank you.
Thank you. Our next question comes from the line of Eddie Leung, Bank of America Merrill Lynch. Please go ahead.
Good evening. Thank you for taking my question. I'm curious to hear your thoughts on the competitive environment you see today in the less-developed areas versus a few years ago, when you competed in the tier 1 and 2 cities. At the moment, it seems to us that one similarity is the heavy discounts on certain standardized products. Just wondering how do you compete differently today versus a few years ago? Thank you.
Well, actually, if you look at our customer base today, we have nearly 700 million, I mean, annual active consumers, 693 million annual active consumers as of September in our China retail marketplace. These customers not only come from the top-tier cities, many of them are from low-tier cities. We have wide coverage. I think for today, I think for the new customers on our platform and our advantage is that we have in-depth selections covering all the categories, covering all the price point, price range, which are available for all the customers. In this case, technology play a very important role in terms of matching the right demand with the right supplies.
So far, as I share with you in my script, for the new customers on our platform within one year, we saw very robust growth in ARPU, that's a very good signal for us, to show the power of our platform. I would say, for the newcomers, they may spend a lot of so-called marketing dollars to subsidize the customers, subsidize the merchants. As marketplaces, I always believe that the key thing is generate the sustainable value for both merchants and customers. As a platform, if the buyer sellers, they transact between each other, as a platform, you always subsidize. I don't see this is a sustainable model in the long run. I'm sure all the investors will agree this. From our side, we invest for acquiring new customers as we always do.
That's why we see a very robust user growth, and we add another 30 million MAU in this quarter. We care more about the retention of the customers. Technology will continue to play a very important role to improve the thickness of the users.
Understood. Thank you, Daniel.
Thank you. Our next question comes from the line of Binnie Wong of HSBC. Please go ahead.
Hi, good evening, management. Thank you for taking my question. My question is also on the less-developed market strategy. I recall company disclosed the percentage of new users coming from low end has been over 70% in the past several quarters. I just wonder if there's any update. Also, as we expand it into the lower tier products, how do you see that our Taobao or Tmall merchants are spending on their advertising budget would behave differently? I guess also a quick follow-up on Maggie's comment on that 25% cross-selling on their local consumer services. How do we tap in? What is our strategy to tap into the incremental, the 75% cross-selling from our China retail marketplace into our consumer services? Thank you.
In terms of the lower-tier user add, overall, we're still showing very strong in the user acquisition. After several quarters of strong acquisitions on lower-tier cities, if you look at user coming from lower-tier city as a percentage of total, it come down a little bit. I think overall it's very strong growth. We're not only acquiring users from lower-tier, but on top-tier cities. We also continuously to add consumers. I think one thing that's very important is that it's not only the user growth, but also the ARPU growth is very healthy. One more thing is very important is the retention. As I talked to you during the last day, if you look at our customers' retention, it's very high. Take an example of our high-end customers who spend over CNY 10,000 per annum.
There are over 100 million of them, 130 actually million for this year. When you look at the percentage staying on our platform, it's like 98%. That gives you a sense that we're fast, not only fast-growing, but a more balanced, more healthy growth.
The other question was about cross-selling to the other 75% of the users.
Yeah. I think this is the synergies we are in the process of realizing in the local consumer services. We have integrated consumer marketplaces. Today, 75% of the China AAC active users from the China retail market bases are the users purchasers in local services. We see huge synergies to improve this penetration. That's why we make continuous efforts to integrate our product and technology infrastructure to make the entire platforms in Alibaba digital economy fully integrated. Going forward, we will continue to strengthen our supplies from the local cities, and to have more coverage in the local cities to make sure we have the good supply to the location-based consumers, which we know very clearly about their profile.
Just one other question was the ad spending of these Taobao Tmall merchants in the lower-tier cities, how do you target them?
I think the fundamentals is still user growth and consumer experience. Then, like we said several times in the past that our model is that merchants, they themselves make decisions on how much budget they want to allocate to the platform, and they bid for the price they're willing to pay. If you look at our revenue growth, it's the ultimate proof of the value we've provided to not only the consumers but also the merchants. I think it's not a lower-tier city merchant. Merchants is across the country, right? The brands. I think they have been making decisions to add the budget and increase their spending on platform.
Thank you.
Thank you. My next question is from the line of Grace Chen of Morgan Stanley. Please go ahead.
Thank you for taking my question. My question is about the differences in Alibaba's approaches to capitalize on opportunities in the affluent middle class and urbanization in lower-tier cities. It'd be great if the management can talk about the differences in the consumer behaviors, preferences, in these two segments, and thus your strategies, and also the differences in the competitive landscape in these two segments. If possible, can you use the coming Double 11 promotion as an example to elaborate your strategies, especially in the less developed regions? A follow-up is that the incremental user group have been coming from the less developed areas. What will be the implications on the financial numbers or cost structure with more users now coming from less developed areas? Thank you very much.
Well, I would say, if you look at the users' habits from different tier cities, I think that it's highly relevant to their local lifestyle and their addressable income. I think in the different shopping events, especially like November 11, I think all the people want to get their best products. Maybe some of them, they don't spend in a day-to-day on the brand products. In the shopping festival, because of the good prices and the good products available on the platform, so most of people will try to explore the branded products. At the same time, I think for the day-to-day necessities, for a lot of categories which are not focused, people make shopping decisions, don't focus on brands, so people will care more about the functions and of course, the price advantage.
That's why we strongly believe that technology is so important to reflect this customer needs on a real-time basis. I think that's the important successful factor in both the day-to-day operation and also in the big events like November 11.
Yeah. In terms of the spending from the lower-tier cities and the high-end, I talked about the high-end consumer spending pattern, very strong spending power and high retention. Lower-tier city, we actually observed that the ARPU from the lower-tier city consumers are not as low as people imagine. The spending I think is more tied to the user experience, the consumer experience. Experience also includes they can find whatever they want. We talked about the product supply, different supplies, and we talked about segmentation of the consumption. I think we have addressed very well in our top apps of different demands from different level consumers.
Next question.
Thank you. Our next question is from the line of Zachary Schwartzman of RBC Capital Markets. Please go ahead.
Great. Thank you. Profit growth trends across the business as a whole and on the core marketplace have stabilized or even accelerated, I guess giving you some more flexibility, as you said, in discretionary investing to strengthen your strategic moats. Maggie, can more on expense discipline and operating efficiencies as you expand some of the recently integrated businesses in core commerce. Then just to confirm, was there any change in priority here with your final comments and your prepared remarks for the second half of the year? Thank you.
Yeah. I mentioned that we're going to focus on three key things, right? Improve user experience is always the most important thing, and this will result higher engagement in customer spending. I also talked about reinvesting back to these competitive areas, just like what we did in previous years to expand our B2C market leadership. I think we have been very successful on that round of reinvestment and expand our market share. We're going to continue to do that in the strategic important areas. Number 3, I also talked about the discipline, right? Operating efficiency. I think it's very important because Daniel mentioned this, we don't believe continuous subsidizing or just tremendous spending in the marketing would bring us a sustainable business. We gonna be smart, spend our money, and continuous to focus or emphasize on operating efficiencies.
Also, Zachary, I just want to address the seeming conflict between expense operating efficiency with discipline versus being aggressive and reinvesting our profits into strategic areas that are discretionary. I'll give you an example. In terms of acquiring new users, for example, in lower tier cities, we can now acquire users for the Taobao China retail marketplace. The same user could also potentially be a user for our local service business. We only have to spend the marketing dollars once to acquire that user, to then use our cross-selling with our multiple platforms to further penetrate those users that have not used, for example, local services before. Those synergies create operating efficiencies.
We could be at the same time aggressively investing into the lower tier cities. Okay, next question.
Thank you. Our next question is from the line of Alex Yao of JPMorgan. Please go ahead.
Hi. Thank you, management, for taking my question, and congratulations on a very strong quarter. I would like to follow up with the previous question, specifically regarding Maggie's comment, you guys plan to reinvesting the discretionary profit in second half backing the strategic areas. I think if we take a look at your first half financial results, the financial impact from new initiatives under Core Commerce continue to be narrowing, which leads to very strong profit growth. Shall we think that you will be incrementally more aggressive in those initiatives in the second half, such that the financial show trend in the first half cannot be extrapolating to the second half? Also, can you talk about your priorities across the four initiatives, i.e., local consumption, international logistic, and the New Retail? Thank you.
Sure, Alex. Firstly, I want to highlight again to investors that if you look at our revenue growth and profit growth, those are very strong, right? Way ahead of almost all of our global peers. We do have this luxury, if you recall, to reinvest because strong core and very good management of the business. Talk about second half. In those strategic areas, things like local consumer service, things like globalization, and also the DME, also logistics, we gonna continue to invest. At the same time, if you look at the competitive landscape, right? We've seen competitors have been very aggressive investing in the China retail commerce business, also in the local service businesses. It's not only reactive to competition, but also for our own needs to expand the user base, also to [deep plow ] this user base.
It's a good time for us to reinvest. Profit trend, et cetera, although we don't guide on profitability, I mentioned that we do care about the efficiency of the business and also the profit growth. I think this is a very important measure among our senior management of the business growth. Yeah, I think the prioritization of investment. We missed out on this, our PPT, the investment areas. I would say that these areas are equally important. Not only the Cloud and the C2M, but also the local consumer service and the logistics, new retail, and globalization.
Okay. Next question.
Thank you. Our next question is from the line of Gregory Zhao of Barclays. Please go ahead.
Hi, management. A very strong quarter, and thanks for taking my question. A question to Daniel. As you highlighted during the prepared remark and the investor day, Baba is enhancing the digital economy strategy, and you split the economy into two groups, the two consumer and two business segments. Given the difference between the two business, the nature, I just want to understand more about the execution and how do you coordinate between the two segments, as in globally, we see several successful examples like Amazon, like Microsoft, and how is your strategy different from these peers? Also very quick follow-up on the Singles' Day. We see some delivery companies announced to increase the delivery fee during the Double 11 promotion this year. If you can help us understand what the implication to you and your competitors. Thank you.
I think the first one is a very good question. I think when we said that we're having two flying wheels, a 2C strategy and 2B strategy. I think these two strategies are relevant to different type of businesses, which requires different skill sets and even DNA of the team. That's why we said Alibaba is in digital economy, which have a diversity of the skill sets of people and even the way of working. From a consumer business, as we always said, we encourage young people to take more responsibility to innovate the product features which fit for the needs of the young customers. We always do this bottom up on the innovations. For the enterprise services, and actually, via the past 10 years efforts in Tmall, we've already built a enterprise services model to serve big brand and retailers.
Now we roll this over to more categories, even into cloud services to corporate clients. We've already built a very good team in terms of the cloud services and also to integrate multiple services from Alibaba to one corporate client. We will continue to do so, and we believe to have two flying wheels, a 2C and 2B, but with a good connection and with a good chemistry is the core value of Alibaba, is the core competitive advantage of Alibaba. In terms of the logistic company's performance or pricing strategies in November 11th, so far I don't hear any big pricing policy change from my logistic partners. Actually, we are working very closely with all the logistic partners, and we prepare for a long time to make sure we have the right capacity and the right service available for the upcoming shopping event.
Thank you very much.
Next question.
Thank you. Our next question is from the line of Tina Long of Credit Suisse. Please go ahead.
Hi. Thank you. Thank you very much for taking my question. Congratulations again on the results. I have one quick question on the live streaming. As the format of live streaming gets increasingly popular, can you give us updates on the GMV contribution for this format in first half this year? Also, I want to understand the monetization for this format, especially when the live streaming is native versus those from third-party sites, like Douyin or Kuaishou. Thank you.
Sure. Live streaming, if you look at the GMV size, this is already what we call this new swimming lane that generates over CNY 100 billion GMV per annum. If you look at the merchants who have been using this service, over 50% of them are using live streaming. This is very popular and value-added service to these merchants. In terms of the monetization, we haven't really started. They're very early-stage tests. There are multiple ways we can monetize the service. We'll give you update when we start the formal monetization.
Okay. Thank you.
Next question.
Thank you. Our next question is from the line of Jerry Liu of UBS. Yes, go ahead.
Hi. Thank you for your time. I have two quick ones. One is, at the investor day, we talked about multiple new revenue drivers, whether that's live streaming, the secondhand platform. Just thinking ahead into next year, as we look at these opportunities in addition to the feed. Is the feed still the primary one we're looking to monetize? Are some of these other opportunities also possible as we head into next year? Thank you.
Sure. In terms of growth driver, as I mentioned, happy that you heard that we have so many new business and services that already generate quite big size of business. They are opportunities for us to monetize these business such as Idle Fish, that's the biggest secondhand platform in China, and also like a live streaming platform, also like Tao Factory. If you look into next year, yes, we do have opportunities where, I should say it's possible that we start to monetize because these are substantially big businesses that we can start thinking about that. Monetization on the recommendation fees. I think the way we look at this is that, like we have been always doing, where we tend to rather undermonetize than overmonetize. We already have a test and extended a little bit on the test on monetizing recommendation fees.
Whether we're going to expand it, we'll see and decide later on. Overall, we already have shown 40% year-on-year revenue growth, right? For the past two quarters, and our guidance shows like a 30-ish, which is way ahead of a lot of our global peers. We're going to have a more balanced approach on monetization to look after consumer experience, merchants ROI, as well as our revenue growth.
Thank you.
Thank you.
Next question.
Our next question is from the line of Youssef Squali of SunTrust. Please go ahead.
Excellent. Thank you. I have two quick questions. Can you provide us with an update on the food delivery traction in lower tier cities, maybe number of cities and the competitive intensity there? The kind of a broader question for either Joe or Daniel. We've seen some conflicting data on the Chinese economy recently, NBS, for July and September suggests a slowdown in the economy in general and even online. This morning, there was a new private survey that showed actually manufacturing expanded, I think, in October, much faster than expected. What do you make of it? Generally, how much of a predictor is this of demand for Baba services when, particularly from us looking at this from the outside? Thank you so much.
Let me answer the first question. In the local service food delivery business, we are extending our coverage in the low-tier cities in terms of the local supplies. In the past one year, we've already successfully expanded to many low-tier cities. I think that's not enough. We will continue to do so to strengthen our supply, which we believe very important, in the local service business. We have huge advantage in the consumer side, we can leverage a lot, as we said, in the digital economy in terms of the cross-sell to the consumers in the ecosystem. I think from supply side, we have done a lot, and so far we see it very good, I mean, opportunities and very good trend if we have the right supply in a particular region.
We will continue to do so and have a more strong local supply.
On the other question about sort of whether the total macroeconomic data is a good predictor of Alibaba's performance. Well, I think you have seen that we have just multiple quarters where Alibaba's business outperforms the whole economy, and even outperforms total retail sales. Currently, we're looking at total retail sales growing at around 8%, and yet e-commerce, based on the NBS data, is growing in the high teens, in the latest data that's available. We're outgrowing the entire retail sector as well as the e-commerce sector. I think there's a secular trend. Obviously, e-commerce is taking share away from the traditional retail economy. Alibaba is very much driving that secular trend. Vis-à-vis peers, we're also outgrowing the peers in e-commerce, because now, as Daniel has referred to many times, we are getting synergies from a few areas. Number one, technology.
Being able to match a variety of product supply in different formats. Also different types from standardized products to long-tail products. Our technology will match the right products to the right consumers. That is giving us a leg up vis-a-vis competitors. The other area of synergy is that now we have close to 700 million annual active consumers in our China Retail Marketplace, that we're able to do the cross-selling of additional services like local services and entertainment to our base of close to 700 million active consumers in the China Retail Marketplace. These synergies are now starting to come through, and that's also giving us an advantage over our peers.
Okay. Thank you both.
Thank you. Our last question comes from the line of Piyush Mubayi of Goldman Sachs. Please go ahead.
Thank you for taking my question. Maggie, on the points you made about improving user experience that will result in high engagement and the customer spend factor, can I just ask where you are on user experience in terms of how you're defining that, and where do you want to take it? Second, does that not mean, and I know that Joe talked about the contradiction, assuming contradiction here. What does this mean for the ability for you to control or to bring down your spend, in particular, in the second half? There was a specific word you used there that was aggressively reinvesting. Just wanted to ask why that word aggressively was used. I'm sorry I'm being very picky. Thank you.
That's fine. That's fine, Piyush. In terms of user experience, we have many measures, actually. On the ones for your easy understanding that we've seen user expansion, first of all, it's word of mouth. Besides our marketing activities, there are also word of mouth. More importantly, it's user retention and also user spending, and also user time spent on our platform. Also cross-platform time spending by the users. There are many ways, the other metrics you might be interested is the conversion. Right? It's the how many just users convert into buyers, the buyers convert into the repeated buyers. The loyal customers, where we have 88VIP members on our platform who actually are spending levels very high. This is what we are very happy to see.
In terms of our spending and why we use aggressive. Okay, this is a question, very interesting. I thought about this. If we say we're very disciplined in spending, right? Some people may worry about you might give more room to the competitors, right? They're spending very aggressively, and you're emphasizing on discipline. If we're talking about aggressive spending, then other group of people worry about how this is going to impact your profit margin, et cetera. Actually, this is a game that we play every day. This is a decision we need to make every day. First of all, when you look at our strong profit growth, that gives us the bullets, if you will, to fight. We do have a very strong profit and cash flow to invest.
Secondly, while in the past several quarters, we've seen the efficiency out of our platforms. When you look at the marketing spending as a % of revenue, when you look at [inaudible], when you look at all of these spendings as a total revenue, we have very good control on these spendings, and we measure our eyes at different levels. I think today we still see the potential in so many areas, and we do believe we are the one that have the best position to expand our service across all of these areas in commerce, and to help merchants and consumers. I think we're in a good position to spend. Aggressively, I think we have said that several times. Like in the past year when we invested in our cloud business, we talk about aggressive spending.
When we invest into our B2C business, we also talk about aggressive spending. The key thing is that we spend aggressively, but the return should be ensured. That's our thinking on that.
I think what Maggie means is simply that we can afford to be aggressive when we want to be. There's market conditions may change from quarter to quarter, but we have the luxury. If you look at our quarterly earnings before interest, tax and amortization, the EBITDA measure. This quarter, we're at CNY 45 billion of EBITDA, we're taking about 15% of that number to aggressively invest into the core commerce areas like local services, international, new retail, and logistics. We could be very aggressive, but still just spend 15% of our EBITDA in those core areas. I think we simply mean we've got the luxury to do that.
Right. While some companies spend like 50% of their revenue, right, in the marketing.
Okay. Thank you, everyone. That was the last question. If you have any questions, feel free to reach out to the Alibaba IR team. Thank you.
Thank you. Ladies and gentlemen, that does end the conference for today, and thank you for participating. You now all disconnect.