Good day, ladies and gentlemen. Thank you for standing by, and welcome to Alibaba Group's December Quarter 2018 Results Conference Call. At this time, all participants are in listen only mode. After the company's prepared remarks, there will be a question and answer session. I would now like to turn the call over to Rob Lin, Head of Investor Relations of Alibaba Group. Please go ahead.
Good day and good evening, everyone, and welcome to Alibaba Group's December Quarter 2018 Results Conference Call. With us today are Joe Tsai, Executive Vice Chairman, Daniel Zhang, Chief Executive Officer, 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 that 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 Form 20-F and other documents filed with the SEC.
Any forward-looking statements that we make on this call are based on assumptions as of today. 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, adjusted EBITA, adjusted EBITA margin, Marketplace Core Commerce adjusted EBITA, non-GAAP net income, non-GAAP diluted EPS, and free cash flow, are expressed on a non-GAAP basis. Our GAAP results and reconciliations of GAAP to non-GAAP measures can be found in our earnings press release. Unless otherwise stated, growth rate of all stated metrics mentioned during this call refer to year-on-year growth versus the same quarter last year. With that, I will now turn it over to Joe.
Thank you, Rob. Thank you all for joining us. We had another good quarter with excellent business performance and sound execution against our overall strategy. We live in an environment where external factors seem to drive investor sentiment regarding Alibaba's business. I would like to address three macro issues that may be on your minds. First is how to look at Alibaba in the context of the Chinese economy. Daniel later will offer his insights on the current state of the Chinese economy from the vantage point of Alibaba's business. I want to refresh your memory about three secular developments that I referred to in the last earnings call. One, consumption upgrade by China's 300 million middle-class consumers continues its course. By OECD's projection, the Chinese middle class will grow to 850 million people by 2030.
Two, the healthy balance sheet of Chinese households and the increasing availability of credit will fuel consumption. Three, Alibaba's active role in digitizing the retail sector expands our total addressable market to the entire $5 trillion retail economy in China. The size of the Chinese economy is $13 trillion . In the future, obsessing on the rate of growth is not meaningful because of the law of large numbers. The reality is the absolute dollar amount of new wealth creation in the Chinese economy will be well over $800 billion each year. We have conviction that e-commerce and digitization of retail will continue to grow at a faster rate than the overall economy. While the overall economy grew in single digits, the e-commerce sector GMV grew at 20%-30% over the last several years.
That is because technology innovation and improved productivity are driving sustained growth over a long period of time. The second issue I want to address is the trade war. Concerns about trade tensions might affect sentiment, but Alibaba's exposure to the tangible effects of trade tariffs is small. For our businesses in e-commerce, consumer services, entertainment, and cloud computing, the primary growth driver is not exports, but domestic consumption and corporate transformation. Digitization of the retail sector and the resulting productivity and efficiency gains will accrue to Alibaba with or without a trade war. Alibaba is well positioned to help solve the structural trade deficit issue vis-a-vis the United States. With nearly 700 million Chinese consumers shopping on Taobao and Tmall, we are the platform of choice for American companies and farmers to gain access to the Chinese market. The third issue is regulation.
Recently, investors have asked us about perceived regulatory tightening of internet businesses. Of all the economies in the world, China is at the forefront when it comes to the confluence of rapid technology development and large-scale wealth creation. Our perspective is that China's regulatory landscape should be expected to evolve along with the rapidly changing developments in the new economy. We have witnessed the government becoming more adept at calibrating the interplay between regulation and economic growth. I would like to point to several policy directions that provide assurance to businesses operating in China. First, the government has implemented fiscal policy initiatives that are business-friendly. VAT rates were lowered in 2018 and are expected to be cut further in 2019. The government also introduced lower Social Security contributions, which especially benefited small businesses.
Second, the government raised the threshold for personal income tax exemption, giving lower income groups more to spend.
This is expected to provide a broad-based spending stimulus as lower income groups devote a higher percentage of their disposable income to consumption. Third, in early January, the State Council announced new initiatives to support small enterprises by reducing corporate income tax rates and raising the monthly sales threshold for VAT exemption. With these policies, it's clear to us that the government intends to ignite business confidence and encourage business investment as well as consumer spending. It is also clear to us that the government recognizes the importance of small businesses as the backbone of the economy and job creation. We believe that anything that's good for business confidence, and in particular good for consumers and SMEs, will be good for Alibaba. Now, I turn to Daniel for his remarks.
Thanks, Joe. Hello, everyone, and thank you for joining our earnings call today. During this call today, I will share our observation of the Chinese economy and how our investment in new businesses will support our long-term growth. Based on data from the National Bureau of Statistics, China's GDP growth rate was 6.4% year-on-year in the fourth quarter of 2018, and the full-year growth rate was 6.6%. China's overall retail consumption grew around 8% year-on-year in the fourth quarter. The slowdown of macro may cause concerns in the market. What we see from Alibaba's platforms is that Chinese consumption growth is still strong, driven by a growing base of increasingly affluent young consumers. We saw aspirational Chinese consumers look for enriched shopping experience and high-quality products and services on our platforms.
Our Tmall physical goods GMV grew 29% year-on-year this quarter, while China's overall online physical goods grew 21%. The robust growth was driven by strength in the FMCG, apparel, and home furnishing categories, reflecting strong secular consumption trends. Our Singles' Day shopping festival generated $30.8 billion in GMV, representing a growth rate of 27% year-on-year. During the event, among the hundreds of millions of consumers that made purchases, 46% were born after 1990, and over 40% made purchases from international brands. This young generation of consumers continue to be the main power of consumption growth in China. We saw the ongoing urbanization continue to be the engine of China's economic growth. Over 70% of the increase in our annual active users in this quarter was from Tier 3 and below cities.
From a category perspective, due to cooling off of the real estate market, large ticket categories like white appliances have experienced a slower growth. Due to lack of technology innovation, mobile phones showed softer growth year terms, while categories in consumer staples, apparel, and home furnishing exhibited resilient growth in this quarter. We also observed subcategories like electronic toothbrush and beauty electronic devices grow fast in our platforms, representing Chinese consumers continue to upgrade their lifestyle. We believe as China seeks to generate sustainable, high-quality growth, it has to transform from an export and investment-oriented economy to a consumption-driven economy. It may result in softer near-term economic performance. We believe the consumption power of 1.4 billion Chinese population is the growth engine of Chinese economy in the future. Let's talk about Alibaba. Our core business has been exhibiting robust and sustainable growth.
In December 2018, our China retail marketplace business had 699 million mobile MAUs, representing a quarterly net increase of 33 million. Annual active consumers were 636 million, reflecting successful user acquisition programs such as referrals through the Alipay app, and is an early indicator of transaction activity on our platforms. In October, we fully rolled out the new Taobao interface, which drove effective user engagement and improved traffic operating efficiency in mobile Taobao. We are also proactively working on improving recommendation algorithms and making preparation for future monetization. We have exhibited robust marketplace-based core commerce profitability. As measured by adjusted EBITDA of $7.9 billion, growing 31% year-on-year. This allows us to invest in the strategic areas for the long-term prosperity of Alibaba digital economy. These areas include cloud, logistics, new retail, digital entertainment, local consumer services, and globalization. We started our cloud business nine years ago.
Over the last few years, our cloud business deliver solid top-line growth and establish a leading position in China's nascent cloud market. In November, we made an organization change to appoint Jeff Zhang as President of Alibaba Cloud, adding his responsibility on top of his role as our Chief Technology Officer. We believe under this framework, we can make available much of our data technology used in our own businesses to our enterprise customers to accelerate their digital transformation. We continue to invest in Cainiao to build a logistic infrastructure of commerce. Through digitalizing the entire fulfillment and the delivery process, Cainiao continues to improve consumer experience and lower industry costs. Our new retail business consists of two major directions. Reforming old and creating new, both of which enlarge the addressable market.
On one hand, we continue to make good progress in digitalizing partner retailers and enable their new retail transformation. On the other hand, Hema, our proprietary grocery retail chain, continue to expand its footprint, optimize its existing stores, and introduce new initiatives that improve consumer experience. We continue to expand consumption use cases within the Alibaba digital economy through the investment in digital media and local consumer services. These businesses are critical to drive future customer acquisition and retention with our ecosystem. We will be competitive and at the same time continue to improve our operating efficiency. We are committed to globalizing our business. One of the key regions we will stay focused on in the near term is Southeast Asia, which is the fourth largest region by GDP after U.S., Europe, and China. It has over 650 million in population that are relatively young.
Online shopping penetration is still at low single digits. Leveraging our unrivaled technology and strengthening team management, we believe Lazada will well-positioned to continue to capture shares in this growing market. China's economy is facing some uncertainty, we do see opportunities. The opportunities lie in strong consumption power, emerging disruptive technologies, and innovative business models that drive the next growth phase of digital China. Over the last 10 years, Alibaba has built a broad range of platform businesses, including retail, marketing, financial, logistics, and cloud computing services, enabled by our advanced data technologies. These form the core of the Alibaba Business Operating System, which are important to the digital transformation of our enterprise customers and allow us to become the leading partner of businesses within China and around the world. I turn the call over to Maggie, who will walk you through the details of our financial results.
Thank you, Daniel. Hello, everyone. In the December 2018 quarter, our major financial metrics continued to record strong results. Our total revenue grew 41% to CNY 117 billion. This is actually the first quarter our quarterly revenue surpassed CNY 100 billion. The increase was mainly driven by the robust revenue growth of our China commerce retail business, 1% to CNY 117 billion. This is actually the first quarter our quarterly revenue surpassed CNY 100 billion. The increase was mainly driven by the robust revenue growth of our China commerce retail business, the consolidation of Ele.me, as well as strong revenue growth of Alibaba Cloud. Even stripping out acquired businesses, our revenue growth during the quarter continued to outperform that of almost all global technology peers.
As a percentage of revenue, without the effect of our SBC expenses, all our operating expenses, including product development, sales and marketing, and general and administrative expenses, remained stable year-over-year during the quarter. Excluding the effect of our SBC, cost of revenue as a percentage of total revenue increased by 10 percentage points to 50% this quarter. The increase was primarily due to, first, the consolidation of Ele.me. Second, an increase of the cost of inventory and logistics from our self-operated new retail and direct import businesses. Third, an increase in content spending by Youku on original content, as well as an impairment charge on licensed copyright. Now let's turn to the segments. Core commerce. Our core commerce segment had another strong quarter, with revenue growth of 40% year-over-year. When we look at China commerce retail, the fundamentals of our retail business continued to be solid.
The combined customer management revenue and commission revenue exhibited a healthy growth of 27% year-over-year for the quarter. Customer management revenue grew 28% in the quarter. The growth was primarily the result of increases in volume and paid clicks, driven by higher click-through rate. Of course, these are all backed by the increased user base and enhanced user engagement. We continuously expand this user base and continuously improve our user experience. Commission revenue grew 24% in the quarter. The growth of commission revenue is primarily due to strong growth in Tmall paid physical goods GMV of 29%. The discrepancy of the growth rates between the commission revenue and the Tmall physical goods GMV is primarily due to our adoption of the new accounting requirement, which has the effect of the spreading out recognition of revenue from annual service fees received from Tmall merchants.
Whereas we previously recognized these fees at the end of each calendar year. Others from China commerce retail was up 122% to CNY 11 billion. The rapid growth was primarily driven by contributions from Freshippo, also known as Hema, Tmall Direct Import, and other direct sales businesses. As of the quarter end, there were 109 Hema stores in China, and the retail chain continued to achieve robust same-store sales growth. Revenue from local customer services was CNY 5.2 billion. The growth of daily on-demand orders continued to be strong during the quarter. In December 2018, we combined our on-demand food delivery platform, Ele.me, with our service platform, Koubei, to create a local consumer service business segment. Koubei had a very limited impact on our local consumer service revenue this quarter.
We believe we have a strong management team in our local consumer services to execute our strategy to gain market share. Revenue from our international commerce retail business in the quarter was up 23% year-over-year to CNY 5.8 billion. The increase was primarily due to the consolidation of Trendyol, Turkey's leading e-commerce platform. During the quarter, Lazada strengthened its core marketplace businesses and reduced exposure to direct sales in merchandise categories. This business model shift resulted in accelerating marketplace GMV growth, with direct sales revenue decline during the same period. As a result, the revenue growth of Lazada was slower than prior quarters due to a decrease in revenue generated from our direct sales business, where revenue is recorded on a growth basis, including the cost of inventory.
We believe the shift in model towards capital-like marketplace business will solidify a healthier foundation for scalable growth in the future. Now let's look at the drivers of core commerce profitability. We continue to generate solid market-based core commerce EBITDA that grew 31% to CNY 54 billion during the quarter. This core profit growth was the main driver of our free cash flow for the quarter, which came in at CNY 51.4 billion, which is $7.5 billion . Because of the strong profit and cash flow generated, we're able to invest in four strategic areas, including number one, local consumer service. Number two, Lazada. Three, new retail and Tmall Direct Import. And number four, Cainiao. The losses generated from these investments was CNY 8.2 billion. We have already started to see efficiency gains and greater synergies from these businesses inside the Alibaba digital economy.
We will continue to invest and work towards delivering enhanced financial return from these businesses in the long term. After incorporating the losses from these investments, our core commerce EBITDA grew 20% to CNY 46 billion during the quarter. Cloud computing revenue grew 84% year-over-year to CNY 6.6 billion, primarily driven by increased spending from enterprise customers. Adjusted EBITDA for cloud computing segment was a loss of CNY 274 million, reflecting a - 4% EBITDA margin, improving from -5% from the same quarter last year. Digital media entertainment revenue grew 20% year-over-year to CNY 6.5 billion. The increase is primarily due to an increase in revenue from mobile value-added service provided by UCWeb, such as mobile search and game publishing, and an increase in subscription revenue from Youku. Adjusted EBITDA was a loss of CNY 6 billion.
This loss figure included impairment charges taken on licensed copyrights that did not generate the expected returns following a regular evaluation of programming. The evaluation resulted in CNY 2.8 billion impairment charges during the quarter. During the quarter, we made the necessary changes to management, who we expect to drive more efficient content strategies and synergies with the rest of our business. Revenue from innovation initiatives and others grew 73% year-over-year to CNY 1.3 billion, mainly due to an increase in revenue from Tmall Genie and Amap. Adjusted EBITDA was a loss of CNY 1.6 billion. Now, let me highlight a few financial metrics that impact net income during the quarter. Other income was CNY 387 million, compared to a loss of CNY 348 million in the same quarter last year. The increase in other income was primarily due to a decrease in exchange loss incurred during the quarter.
We did not recognize any profit sharing from Ant Financial during the quarter. Ant Financial continued its strategic investments to acquire new users and capture growth opportunities in the offline payment market. Currently, Alipay and its affiliates have over 1 billion annual active users globally. As of December 31st, 2018, cash equivalents, and short-term investments were CNY 192 billion, $28 billion . The increase in cash is primarily due to free cash flow generated from operations, partially offset by cash used in investments and acquisition activities and share repurchase. We generated robust operating cash flow of CNY 65 billion and free cash flow of CNY 51 billion. Please note that we have deducted content spending when measuring FCF, given that such content spend was capitalized. We're committed to enhance value for our shareholders through share repurchases.
Since September 2018, we have repurchased approximately 10.86 million of our ADRs for a total of approximately $1.57 billion as of yesterday. Looking ahead, as Daniel discussed, the demand of products and services on China Marketplace continue to be solid. Our new Taobao interface is driving effective user engagement and improving traffic operation efficiencies. We are testing the potential monetization of recommendation feeds. We need to ensure improved the merchants' ROI as well as a better user experience. We will update the market of our progress to monetize recommendation feeds at due course. We remain confident about our value proposition to consumers and merchants and will be focused on solid execution. We expect our core profit growth to remain healthy. At the same time, we will continue to invest in strategically important areas to increase our addressable market and capture long-term growth opportunities. Let's now turn to the Q&A.
Hi, operator. We are ready for Q&A.
Thank you. Ladies and gentlemen, we will 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 yourself to no more than one question at a time. Again, it is star one to ask a question. Our first question comes from the line of Grace Chen from Morgan Stanley. Please ask your question.
Thank you. Thank you very much. My question is about investments in various new ventures. I am wondering, as we get into the new fiscal year, how do we rank these initiatives in terms of priorities? These investment including retail, local consumer services, Digital Media and Entertainment, and Lazada. Should we expect the loss from these ventures to be narrowing in the new fiscal year, especially Digital Media and Entertainment, in which we see investment widen substantially in the December quarter? Will there be any potential strategic changes or adjustments? For example, are we investing more aggressively into the industrial Internet segment? Thank you.
Thank you. This is Daniel. Let me answer your question. I think as I said in my script, I think based on the very solid core businesses, we have the flexibility to invest for the future. I think in the new year, we will focus on how to generate these synergies of the new areas we invest. To build a strong connection and synergies with the core business of Alibaba ecosystem. I think for the digital content, for the local consumer services, we view these two areas are the extension of categories of our consumer needs to leverage the 700 million consumer base we have. We believe that we need to provide with them a very comprehensive supplies, ranging from physical goods to content and to local services. We think this is very important for the prosperity of our ecosystem.
Actually, when we're doing this investment, on one hand, we try to make ourself to be competitive in the market. In each of the areas of the new business, you can see that in the market, there are a couple of players. We have to make ourself competitive. On the other hand, we will continue to improve our operating efficiency. We set a lot of disciplines to make sure we can deliver the solid results in each of these areas.
Okay. Next question.
Thank you. Next question comes from the line of Alicia Yap from Citigroup. Please ask your question.
Thank you. Good evening, management. Thanks for taking my questions. I have a question regarding your commission revenue. Regarding the adoption of the new accounting treatment, could you elaborate a bit, what would be the commission revenue growth rate be this quarter, if there were no change of the accounting adoption? Should that translate to higher commission revenue growth than the GMV growth in the next three quarters? Lastly, any update on the timing of the rollout for the new recommended fee monetization? Thank you.
Sure, Alicia. This is Maggie. Your first question regarding the commission revenue growth, if we exclude the impact of just the accounting treatment. The growth would have been just inconsistent with the growth of the GMV. Basically, the mixed commission rate has not been changed that much. For the recommendation fees monetization, as Daniel and I mentioned during the call, we're testing and have been working on this, but there is no exact timetable. We're going to update you at due course. One thing for sure is that by the time we roll out this monetization, we would have a very good balance of the merchants ROI as well as the user experience.
Next question.
Thank you. Our next question comes from the line of Piyush Mubayi from Goldman Sachs. Please ask your question.
I appreciate the opportunity. Thank you. During third quarter, what drove the higher click-through rates, which led to the higher paid clicks and the acceleration in customer management revenue that we saw? Was this on the search side and a function of the evolution of the algorithm, or was it the new Taobao app design that made the difference? If I can sneak a question on feed, I understand that it's an update we can receive from you in due course. A quarter ago, you talked about the fluid macroeconomic conditions. Is it in any way going to be linked to a recovery in the economy? That's my question. Thank you.
Right, Piyush. When you look at the customer management revenue growth, we said that the growth is mainly coming from the growth of the paid clicks, which is driven by the click-through rate growth. It's coming from actually several things, when you look at the active user base being expanded and engagement being enhanced. At the same time, we're optimizing our search, and all of these contribute to the growth of the CTR. For the second question.
The second question is the potential monetization recommendation linked to a recovery of the economy?
No.
Well, actually, we don't tie this monetization process with the economic condition. I think we do have to take care of the merchants ROI. I think if we give them more flexible marketing tools, it's also good for them to do more business and acquire new customers for each of the merchants. Today, as we said, we are actually making preparation from the tech perspective to make sure we can have the right algorithms and right technology, to make sure we have the native ad, the recommendation to ensure the user experiences. At the same time, we can ensure a good return, a good ROI for the advertisers.
Okay, next question.
Thank you, Maggie. Daniel?
Thank you. Next question comes from the line of Eddie Leung from Merrill Lynch. Please ask your question.
Hey. Thank you for taking my question. I have questions on the smaller merchants. Have we seen any differentiation in the business activities between the small sellers and large merchants recently, given the external change in economic conditions? Similar to that, could you share more color with us on the potential impact of e-commerce laws on the smaller merchants? Thank you.
Well, Eddie, I think this is a very good question. I think the very beautiful effect in Taobao marketplaces is every year we generate a lot of new merchants. Actually today, when you look at our ecosystem, in recent years, we do have a lot of new merchants. They are not like a traditional reseller on the platform. I don't think they are the traditional small merchants just in terms of size. Actually, a lot of merchants today, they are doing the live streaming on the platform. They are the key opinion leader, but at the same time, they are good sellers. I think we do encourage the selections of the merchant types, and we also try very hard to provide them with technologies and tools to help them to show their uniqueness to the customers.
I think that's the long-term growth driver, and that's the long-term guarantee of the prosperity of Taobao marketplaces.
Eddie, I wanted to address the potential e-commerce law. In fact, I referred to this in my opening script. The State Council just announced a tax relief for small businesses. The e-commerce law, the fundamental point there is that the SAIC require registration of all the merchants. They created a lot of uncertainty among the merchants about what the effect of registration is, because the concern is that the tax enforcement will be tightened. Now, on the other hand, with this tax relief for SMEs, this basically offsets that concern. Specifically, the tax relief involved two aspects. Number one, the tax exemption threshold for VAT tax has been raised from CNY 30,000 per month to CNY 100,000 per month. In other words, if you're a small business that's doing less than CNY 100,000 per month in sales, you will be exempt from the VAT regime.
The second aspect of the tax relief is corporate tax rate has come down from 25%, that's the normal corporate tax rate in China. For small businesses, it has come down to 5% for the first CNY 1 million in profits, and then 10% for the next, from CNY 1 million to CNY 3 million. Effectively, you're lowering corporate tax rates by a lot. The combination of these two tax relief measures has basically offset the concern about the e-commerce law relating to registering small businesses.
Thank you, Daniel and Joe. Thanks.
Next question.
Thank you. Next question comes from the line of Binnie Wong from HSBC. Please ask your question.
Good evening, management. Thank you for the opportunity to ask the question. I have a question on the improvement in margins and also the investment cycle. We see an improvement in the margin side, especially in your marketplace Core Commerce, which clearly shows strong operating leverage and efficiency. How should we think about the stage of company's investment cycle, especially in terms of can management elaborate more on, is the efficiency coming more on the local customer services or new retail? And also, can you comment on the competitive landscape in our local services, and how our strategy has evolved in respond to competition, say, in terms of tech rates or promotions?
Just very lastly is that, if we look at our longer term, as our ecosystem has been expanding, and we are penetrating into different business segments, how have we been seeing the cross-selling across the different products within our ecosystem to go deeper into customers' pockets? Thank you.
Several questions from Binnie. Let me answer the margin profitability investment one first, then Daniel could answer you on the local service progress and the cross-selling question. When you talk about margin, as we talk throughout all of these quarters, we encourage people to look at the profitability. As well, we're growing into such a big size of business, the absolute dollar of profit is meaningful to the EPS and calculate your returns on capital. Okay. Basically, the substance of that question is how much more we are going to invest and our profit growth. I understand that investors have questions, concerns, or even worried about how much are you guys going to invest in those strategic initiatives? How much more are you going to spend? I want to talk about two things. Number one.
We invest in these strategically important areas by spending money that's generated from our core business, while our other competitors just spend money from what they raised from the investors, from the market. How strong is our core? When you look at our customer management revenue and commission revenue, if you add them together, it gives you like CNY 70 billion in a quarter's time. When you look at the core profit, which we reported CNY 54 billion, right? Mostly are coming from China retail. You can tell the margin if you will, and you can tell the powerfulness of our core. This provides strong support for us to invest in those strategic areas. Number two, when we look at investment, we emphasize a lot on the operating efficiency, investment efficiency. We do have internal measures on each of these investments.
All of these investments are still in the stage, which is early to talk about financial returns, profit. However, they are business progress, which we are very well on track.
In terms of the local services business, later last year, as we said, we merged the Koubei and Ele.me business and formed a new local consumer service company. We strongly believe that by doing this, we can reduce the overlap of the spending in client acquisition and client services. Today, if you look at this food business, actually, for each of the restaurants and the in-store business and the food delivery business are equally important to every single restaurant. Today, by combining these two business, we anticipate a lot of synergies in the new co. I think back to your last question about the cross-selling opportunity, I think this is really our advantage of Alibaba ecosystem. We try very hard to build synergies cross-business, and bring new customers to each of the businesses within Alibaba ecosystem.
Take example, in November 11, not only our China retail platform is the main driver. Actually, all the user interface of Alibaba big family participate. There are around 20 businesses participate. We do a lot of customer engagement through different mobile interfaces, which also bring a lot of new customers not only to our retail business, but also to other businesses like Youku, like mobile browser, like travel, so on and so forth. We will continue to do that. The 700 million active customers is the most important asset in Alibaba ecosystem. We will try to leverage this power and unlock the potential of the consumption.
Okay. Before next question, I would just encourage the analysts to limit to one question for the opportunity for others. Next question.
Thank you. Next question comes from the line of Mark Mahaney from RBC Capital. Please ask your question.
Hi. Thank you. It's Zachary Schwartzman on for Mark. Outside of your market-based core commerce segment, are any of your newer investments in core commerce between local consumer services, international, New Retail, direct import, and logistics growing more quickly from a profitability perspective than you were initially expecting? Can you please provide a ranking here in terms of profitability or loss contribution? Any recent learnings from this quarter from these consolidations. Thank you.
Sure, Mark. We mentioned in our earnings that the investment we made within the core is mainly in these four areas. Ele.me, Lazada, New Retail, and Cainiao. We make this in the order of spending from high to low, or the loss level from high to low.
Next question.
Thanks.
Thank you. Next question comes from the line of Gregory Zhao from Barclays. Please ask your question.
Hi, management. Thanks for taking my question. Based on the guidance you updated the last earning conference call and your first three quarters earnings results. This imply some accelerated total revenue growth in your fiscal 4Q. Would you please help us understand the key acceleration drivers behind? Do you have any updates to the full year guidance? Very quick follow-up, we noticed you already launched some promotions and activities such as a red envelope during the Chinese New Year celebration. Would you please help us to understand how the promotions are compared to last year and what the implication to your user growth and margin? Thank you.
Right. When you look at the revenue growth for the quarter, which is 41% year-on-year, it's a big quarter, and we think this 41% is very strong. When you look at the customer management revenue, which shows acceleration in the growth rate, that's mainly because of the increase in the volume paid clicks driven by higher click-through rate. If you look at the driver for that basically continues to be expanded user base, increased engagement, and also to optimize the search.
I think that today from a business perspective, we try to continue to enhance our leadership position in the market. That's why the new customer acquisition to us is very strategic. That's why so far we focus a lot on these new customer acquisition and retention. As we said in the script, we have done a lot together with Ant Financial, Alipay, to acquire new customers. In terms of the Chinese New Year promotion, I think we are still on the way. Alipay just launched their New Year Eve campaign, and this become a new IP, super IP, in China, and we anticipate a lot of consumers will participate. From AJH perspective, we view this as another booming opportunity to acquire new customers. That's the synergies we have validated, and we will continue to do so.
You also asked about the guidance. We don't have any update on guidance.
Okay, next question.
Thank you. Next question comes from the line of Youssef Squali from SunTrust. Please ask your question.
Excellent. Thank you very much. Good morning. Quick question for Joe, if I could. Talking about the government stimulus, I was just wondering if you can point to or share any proof points in recent past that some of these stimulus work that the government has done so far has actually had a positive impact or the desired impact, how quickly it may have taken shape. One example recently is that in cars and household appliances, it looks like the National Development and Reform Commission told state broadcaster CCTV that the government will be rolling out some measures to boost that. I was just wondering if you can provide any kind of color you may have on that since you guys have talked about how household appliances saw some slowdown. Thank you.
Okay. Well, I think the most recent tax relief for small businesses had just been announced very recently, just a few days ago. The effect of that, obviously we anticipate that to work through, but we haven't seen any actual effect yet at this point. Over the course of the last year, there's also some discussion on the lowering of the VAT rate itself, as well as raising the tax exemption level for personal income tax, which improved the disposable income level, especially the lower income groups. We think that those will all work through. The bigger point here is that the Chinese government is now getting quite sophisticated in terms of targeting the government measures more towards fiscal policy. We've seen in previous cycles that there is an overall sort of pumping of more liquidity into the system, using monetary policy.
In the previous cycles that might have worked at previous sort of debt levels. Currently, we have debt levels in the economy that it's not extremely high, but it's sort of at a fairly high point. The government is turning into fiscal policy to stimulate the economy. We think it's the right thing to do. We think tax cuts is right on point. We anticipate that these various cuts that encourage both individual spending and also on small businesses will work through the economy over time.
Okay. Next question.
Thank you. Next question comes from the line of Alex Yao from JP Morgan. Please ask your question.
Hi, good evening, management. Thank you for taking my question. Can you give us an update on your video content strategy into 2019? How should we think about the P&L impact from the recent Fan Bingbing scandal and the celebrity tax situation? Thank you.
I'll repeat. The question is, our content spending strategy this year, and then how do we view the, I guess there's various scandals among the celebrities. How do we view that in terms of the importance for this business?
We have very consistent and content strategies, and we will closely monitor the effectiveness of these content strategies. So far, as you said, I think the market is quite cooling down, and I think this is good for the market and for the whole content market. The cost of the production, the cost of the actors and actresses actually is reducing. I think this is good for the health growth in the future. We will continue to closely monitor the operating efficiency of the content production and the content distribution.
The key thing is we want to leverage the user base, several hundred million consumer user base we have in the digital media and digital content area.
Okay. Next question.
Thank you. Next question comes from the line of Han Joon Kim from Deutsche Bank. Please ask your question.
Great. Thank you for the chance to ask a question. I wanted to follow up on the digital media business. I think, Daniel, you just mentioned that we have a fairly consistent strategy, but as we integrate this with Alibaba Pictures as well, how do we think about the KPIs for this business? Should we be anticipating that the current level of losses continue or perhaps widen or perhaps narrow? What are the key KPIs that you generally care about?
Sorry. You were breaking off. I believe the KPI that you're looking for this business, right?
Yeah. The key focus of the KPI as the business gets restructured or merged with Alibaba Pictures.
Well, I think we focus on the user growth in our digital content business. Actually, we see quite robust growth of the number of subscribers this quarter in our DME business. I think that's very important that we can distribute the content to the broad-based consumers we have in Alibaba family. Also, we are trying to enhance our users' experiences also to give them multiple consumption categories in all of the physical goods, local services, as well as digital contents.
Yeah. I think just to supplement Daniel, I think because we have a broad ecosystem including commerce and also local services, we don't look at the entertainment business as a standalone business in terms of KPIs. If you are offering good content and that increases retention for our e-commerce business and also increase per-user spend in e-commerce or local services, that is cross-selling, and that improves the KPIs in our other segments. We need to look at those KPIs as a whole. Thanks.
Great. Thank you very much.
Last two questions.
Thank you. Next question comes from the line of Thomas Chong from Credit Suisse. Please ask your question.
Hi. Thanks management for taking my questions. I have a question about our cloud computing business. Given that we have already achieved 50% in terms of the market share, what's our next milestone? Is there any timeline that we can think about the breakeven timing? Thank you.
Actually, we have a very clear cloud strategy, and we are very happy to see the progress we've made. Today we are obviously the market leader in cloud business in China. If you look at the cloud market in China today, we still believe today is in the very early stage. In the digital era, every single business needs to go to cloud. I think when people have a definition of cloud, people talk about various services. Actually, in Alibaba ecosystem, we have already built a very strong cloud infra in terms of IaaS service. In terms of PaaS and in terms of SaaS, we also have a lot of expertise. For example, our middleware and database services are very important, very critical in PaaS.
Our retail technologies, actually, our marketing technologies, our technologies in Ant Finance, and our technologies in Cainiao are also relevant to all the financial institutions and logistics companies. We are trying to share this SaaS-based technology through our Alibaba Cloud into the market. That's why in our recent organization upgrading, we even renamed the BU of cloud into cloud and intelligence. We believe cloud is not only about infrastructure. Cloud is about data technology, data intelligence capability. We want to share this data technology and data intelligence capability into the whole market.
Okay. Operator, last question.
Thank you. Next question comes from the line of Jerry Liu from UBS. Please ask your question.
Hi. Thanks, guys. Appreciate the earlier comments on macro and regulation. Wanted to see if we can get some similar comments on the outlook for the advertising market this year, especially as some of the larger advertisers reset budgets at the beginning of the year. Thanks.
Well, actually, when we look at the advertisement market, actually, we don't view this as a separate market. We view this as a part of our core commerce ecosystem. Today, most of the merchants, most of the brand partners, advertisers on our platform, they don't view us as only a sales platform and neither only a marketing platform. Actually, we are the only platform in the world which people can tie marketing, tie branding into the end sales. How to make this end-to-end value chain from brand building, from awareness into attention, into purchase, and into loyal customer. This AIPL is the customer lifecycle management opportunities we want to offer to our both merchants, brand partners, and advertisers. We continue to strengthen our unique role in this advertisement world. Again, we are not trying to be one of the advertisement platforms to our advertisers.
We try to give them all-in-one ecosystem to help them to generate sustainable growth in the new digital era.
Okay. Thank you everyone for joining. If you have any questions, please contact the IR team at Alibaba. Thank you.
Thank you. This concludes our conference for today. Thank you all for participating. You may all disconnect.