Good day, ladies and gentlemen. Thank you for standing by. Welcome to Alibaba Group's March quarter 2018 and full fiscal year 2018 results conference call. At this time, all participants are in a listen-only mode. After management's prepared remarks, there will 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.
Thank you, operator. Good day, everyone, and welcome to Alibaba Group's March quarter 2018 and full fiscal year 2018 results conference call. With us 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 corporate website. The 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 Form 20-F and other documents filed with the U.S. Securities and Exchange Commission.
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 also note that certain financial measures that we use on the call, such as adjusted EBITDA, adjusted EBITDA margin, adjusted EBITA, adjusted EBITA margin, 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. I will turn the call over to Joe.
Thank you, Rob. Thank you all for joining us. We had an excellent year in fiscal 2018. Overall revenues grew 58% year-over-year. Taobao and Tmall GMV accelerated its growth from the 22% growth last year to 28% growth this year. I want to thank our team for a truly exceptional year. On these great results, I want to highlight a few things that demonstrate the success of our strategy and execution. There are three things worth noting. First, we gain incremental market share and a larger share of the consumer e-commerce wallet despite the law of large numbers. How is that possible? Through technology and consumer insights, we put the right products in front of the right customers at the right time. We also executed tailored strategies in supply chain, product and merchant curation, and logistics for key categories, including apparels, FMCG, home appliances, and consumer electronics.
The combination of our superior technology and operating excellence means that we can continue to achieve substantial growth at scale, conquering the law of large numbers. The second thing worth noting is that our new retail initiatives are substantially growing Alibaba's total addressable market in commerce. In retail, we're anticipating changing consumer behavior and increasing expectations of quality and convenience, whether these consumers shop online or in offline stores. Through our proprietary technology and operational implementation, we're enabling our retail partners to meet and even exceed these consumer expectations and capture incremental sales and operating efficiency. In this process of digitizing the entire retail operation, we are driving a massive transformation of the traditional retail industry. It is fair to say that our e-commerce platform is fast becoming the leading retail infrastructure of China.
With this transformation, China's $5 trillion U.S. in retail sales will be available to Alibaba as our total addressable market. The third thing worth noting is that Alibaba is well-positioned to capture more discretionary spend of Chinese consumers through entertainment and local service offerings beyond e-commerce. Over the past year, we made substantial investments in our digital media and entertainment business. We strengthened our offerings in streaming content and subscription video services for an expanding viewership. We also made a key strategic acquisition to take full control of Ele.me, an online food ordering and delivering business that comes with a comprehensive local fulfillment and delivery network, which will help to power our new retail strategy. The substantial assets in entertainment and local services can leverage our user base of over 550 million annual active consumers in e-commerce.
We're extremely excited by the potential flywheel effects of expanding the wallet share of these 550 million users across our ecosystem, as well as the synergies and consumer insights that can be achieved through a platform built on the Alibaba technology infrastructure. Now, I would turn it over to Daniel for his comments about the quarter.
Thanks, Joe. Hello, everyone, and thank you for joining our earnings call today. We delivered another outstanding quarter and fiscal year. Today, our business is stronger than ever because of our focus on delivering unique value propositions to our customers. Over the past year, we achieved many important milestones across our entire businesses. We enjoyed exceptional revenue growth in our core commerce business while successfully activating new synergies between platforms and setting up solid foundations for the next stage of growth in strategic areas such as new retail and globalization. We were guided and will continue to be guided by a long-term, forward-looking approach to investing in new user acquisition, new technology, and the creation of new retail experiences. As we have said from day one, we work for today, invest for tomorrow, and incubate for the future.
Taobao continued to be the leading consumer media platform and the starting point of any retail journey for Chinese consumers. We achieved consistently higher user engagements due to AI enhancements that delivered greater precision and relevance in user experiences, both in merchandise selection and in the mix of digital contents. Mobile MAUs on our China retail marketplaces reached a total of 617 million, which grew by 22% year-over-year. Our successful new user acquisition campaign during Chinese New Year, which culminated during the annual televised CCTV Spring Festival Gala, contributed a net increase of 37 million annual active consumers this past quarter, largely from tier 3, tier 4 cities and rural areas. This was the largest user net add over the course of the last 13 quarters. Tmall continued to experience robust growth across all categories and expand its market leadership.
Physical goods GMV grew 40% year-over-year in this past quarter, mainly driven by accelerated growth in fashion and FMCG categories, as well as robust demand in consumer electronics. Many brands launched on Tmall this quarter, including H&M, YSL Beauty, and Valentino. Over the past year, Tmall has been able to solidify the growth market share through its unique value proposition to brands and reach new customers, and to retain and serve existing customers online, offline. Market leadership and user share gains continue to be our priority for Tmall, and we will continue to invest in our business. Over the past year, we made excellent progress in our new retail strategy through both fostering in-house innovations and investing in opportunities ripe for change. During this past quarter, we expanded into two new cities in China and added 13 new Hema stores, bringing the total store locations to 37.
On average, more than 50% of orders processed by Hema stores were placed online for home delivery. We began to leverage proprietary in-store technologies and the digitalized supply chain system incubated at Hema for deployment in select Sun Art Retail properties across China. Our acquisition of Ele.me will extend our service offerings to include on-demand food delivery. This is strategically valuable for strengthening user stickiness on our platform as well as our last-mile delivery network range and penetration. Our investment in Easyhome is an entry point to redefine the home improvement shopping experiences to meet the needs of the rising population of middle-class homeowners in China. We made great strides in our globalization strategy. Revenue for our international retail business increased by 94% year-over-year.
Our cross-border import business, Tmall Global, enjoyed a 113% year-over-year growth in GMV this past quarter, driven by top-selling categories of beauty, baby and maternity, and health supplements. To further accelerate Lazada's development and market share growth, we successfully integrated our entire technology platform across the six markets into the main Alibaba infrastructure, and we will invest an additional RMB 2 billion into the business. Our deep long-term commitment to Lazada and the Southeast Asia market was further demonstrated by the appointment of Lucy Peng, Alibaba co-founder and partner, as chief executive in addition to her role as chairwoman. Over this past fiscal year, Cainiao made solid progress in expanding delivery network and improving industry-wide operational efficiency and service quality through digitization. More than 90% of all delivery orders generated on our China retail marketplaces now use e-waybills pioneered by Cainiao.
Additionally, more than 70 logistics partners use Cainiao's logistics cloud service to improve efficiencies of collection and delivery services through data technology. Next day delivery service coverage expanded to 211 cities and nearly 1,500 counties. For cross-border service, successful system integration with all key ports of entry and exit in China ensures customs clearance are now processed in seconds. Door-to-door scan delivery between major global destinations is no more than 10 days. Our cloud computing business continued its rapid growth over the past year. Alibaba Cloud is a market leader for Infrastructure-as-a-Service in China. Revenue grew 103% year-over-year this past quarter, driven by the growth of paying customers and the subscription of higher value-added products.
Our acquisition of C-SKY Microsystems, a leading Chinese supplier of embedded CPU cores, together with our previous investment into this sector, will solidify in-house chip capabilities that will be integral to our cloud-based IoT business strategy. We continue to introduce new product and service, and features, including a perpetual edge computing software that enables the development of IoT ecosystems. We opened a new data center in Indonesia, raising our global presence to a total of 18 countries and regions. Our digital media and entertainment business continued to gain momentum. Subscribers on Youku grew over 160% year-over-year this past quarter, as we continue to gain consumers' mind share through acquisitions and developments of quality licensed and original content, such as hit reality show, "Street Dance of China." I also want to provide an update on our innovation initiatives.
AutoNavi is now the largest provider of mobile digital map, navigation, and real-time traffic information in China, with approximately 16 million daily active users. Its digital map platform also serves as an infrastructure for many major mobile apps in a wide variety of sectors such as food delivery and rideshare. Our voice control assistant, Tmall Genie, positioned as a centerpiece in homes to serve the needs of day-to-day family life, has sold more than two million units. The latest operating platform upgrade for Tmall Genie is equipped with visual recognition capability, in addition to Chinese voice recognition. As we surpass a new milestone with a total GMV of $768 billion for this past fiscal year, I remain confident that we are on track to reach our goal of $1 trillion GMV by fiscal 2020.
Looking forward, we will continue to invest in new user acquisition and expand consumer wallet share through category expansions of physical products, digital content, and local services. We will continue to invest and further expand the considerable gains we have achieved in B2C market leadership this past year. China's commitment to import $8 trillion worth of goods in the next few years is a significant opportunity for our platform. We will work with producers and merchants to bring the best products from around the world directly to consumers in China. We will continue to scale new retail formats that we have been incubating, such as Hema. We will work closely with committed partners to transform and upgrade traditional retail formats, ensuring that they enjoy first-mover advantage in the changing environment.
As our customers digitalize their business, we will provide comprehensive solutions to address their evolving needs across commerce, marketing, cloud computing, and more. Cainiao will continue to focus on building a global digital logistic infrastructure and accelerate the development of smart delivery solutions to address the evolving needs of New Retail. Last but not least, we will continue to invest aggressively in new innovative initiatives for the future. Now, I turn the call over to Maggie, who will walk you through the details of our financial results.
Thank you, Daniel. Hello, everyone. We delivered another strong quarter and one of the strongest annual results since our IPO. In March 2018 quarter, major operating and financial metrics continued to record very strong results. Total revenue grew 61% year-over-year to RMB 62 billion. Revenue from core commerce grew 62% year-over-year. Mobile MAU, our China retail marketplaces reached 617 million in March, an increase of 37 million over December quarter. Annual active consumers on our China retail marketplace reached 562 million. The net increase of 37 million from the 12-month period ended December 2017 represents the largest net add in the last 13 quarters. Revenue from cloud computing increased 103% year-over-year to RMB 4.4 billion. Core commerce EBITDA margin was 43%, excluding investments in New Retail, investment in Lazada and Cainiao, core commerce EBITDA margin would have been similar to the previous years.
Our non-GAAP free cash flow was RMB 8.6 billion for the quarter compared to RMB 8 billion in the same quarter of last year. When we look at the quarterly revenue. For the quarter, total revenue grew 61% year-on-year. This was led by robust growth in our China commerce retail business, Alibaba Cloud, and the international commerce retail business. The consolidation of Cainiao and Intime also resulted in greater revenue. If you take out the revenue growth coming from consolidation of Cainiao, our revenue would still have grown over 50% year-over-year. Cost of revenue, excluding SBC, was RMB 30.8 billion. Excluding the effects of SBC, cost of revenue as a percentage of revenue increased from 37% in the quarter ended March last year to 50% in quarter ended this March quarter.
The increase is primarily due to the cost of inventory in our New Retail businesses and Lazada, as well as investment in Cainiao and our spending in growing user base and improving user experience. Sales and marketing expenses exclude SBC, were RMB 7 billion in the quarter. Without the effect of SBC, sales and marketing expenses percentage of revenue would have increased from 10% in quarter ended March last year to 11% this quarter, primarily due to an increase in our discretionary advertising and promotional spending for user acquisition that led to a significant increase in annual active buyer and MAU during the quarter. As a percentage of revenue, without the effect of SBC, all other major operating expenses remained stable year-on-year. Let's take a look at the net income. Non-GAAP net income in the quarter was RMB 14 billion, an increase of 35% year-on-year.
Reconciliation of non-GAAP measures to comparable GAAP measures can be found in our press release. By looking at this quarter's net income, GAAP net income, it shows a decrease of 33%. This is primarily due to non-recurring disposal gain from sales of certain investment last March quarter. If you take that out, the net income going to show a growth of around 27%, I think. Free cash flow. In March quarter, we generated RMB 8.6 billion in free cash flow compared to RMB 8 billion last year. As of March, cash equivalents, and short-term investments were RMB 205 billion compared to RMB 220 billion as of December last year. This decrease during the quarter was primarily due to cash used in investing activities, including investments in Wanda Cinemas, Easyhome, and cash used to acquire additional shares of Intime, partly offset by free cash flow generated from operations.
Capital expenditures in this quarter were RMB 7 billion, in which about RMB 1.5 billion related to the acquisition of [Lan 易 瑞 滋] and construction progress. Let's turn to the segment report. Core commerce segment had another strong quarter with revenue growth of 62% year-on-year. The robust performance was mainly driven by the China commerce retail business that grew 56% year-on-year and represents 78% of the segment revenue. Let's look at the key components of China commerce retail business. Customer management revenue grew by 35% year-over-year, driven largely by further increase in average unit price per click, and to a lesser extent, the volume of click. Increasing price per click reflects our ability to deliver highly relevant paid search to consumers through personalization technology, which drove increased conversion. We're seeing higher average spending per merchant on our customer management services.
The 35% growth rate of customer management revenue in March quarter also reflects a normalized growth trend as we take a measured approach to monetize. We continue to have multiple monetization levers that support our customer management revenue, including implementation, technology improvements, as well as ad load and inventory increases. Commission revenue grew by 39% year-over-year, primarily due to a strong 40% year-over-year growth in the physical goods GMV on Tmall. Other revenue was RMB 5.8 billion, up over 1,000% year-over-year, and represents the fast growth of our new retail business, which includes Hema, Tmall Import, and Intime. Our core marketplace adjusted EBITDA margin was 43% this quarter as compared to 59% in the same quarter last year. Excluding the gross revenue accounts effect of new retail, Lazada, Cainiao, adjusted core commerce EBITDA margin was similar to that of previous years. Cloud computing grew 103% year-on-year.
This is primarily driven by an increase in number of paying customers and increase in their usage of our cloud services. Digital media entertainment segment shows a revenue of RMB 5.3 billion, an increase of 34% year-on-year. This increase was mainly driven by increase in subscription revenue from Youku Tudou and mobile value-added service revenue from UCWeb. Youku's daily average subscriber maintains strong momentum, with over 160% year-over-year growth, driven by successful launch of several hit reality TV shows and dramas. Adjusted EBITDA margin of the digital media entertainment segment was -49% this quarter, compared to -44% the same period last year. It was mainly due to the increase in content costs of Youku Tudou. Revenue from innovation initiatives and other segments was RMB 988 million in this quarter. Adjusted EBITDA margin of this segment was -87%, primarily due to the investment in these new business initiatives.
Let's take a look at the full year financial highlights. The total revenue growing 58% year-over-year to 250 billion RMB, exceeding our original guidance in a big time. Even excluding the consolidation of Cainiao, organic revenue growth still remains strong growth at over 50% year-over-year growth, which is still much higher than the original guidance that I gave last June. The strong revenue growth is driven by robust growth of our core commerce segment and another year of triple-digit revenue growth of Alibaba Cloud as it continues to drive market leadership. The core commerce delivered one of the strongest years since IPO with overall revenue growth of 60%, and GMV transacted our China retail marketplace in fiscal 2018 was about 4.8 trillion RMB, an increase of 28% year-over-year. By the way, this GMV doesn't include the GMV from our new retail yet.
Going forward, we will report new retail GMV on annual basis as well. The growth acceleration reflects Tmall's continued expansion in B2C market leadership with Tmall physical goods GMV growth growing at 45% year-over-year during the fiscal year. This number, by the way, is a lot higher than our competitors. Annual active consumers in China reached 562 million, and we talked about that strong growth. Does the MAU growth. Our cloud computing business has doubled its revenue and has shown an annual revenue of 13.4 billion RMB. Our business has shown strong profitability and cash flow generation ability. For fiscal 2018, we generated 99 billion RMB, which is $16 billion in free cash flow, compared to 69 billion RMB in fiscal 2017. Today, now let's take a look at the margin.
I know a lot of people have question on margin and how we look at the margin. If we step back and look at core commerce on pure like to like basis year-over-year, we would have enjoyed improved margin of core commerce EBITDA margin. When you look at this table, if we exclude new strategic initiatives, new retail, Cainiao, Lazada, adjusted core commerce EBITDA margin would have been 63% versus 62% for fiscal 2017, reflecting operating leverage. This 63% margin already reflects a year-over-year step-up in investment within preexisting China retail marketplace business, i.e., our spending on user experience, B2C market leadership expansion. This investment has led to faster user growth and greater market leadership gain for China marketplace.
The development of new retail business will have different financial and margin impacts to core commerce over the next several years because parts of our new retail revenues are accounted for on growth basis where we operate, own, and sell inventory directly. By the way, please note that this is not same as a traditional buy and sell first-party business because the reason we're doing this is to figure out the ways to improve the efficiency of the whole retail value chain for the restructure and transition of this retail field. Later on, we're going to use this methodology to enable user technology to enable the offline retailers to reform their business. This is our create new and reform old new retail strategy. We expect new retail to become a more meaningful revenue contributor to the core commerce over long term.
When you look at the increasing mix of new retail revenue, this will structurally change the margin profile of core commerce segment. However, we believe new retail will have a more meaningful profit contribution to core commerce. Sustainable profit growth. Instead of a blended margin rate, which is not meaningfully understanding the true profitability of our business, we're focusing on growing our business and absolute profit, which we think investors should focus on as well. Back in fiscal year 2014 to 2016, even during a period of investments, we were still able to deliver strong and healthy EBIT growth of over 40% in the past two years. We had gone through a period of investment to expand our mobile strategy in 2015 and 2016 fiscal that had proven to be very successful.
Our further investments in technology and content for the ecosystem over the last several years continue to improve monetization and added significant value to our customers and users. To our profit growth. Looking ahead, we continue to be very excited about Alibaba's growth prospects. We expect revenue growth for fiscal year 2019 to be over 60% year-over-year, excluding the consolidation of Ele.me and Cainiao Network, because Cainiao, we only had half-year revenue last year. We expect revenue growth for fiscal 2019 to be over 60%. We have shown a track record of delivering robust profit growth by identifying new growth opportunities that is supported by solid execution. We will continue to invest our operating free cash flow to generate long-term sustainable profit growth. That concludes our prepared remarks. Operator, we're ready to begin the Q&A session. Thank you.
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 yourselves to no more than one question at a time. Again, it's star one on your telephone and wait for your name to be announced. Your first question comes from the line of Eddie Leung from Merrill Lynch. Go ahead, please ask your question.
Good evening. I have a question on new retail. Could you give us some insights on how the operating and financial metrics of some of your more mature Hema stores are comparing with the best-in-class offline retailers in the same category? Thanks.
Thanks, Eddie. Let me add more color on the Hema store operation and your question about new retail. Actually, when we planned the Hema model and what we want to achieve there is that we want to build a new retail format which can have more efficient operation for food and fresh products and FMCG products. Today, what we have seen is that, as I said in my script, that we generated 50% of the orders in Hema store and which are from mobile users and the products are fulfilled by Hema store and delivered to their home, which means, by this way, we extend the Hema coverage of the customers and improve the store operating efficiency. Because as you can imagine, the fixed operating cost for a store remain stable.
While if we can have extra coverage to the consumers, not only in the store but also nearby, we can generate orders via this mobile reach, this essentially help us to improve the operating efficiency and improve the productivity of the stores, which we strongly believe is very good for the retail business. The second thing is about the delivery cost. Actually, today, when we build our Hema model, what we want to achieve is that we want to upgrade the e-commerce logistics from a hub and spoke model to a more integrated offline, online integrated logistics and fulfill model. Today, when we generate the orders from online and people expect an on-demand delivery to home.
Why we can achieve that, and when people may know that we can achieve that even within 30 minutes, is because we can fulfill by the nearest store, and people can get their product as they expected on demand. I think that's the other advantage of this new retail format. Thank you.
Got that. Thank you.
Operator, next question.
Your next question comes from the line of Grace Chen from Morgan Stanley. Go ahead, please ask your question.
Yeah. Thank you. Thank you for taking my question. My question is about the drivers for strong growth in revenue in the coming fiscal year 2019. In the beginning of fiscal 2018, I remember that the management made it clear that Alibaba will focus on market share gains and reacceleration of GMV growth. The result was great because we see Tmall deliver very strong growth in GMV. We also see reacceleration in user growth. At the same time, we also spend more to improve user experience. As we enter fiscal 2019, I'm wondering whether market share gains will continue to be on top of your priority, so we will continue to see you guys spend more aggressively. Thank you.
Okay. Grace, thank you for the question. We guided over 60% year-on-year revenue growth for fiscal 2019. That strong growth is going to come in from pretty much all the businesses, mainly our core commerce, and AliCloud. Of course, we're going to continue investing to expand our B2C market leadership. At the same time, our strategic initiatives will also drive the growth. The people might ask about the 50% seems to be very high. You have newly added businesses. That wouldn't be apple to apple. That's why we gave a 50% year-on-year growth if you take out Ele.me and partially Cainiao, since Cainiao was only consolidated half year last year. Then for new retail initiatives, that also contributes to the revenue growth. However, if you look at the China retail revenue, that new retail only accounts for somewhere about 10% of the total.
The main revenue growth is going to still be coming from our core of core China retail commerce.
Hey, Grace, this is Joe Tsai. Your second question about whether market share gains will be a priority. I think with our New Retail initiatives, the definition of the market has expanded into RMB 5 trillion of retail sales in China, that's our total addressable market. Of course, we would prefer to see this as a further market penetration on a much bigger TAM. Having said that, we're going to be extremely competitive when it comes to competition and your traditional sort of perspective on market share gains.
Operator, next question.
Your next question comes from the line of Alicia Yap from Citigroup. Go ahead, please ask your question.
Hi. Good evening, management. Thanks for taking my questions. I wanted to ask in terms of can you remind us how much you have budgeted to spend on the various investments? For example, the amount or the percentage on the user experience improvement, your user acquisition, your globalizations, your New Retail, and even for the digital content as well as the China logistic. In addition to that, from the consolidations of Ele.me, how much should we be expecting that you're going to invest to spend further on the Ele.me? Any color that you could give us in terms of the rough dollar amount or the percentage would be helpful.
Sorry, Alicia.
Yep.
Your phone is breaking up. Maybe you can restate your questions more clearly and limit it to just one question.
Yeah. Hi. Can you hear me okay now?
Yes.
Okay. Yeah. I think my question is regarding the budget. If you can give us some color in terms of the areas of the investment that you guys will be planning for fiscal 2019 in areas that you have been talking about, which is the user acquisition, globalizations, and all these new retail, and also Ele.me. That would be helpful.
Right. Alicia, I think you're asking about our spending in 2019. First of all, let's take a look at the spending in 2018, where we talked about new initiatives and what we still have operating leverage in the core of core. When you look at our slides where it shows the margin analysis, we had 62% margin last year, and for the core of core, it shows 62%. Our investment is 10 percentage point on these new initiatives. Regarding the spending in 2019, I think we're going to continue to invest in these areas because these are strategic important business areas that it won't just last one year investment. New retail, Cainiao, Lazada, Ele.me, we're going to continue to expand the business by investing. How much? That's a question basically talking about margin.
Again, like I said, our focus is to expand the business and put the absolute profit growth rather than looking at the margin. Having this new retail kicked in and becoming more important, our margin structure may shift. However, the profit growth, we expect to be sustainable and healthy in the longer term.
Okay, great. Thank you.
Operator, next question.
Your next question comes from the line of Gregory Zhao from Barclays. Go ahead, please ask your question.
Hi, management. Thanks for taking my question. Congratulations on a strong quarter and strong guidance. I have a quick question on the advertising business side. The personalization algo, I think, substantially dropped your advertising revenue growth last year. Would you please give us an update of your recent progress or development of your customer management and your advertising and the marketing business? What kind of new algo or some new advertising format, like newsfeed ad, you may launch this year to utilize your user traffic or ad inventories, and especially considering the high comp of your customer management revenue growth in fiscal 2018. Could you share some outlook and growth plan of your advertising and customer management revenue growth for this year? Thank you.
Sure. For the customer management revenue growth, you've seen as for the last fiscal year, the first two quarters shows very high growth rate that we talked about, mainly driven by the algorithm changes. Now that change reached its anniversary. In March quarter, we had several initiatives to improve merchant ROI. For example, we talked about Chuxing, right? Where consumer can enter into the stores without click on product listing. This is kind of a giving back returns to merchants. This could lead to less clicks, but at the same time, could help on GMV. When the customer management revenue growth may slow down a little bit, commission revenue could go faster. People should look at our overall revenue growth rather than just one line of the revenue growth.
For future customer management revenue growth, we are confident about our value proposition to merchants, given the data technology and efforts in user experience and merchants ROI. We do have reserves, technology reserves in the pipeline that we're going to update you later on our due course. Thank you.
Thank you very much.
Next question, please.
Next question comes from the line of Piyush Mubayi from Goldman Sachs. Go ahead, please ask your question.
Thank you for taking my question. Congratulations on your guidance, Maggie. It's very strong. I had a question on CDRs, if you could comment on CDR, any plans there. Also, if you could comment on the growth you've seen in Ant as the quarter ended, if possible, now that it's a 33%-owned entity, and if you could confirm that too. Thank you.
Piyush, you're asking for CDR progress, right?
Yes.
I can share with you that we are actively exploring possibilities of a CDR listing in China in all aspects. Right now, we don't have any timetable or details to talk about, but we'll update you later on.
Is there anything you can share with us in terms of the process that it entails?
Yeah, like I said, I think that we're very actively exploring the possibilities and how to implement that return to China project.
Thank you.
Piyush, your question on the Ant Financial. We have not closed on the conversion of our equity stake into Ant Financial yet. We are currently not going to give guidance on the growth of that business. Having said that, just qualitatively speaking, we've seen a very robust acquisition of users and also engagement of the users specifically on the Alipay wallet platform over the last two quarters. Ant has been very aggressive extending into not just the online payments, but also offline, using a mobile device offline in offline establishments. We're very encouraged by those developments.
Maybe just adding to the CDR discussion. Right now, there is basically no detailed rules coming out, rules and regulations. The only thing came out is the end of March, State Council had the CDR guidelines. I can share on the principle of this CDR thing is that we would only come back if this is going to help our business development and expansion of our business and consumers. The other thing is that we're going to make sure that our investor interests get protected. Thank you.
Thank you.
Next question.
Your next question comes from the line of Alex Yao from J.P. Morgan. Please ask your question.
Hi, good morning and good evening, everyone. Congrats for a strong quarter and a very strong revenue guidance for FY 2019. I have a question on Southeast Asia growth strategy. Apparently, this is early stage market with a low e-commerce penetration, and already some local competitors in the space. What does it take to be the winner in this market on a three to five years view? What incremental resource you need to put in to make that happen? Thank you.
Yeah. As you said, actually, the Southeast Asia market today is in a very early stage in e-commerce growth. We have very strong commitment in this market. As we shared in this earnings, and we accomplished the technology re-platform, and basically we upgrade Lazada's platform with Alibaba infrastructure. We also send not only Lucy as CEO and Chairwoman of Lazada, but also we send our best people in Alibaba who have tremendous operating experience and technologies to Southeast Asia market. What we expect is that, again, this is all about to build a new ecosystem in a new market and to build the infrastructure, for example, the payment infrastructure, logistics infrastructure, and the partnership in this market. We are forward-looking, and we will remain confident to grow, to achieve the high growth in the market in the future.
We are also very committed to invest and continue our investment in this market.
Maybe Daniel, I'll just add a little bit more color on the Southeast Asia. I think if you look at specifically, you looked at one of the largest markets like Indonesia, total industry GMV is going to be less than RMB 10 billion this year. We're really at the first pitch of the first inning of the game. It's very early to tell. Too early to tell, really. To your question of what it takes to be successful, I think if you look at it from the user experience standpoint, also from the merchant standpoint, as Daniel referred to, we have just completed our re-architecting of the technology platform, which will enable us to very quickly launch user-facing features and products on the mobile platform. That would lead to better user experience, and very quick response to the market changing dynamics.
On the merchant side, many of the Southeast Asian countries are not large or strong manufacturing countries. The merchants are still looking for sourcing opportunities back to China where there's a manufacturing base. That's where we feel, we believe that having a connection to China, the manufacturing base here with the Alibaba relationship will be very helpful to these merchants.
Next question. Operator, next question.
Next question comes from the line of Mark Mahaney of RBC Capital Markets. Go ahead, please ask your question.
Thank you. Daniel, you mentioned artificial intelligence, AI investments. Could you at a high level talk about the application of AI across all of Alibaba, maybe with a five to 10-year perspective, and talk about the potential impact of artificial intelligence on the business, both in terms of cost efficiencies and in terms of either new revenue opportunities or greater personalization of the services? You've got such broad platforms, multiple platforms at such scale. I would think there'd be enormous opportunity for AI, but it's hard sometimes to figure out what it would actually look like. Any color you have on what kind of impact you could see on both the cost side and on the revenue side from the application of AI. Thank you.
Actually, we have such extensive ecosystem. We have a lot of business use cases which are relevant to AI technology. To us, as we always said, AI is not about future. AI, actually, we have been working for this apply AI technologies. Maybe previously we never call this AI, but we apply these data-driven technologies to our real business for many years. That's also the reason why we can enjoy such a robust growth in the past few years. Going forward, we will continue our investment in AI and apply the technology to many business areas, such as the user experiences, such as the advertising products and services. I have to say that this is not relevant to the consumer interface, but also highly relevant to the many other aspects of the business.
For example, the supply chains, the supply chain management how to enable the flow of the inventories more efficiently. With the data and with the intelligence of the customer demand and how to even produce the products, which can not only meet the existing demand of the clients, of the customers, but also create their new demands. It's all relevant to AI. Having said that, actually, we have the broader business cases to apply AI technology. We will fully leverage what we have today to continue to not only develop the technology but also try to generate the real business economics from the technology.
Thank you, Daniel. Operator, next question.
Your next question comes from the line of Youssef Squali from SunTrust Robinson Humphrey. Please ask your question.
Thank you very much. In terms of the new retail, can you just help us contrast and compare your strategy relative to your main competitor in the market, where you think you have sustainable competitive advantage? Joe, very quickly, as a global player, what is the risk to Baba from this trend of rise in protectionism worldwide, and especially with the potential of a trade war between China and the U.S.? How does Alibaba protect itself? Thanks.
In terms of the new retail strategy, actually, this is one of the core strategies for Alibaba. We strongly believe we have big advantage in structuring and in executing new retail strategy. First of all, actually, during the past 19 years, we have built up the largest consumer retail marketplaces, which is the largest consumer interface, and which I think we have so many consumers around us, and we know their behavior, we know their preference, we know their demographics. Today, all these consumers are not people living in the air, but they are everywhere. When we go to the offline, when we talk about new retail, talk about integrated omni-channel operation, the consumer data we have, the consumer interface we have will bring us a lot of insights and the possible to interact with them in the integrated operation.
Second, we have been operating the retail marketplace for so many years, and we have extensive experience not only to connect people but also to create value for our merchants as well as our customers. Today, we are working very hard not only actually to develop the online platform, but also to incubate the new retail formats and enable the existing retail formats to be upgraded. I think that's actually exactly what we do. We strongly believe that with this technology, together with the retail experiences we have, we can bring our retail partners a lot of space to grow.
In terms of how the trade war will impact our business more broadly, just the overall economy. You could view Alibaba as a very large platform for producers from all around the world to access Chinese consumers. We have over 550 million annual active shoppers on our platform. That's a very attractive platform for these brands and retailers and producers, including farmers, SMEs to come. The trade war right now is really just between the U.S. and China, so it's really limited to that trade flow. When Chinese consumers look abroad to buy things from overseas, there could be replacements. For example, if we can't import food items from the U.S., we could be importing food items from Southeast Asia, from Thailand, Malaysia, from Taiwan, where they grow a lot of fruit.
There will always be alternative channels for us to bring in imported products to satisfy Chinese consumers. Obviously, a trade war is not good for anybody. In particular, we feel we've already publicly communicated, been very public on that, to say that the trade war actually will hurt small businesses in the U.S. Our Chinese consumers are going to find alternative ways to bring imports into the country through our platform.
Great. Thank you both.
Operator, last question.
Last question comes from the line of Jerry Liu of UBS. Go ahead, please ask your question.
Hi. Thank you. My question is around the investment in video and payments over the next year. We've heard from your major competitor about incremental investments there. Can we think about, as you gain scale in those areas, do margins improve, or can we still see a longer period of investment? Thank you.
We have very strong commitment in digital media entertainment sector. We don't view this as a separate new business. We view this as a category expansion for our existing and newly acquired customers. This is an integral part of our ecosystem. As we always said, for Chinese people, when their lifestyle changing and their life quality changing and upgraded, they not only need more physical products, local services, but also they need more digital contents. That's why we enter into this area, and we think this is to meet their growing demand. For today's 550 million annual active shoppers, tomorrow, I think this will also bring a very important stickiness for our customers to stay along with us.
Okay. Operator, that is the last question. Thank you everyone for joining today's call. If you have any questions, please refer to our IR website and contact the IR team. Thank you.
Ladies and gentlemen, this does conclude our conference for today. Thank you for participating. You may now all disconnect.