Good day, ladies and gentlemen. Thank you for standing by. Welcome to Alibaba Group's December quarter 2017 results conference call. At this time, all participants are on 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. Good day, everyone, and welcome to Alibaba Group's December quarter 2017 results conference call. With us are Joe Tsai, Executive Vice Chairman, Daniel Zhang, CEO, Maggie Wu, CFO. This call is also being webcast from our IR section of 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 U.S. Securities and Exchange Commission.
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, 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. With that, I will now turn the call to Joe.
Thank you, Rob. Thank you all for joining us. Alibaba had one of the best quarters in the company's history, with 56% year-on-year revenue growth. We ended the quarter with 515 million annual active consumers on our China retail marketplaces. Compared to the 12-month period ended in the prior quarter, we added 27 million annual active consumers. This is the largest number of active consumer additions in the last three years. We have made tremendous progress in the execution of our New Retail strategy. As a result, revenues from New Retail initiatives are starting to make meaningful contributions to the growth of our China commerce revenues this quarter. I want to say a few words about New Retail. Since Jack Ma coined the term New Retail in 2016, the term has been widely adopted in China by traditional retailers and internet companies alike.
New Retail has become the most talked about concept in business. However, very few people appreciate what New Retail really means, much less what exactly is needed to accomplish true convergence of the online and offline consumer experience. In my view, Alibaba has three unique success factors that is enabling us to realize the New Retail vision. First, Alibaba's marketplace platforms handle billions of transactions each month in shopping, daily services, and payment. These transactions provide us with the best insights into consumer behavior and shifting consumption trends. This puts us in the best position to enable our retail partners to grow their business. Second, Alibaba is a deep technology company. We contribute expertise in cloud, artificial intelligence, mobile transactions, and enterprise systems to help our retail partners improve their business through digitization and operating efficiency.
Third, Alibaba has the most comprehensive ecosystem of commerce platforms, logistics, and payment to support the digital transformation of the retail sector. Next, I want to talk about our transaction with Ant Financial. We are announcing today that pursuant to a strategic agreement with Ant Financial that was entered into in 2014, Alibaba has agreed to take a 33% equity stake in Ant Financial. Those of you who have followed us closely know that this is a significant step in our long-term strategic relationship with Ant Financial, giving Alibaba equity ownership in a company that is a key player in the Alibaba ecosystem.
Ant Financial is not only an integral payment provider for transactions on our e-commerce marketplaces through China's number one mobile payments platform, Alipay, but it is also a provider of financial services such as loans, wealth management, and insurance products to hundreds of millions of consumers and millions of small businesses on the Alibaba platform. We believe deepening our relationship through an equity stake in Ant Financial will bring several key strategic benefits to us. Number one, advancing our New Retail strategy with mobile payments. Number two, increasing user acquisition and retention through collaboration with the Alipay digital wallet. Number three, enhancing the execution of our international expansion. Number four, enabling Alibaba and our shareholders to participate in the future growth of the financial sector. While we have filed a 6-K to summarize the transaction, I want to highlight some of the salient features here.
The first thing is that Alibaba is taking the 33% equity stake and terminating our profit share in Ant Financial. Equity ownership allows us to participate in the long-term value creation of Ant Financial, as opposed to the quarter-to-quarter fluctuations of a profit share. Second, pursuant to the agreement between Alibaba and Ant Financial, Alibaba's subscription of new shares in Ant Financial does not require any cash outlay for Alibaba. Going forward, Alibaba is going to be protected from the dilutive effects of future Ant fundraisings until in an IPO of Ant Financial. Third, Alibaba will have significant governance rights in Ant Financial through board representation, so that the two companies' interests can be further aligned. Now I will turn it over to Daniel for his comments about the quarter.
Thanks, Joe. Hello, everyone, thank you for joining our earnings call today. We delivered another outstanding quarter, our business is performing stronger than ever. This is the seventh consecutive quarter that our revenue has grown by more than 50%. It is the direct result of our long-term forward-looking approach of investing in new user acquisition, new technology, and creation of New Retail experiences. The data we are able to generate from user activity at scale is used to review and improve consumer experience and business operations across our ecosystem. We will continue to invest for the future, not only to grow existing business, but also to nurture new business innovations. Taobao continues to thrive as the top online consumer media and the retail destination for Chinese millennials. Growth of our monthly mobile app users accelerated this quarter.
580 million users now visit our China retail marketplaces via mobile app monthly, an increase of 31 million users over the previous quarter. Our unique blend of highly relevant, personalized content with a community-driven experience continues to attract new users while keeping existing users deeply engaged on a daily basis. Tmall continues to expand its market leadership in B2C and enjoys robust growth across all major categories. Physical goods GMV grew 43% year-over-year. We are especially pleased with the accelerated growth in the mobile phone category. More than 75% year-over-year, achieved through securing exclusive access to the industry's top premium smartphone launch. Market leadership and share gain will continue to be our priority, we will continue to reinvest into the Tmall business. We celebrated our ninth November 11 Global Shopping Festival this past quarter.
Once again, it showcased the extraordinary competitive advantage of our platform model. Our commerce technology infrastructure continued to set new benchmarks in real-time processing power. More than 160 merchants had sales exceeding RMB 100 million. Of those, 17 had more than RMB 500 million in sales. Six had more than RMB 1 billion in sales, two had more than RMB 2 billion in sales. Brand and retail partners leverage our digital technology and omni-channel integration to transform more than 1 million physical locations all over China to offer New Retail shopping experiences. Our globalization strategy continued to demonstrate excellent momentum. Our international commerce retail business grew 93% in revenue year-over-year. Lazada continued to leverage product selection and technology infrastructure from our China retail marketplaces to upgrade its service and experiences for Southeast Asia consumers.
Our eWTP Hub in Malaysia, the first outside of China, went into operation in November 2017. The One Belt, One Road initiative is an important tailwind for our cross-border import business, which will help address the massive demand for imported products in ongoing consumption upgrades taking place in China. Our cloud computing business continued to fly high. Revenue grew 104% year-over-year, as Alibaba Cloud continues to be the market leader in China. We continue to extend product and features, including proprietary AI technologies being deployed to address real-world challenges. Our scientists recently received industry recognition for breakthroughs in areas such as natural language processing and computer vision technology. Our digital media and entertainment business continued to make progress. Our success in development of original content has contributed to more than 100% year-over-year subscriber growth.
We are proud that our original Chinese drama developed by Youku, named "Day and Night," was acquired by Netflix for global distribution, which was a validation of the creative capability of our digital video business. I want to provide an update on New Retail. Exactly one year ago, I shared with you our outlook on the opportunities for a radical transformation in the retail landscape, and a plan to re-engineer the fundamentals of retail operations to offer consumers new value propositions. We have demonstrated what New Retail looks like through innovations such as Hema, and inspired a global wave of experimentation in New Retail. We believe the future of retail is much more than just connecting online and offline. Our New Retail strategy is comprised of creating new and transforming old.
We will continue to innovate new retail formats like Hema with the goal of addressing consumers' evolving demands in the digital age with better products and services, giving them compelling reasons to visit both physical and virtual stores. These new formats will continue to experiment with new proprietary technology to improve consumer experiences. Lack of real-time consumer insights is one of the key issues of China traditional retail today. We are enabling traditional retailer partners to find new life by digitalizing their consumers and increase their catchment area online and offline, thereby improving sales productivity. We are also leveraging our data technology to empower retailers to radically improve operating efficiency and allow them react on a real-time basis based on consumer demand. We are committed to design more new retail formats, and our mission is to enable our retail partners to transform through digitalization.
Our investment in Sun Art is a comprehensive strategic partnership that will leverage our mutual strength to fundamentally change the economics of traditional retail. We have introduced top-selling products on Tmall to over 160 RT-Mart locations across China, and will soon share our proprietary New Retail technology developed by Hema to upgrade Sun Art's existing retail formats and operations. Additional synergies are being realized that will grow our mutual businesses. 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. Here are some financial highlights. In the December 2017 quarter, major operating and financial matches continued to record very strong performances. Total revenue grew 56% year-over-year to RMB 83 billion. Revenue from core commerce grew 57% year-over-year to RMB 73 billion. Mobile MAUs reached 580 million, an increase of 31 million over September quarter. Annual active consumer reached 515 million, an increase of 27 million from our 12-month period ended September 2017. Revenue from cloud computing increased 104% year-over-year to RMB 3.6 billion. Our non-GAAP free cash flow was RMB 46 billion, which is $7.1 billion for the quarter, compared to RMB 34 billion in the same quarter of last year.
For the quarterly revenue, the 56% year-over-year growth was led by robust growth in our China commerce retail business, international commerce retail business, Alibaba Cloud, as well as the consolidation of Cainiao Network. Excluding Cainiao, total revenue growth would have been 49% year-over-year. Quarterly cost trends. Cost of revenue excluding share-based compensation was RMB 33.8 billion. Excluding the effect of SBC expense, cost of revenue as a percentage of revenue increased from 35% in the quarter ended December 2016 to 40% in this quarter. I would like to provide color on changes to our gross margin due to the business mix shift. First, the consolidation of Cainiao affects our overall gross margin because logistics is a lower margin business compared to our original core business.
Second, the significant growth of our New Retail businesses, in particular, Intime department stores and Hema fresh grocery stores, means that New Retail revenues were included in our gross basis, include the cost of inventory, and therefore would have the effect of lowering our overall gross margin. Third, content development and acquisition cost of our digital media entertainment segment is accounted for as a cost of revenue. While these business mix shift factors structurally change our gross margin, the new lines of business in logistics, New Retail, and digital entertainment are highly strategic to our future growth and value creation. In addition, these new businesses do not change the highly profitable and cash flow generative characteristics of our core commerce marketplace business, and our ability to reinvest core commerce profits for further market share gains. Sales and marketing expenses, excluding SBC, were RMB 8.1 billion in the quarter.
Without the effect of SBC expense, sales and marketing expenses as a percentage of revenue was 10% for the quarter, which is consistent with the prior quarter. As a percentage of revenue, without the effect of SBC, all other major operating expenses remained stable year-on-year. Let's look at other income losses. Other net loss in the quarter ended December 2017 was RMB 348 million, compared to other net income of RMB 3 billion in the same quarter of 2016. The reversal from net income to net losses versus last quarter was primarily due to higher foreign exchange loss and a decrease in profit sharing from Ant Financial. During the quarter, Ant Financial successfully executed an aggressive user growth plan that resulted in substantial new user additions and increased user engagement.
As a result of the user growth initiatives, in December 2017, Alipay wallet's daily active users more than doubled on a year-over-year basis. We expect that Ant Financial will continue to invest to expand its market leadership in digital payment, develop new technologies for inclusive financial services, and accelerate its globalization strategy. Non-GAAP net income in the quarter was RMB 27 billion, an increase of 20% year-on-year. Reconciliations of non-GAAP measures to comparable GAAP measures can be found in our press release. Free cash flow and cash. We continue to generate significant free cash flow. In December quarter, we generated RMB 46 billion in free cash flow. Our cash flow allows us the strategic and operational flexibility to invest in technology and acquire the resources to accomplish our strategic objectives. As of December 31st, 2017, our cash equivalents, and short-term investments were RMB 220 billion.
The increase in cash equivalents, and short-term investments during the quarter was primarily due to proceeds from our issuance of $7 billion senior unsecured notes and $7 billion free cash flow generated from operations, partially offset by cash used in investing activities, including investments in Sun Art Retail and the repayment of a senior unsecured notes deal in the year. Capital expenditure in the December quarter was RMB 10 billion, in which about RMB 1.4 billion relates to the acquisition of land use rights and the construction in progress. The rest are investment in IT, servers, et cetera. Segment reporting. Let's take a look at the Core Commerce. Core Commerce segment had another strong quarter with revenue growth of 57% year-over-year. China Commerce Retail business, which represents 82% of the segment revenue, grew 47% year-over-year.
This is the first quarter in which we're including revenues from logistics as we begin to consolidate Cainiao. Excluding Cainiao, Core Commerce revenue growth would have been 49% year-over-year. China Commerce Retail, robust revenue growth of 47%. This includes the growth of our New Retail initiatives, which added meaningful revenues compared to immaterial amounts in prior periods. The New Retail initiatives include Intime department store, imported consumption, and fresh food grocery, Hema. These new businesses, which are highly strategic for our future growth and value creation, will become more meaningful over time. Revenue from our retail marketplaces continue to see strong growth. Customer management revenue grew by 39% year-over-year, driven largely by increases in average unit price per click, and to a lesser extent, the volume of clicks.
Increasing price per click reflects our ability to deliver highly relevant ads to consumers through personalization technology, which drove increased conversions. Thus, merchants put a higher value to clicks that can reach relevant users and drive higher conversions. We're seeing higher average spending on our customer management services by an increasing number of merchants. The 39% growth rate of customer management revenue in December quarter reflects a more normalized growth trend due to an anniversary effect of our personalization algorithms launched in September 2016, as discussed in our previous call. We continue to focus on sustainable revenue growth for our China Commerce Retail business by giving attention to user experience and merchants ROI. Therefore, we will continue to be measured in our approach to monetization. For example, we would prefer to increase ads inventory rather than increase ads load, and to monetize through technology improvements rather than price increases.
China Commerce Retail commission revenue, representing 27% of China Commerce Retail revenue in the quarter, grew by 34% year-over-year, primarily due to a strong GMV growth in the physical goods GMV on Tmall. We're growing 43% year-over-year in the physical goods GMV. The commission revenue growth rate was lower than physical goods GMV growth. This is because of discounts and rebates we provided to merchants during promotions. Other revenue within this China Commerce Retail was RMB 5.1 billion compared to RMB 813 million in the same quarter of last year, primarily driven by our New Retail businesses, including Intime, import consumption in Hema. As you may have noticed, other revenue now represents 7% of segment revenue and grew 525% year-over-year. We expect these New Retail businesses will become a more meaningful part of our growth and value creation in the future.
Our Core Commerce marketplace adjusted EBITA margin was 53% in the quarter as compared to 64% in the same quarter of 2016. Excluding the consolidation of Cainiao, Core Commerce marketplace adjusted EBITA margin would be approximately 57% for the quarter. In a discussion of our cost trends, I have discussed the GP impact of our New Retail businesses, which we believe will accrue longer term strategic value to Alibaba. In addition, we're reinvesting margin from our China Commerce Retail Business towards international markets such as Southeast Asia and new user acquisition. Cloud revenue growing 104% year-over-year, primarily driven by an increase in number of paying customers and improving revenue mix of higher value-added services. Adjusted EBITA margin of the cloud computing segment was negative 5%. This remained stable versus the same period last year. Our cloud computing business top priority remains expanding our market leadership and upselling of higher value-added services.
Our Digital Media and Entertainment segment revenue in December quarter was RMB 5.4 billion, increase of 33% year-on-year. Both UCWeb and Youku contributed to this growth. We're particularly encouraged by the traction of Youku, especially the robust addition of subscribers due to original content. Yearly average subscribers maintained strong momentum with more than 100% year-on-year growth. As a result of increased subscription revenue, Youku's total revenue growth rate for the quarter accelerated from prior quarters. Adjusted EBITA margin of the Digital Media and Entertainment segment was negative 41% this quarter, comparing to negative 50% in the same period last year. The narrowing of negative margins primarily due to revenue growth from UCWeb, which is a higher margin business, partially offset by increased investment in content by Youku.
With the strong growth of the subscription business in online video, we see potential synergies between our Digital Media and Entertainment business and the Core Commerce business, both of which tap into the large consumer user base of our ecosystem. Revenue from Innovation Initiatives and Other segments was RMB 772 million in the December quarter. Starting June quarter 2017, we reclassified revenue from our fresh food store, Hema. We talked about this last quarter. Previously reported under this Innovation Initiatives segment. Now we moved it to China Commerce Retail Business because Hema has already go beyond the incubation stage. Adjusted EBITA margin of this segment was negative 130%, primarily due to investments in new business initiatives. Okay. Looking ahead, given a fair degree of visibility until end of March 2018, we are raising our year-over-year revenue guidance to a range of 55%-56% for fiscal 2018.
As Daniel mentioned earlier, our vision for New Retail to digitize the entire value chain of the retail industry, which would then enable a seamless convergence of consumer experience between online and offline. Over the next several years, you will see an unfolding of how we execute the New Retail strategy as it becomes an integral part of Alibaba economy. The way we look at New Retail's financial impact to Alibaba are as follows. First, the market has huge potential. Digitalization of offline retail, then using our data technology to enable a convergence of online and offline commerce is a huge opportunity that expands our addressable market. Total China retail is a RMB 33 trillion economy, while nearly 20% of it is online. Our New Retail strategy will enable us to tap into the 80% of the retail consumption that remain offline in China.
We believe we have the technology advantage and proprietary know-how to execute the New Retail strategy at large scale. Second, New Retail may have a different cost structure but have similar high capital return characteristics as pure Internet businesses. I've already discussed the structural changes to margin as a result of the business mix shift to New Retail. This is not a concern to us at all because we believe we can maintain the same capital efficiency over time and generate similar returns on invested capital as our Internet-based marketplace business. Finally, technology will drive sustainable and scalable long-term profit growth in New Retail. With our strategy of partnering with retailers, we will build an ecosystem where our technology and know-how will reach businesses far beyond our own.
The value created from improvement in the operating efficiency and the financial performance of our retail partners will generate additional monetization opportunities through capital-light fee-based models such as commissions and management fees. Alibaba is best positioned to transform China's traditional retail landscape, given our large mobile consumer scale and insights, advanced cloud and AI infrastructure, and best-in-class know-how in digital commerce. That concludes our prepared remarks. Operator, we're ready to begin the Q&A session. Thank you.
Thank you. Ladies and gentlemen, if you wish to ask a question, please press star one on your telephone keypad 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. Once again, if you wish to ask a question, please press star one on your telephone keypad and wait for your name to be announced. Your first question comes from the line of Eddie Leung of Merrill Lynch. You may ask your question.
Thank you for taking my questions. The questions are about Ant Financial. At the operating level, how will this deal change the cooperation? Is there anything you can achieve now that you couldn't in the past? Just quickly, perhaps also some color on the retention rate of your users. There has been very fast growth in users in the past one or two years. Just curious, how has been the retention rate during this fast growth period? Thank you.
Eddie, this is Joe Tsai. I'll take your question about Ant Financial. With our equity stake in Ant Financial, this will align our interests further in a number of areas. For example, Ant Financial, as you know, is the number one mobile payments company in China. In the execution of our New Retail strategy, a very important component of working with physical retailers is that they're enabled with mobile payment. That a customer can go to the store and whip out a mobile phone and pay. There's a lot of cooperation there that we can have with them. Another example is to be able to interact between, for example, our e-commerce apps like Taobao app, and also the Alipay wallet so that we can establish a presence. For example, of our e-commerce presence within the Alipay wallet.
This actually helps us to increase user acquisition in terms of new users because there are users that are using the Alipay app that are not buying on our Taobao platform. Another example of cooperation is in international expansion. In new markets, e-commerce presence will need to have a payment solution, and payment expansion into new markets will be looking for new use cases. These are just a few examples of cooperation. With equity stake, I think there's going to be tighter cooperation between the two. Your second question about user retention. I think we have been able to retain the users very well. I assume that's a question addressing Alipay. As you know.
In the fourth quarter, the growth of daily active users of Alipay have gone up more than doubling of our daily active users. Going substantially into January, we just passed January, in the last month, the level of daily active users and engagement have remained, so we don't see any sort of drop-off. Retention is very good.
Your next question comes from the line of Alicia Yap of Citigroup. You may ask your question.
Hi. Good evening, management. Thanks for taking my questions and congrats on the solid quarter. My question is related. Can you share with us if there's any plans or any ongoing technology advancement or improvement of the Taobao app that you are working on? Any chance for potential increasing the monetizations on some of the Taobao pages, for example, by adding the inventory or potentially adjusting the ad loads on the search results? Thank you.
Taobao app is now actually positioned as a consumer community and a content-driven platform. We apply our most recent and new technologies, like the personalized technology algorithm and the real-time behavior-driven algorithm on Taobao. That's why today, people will have a very personalized experience on mobile Taobao. Going forward, we will continue to do so and apply our new technology on Taobao. With the extension of our categories and services and extension of our user base, we will have more and more consumer data and behavior, which also enhance our understanding of people's demand. What we want to do is to make our algorithm more intelligent, which is not only to meet the existing demand of the customers, but also help to create a new demand of the customers. That's all about how to make the technology marry with commerce.
In terms of the monetization, actually, we have a very clear strategy in monetization. We always believe that the most important thing is to enhance the user experience and make people spend more time and more people to come to our site. Actually, today, as a commerce mobile app, actually all the contents potentially could be monetized. Today, we only monetize a very low % of the pages on our mobile app. All the contents and the recommendations and the search results, actually, it's relevant to what consumer need and what the customers want promoted. We have a very clear schedule to monetize our pages, but we still want to make sure we have a very native experience for our customers.
Your next question comes from the line of Alex Yao of J.P. Morgan. Please ask your question.
Hi, good evening, management, and thank you for taking my question. I have a follow-up question on Ant Financial. Can you elaborate a bit more on the sharp decline in Ant Financial's profitability in this quarter? For example, is it because the competition in domestic offline payment market is intensifying, or is it because you are expanding to overseas market share and usage? If the competitors in these markets react with even more aggressive marketing strategy, how do you think about the competition strategy and the financial outlook for this asset in 2018? Related to that, will the new investment strategy in Ant Financial apply to the New Retail strategy as well? Thank you.
Hey, Alex. I'll address that. Ant Financial is a profitable business. They're profitable in all three major lines of business, and that is payment, credit products like consumer credit and SME loans, the third is wealth management in terms of distributing other people's wealth management products on the platform. It's profitable in all three of those business lines. What it means is that it has the luxury of reinvesting profits and cash flow into very strategic areas of growth. During the fourth quarter, what we've seen is that Ant Financial embarked on a very aggressive new user acquisition strategy, and that was very successful. They were able to grow new users by more than doubling the active users on the Alipay wallet platform.
We have also communicated in our earnings release that we expect Ant Financial to continue this fairly aggressive plan to continue to gain more new users and take market share. It's clear that, I think if you look at third-party research data, Ant Financial has claimed market share away from competition over the last quarter. As far as your question about how we think about the growth of our own e-commerce business, maybe Daniel can address that question.
Actually, we do see a lot of synergies between AGH and Ant Financial. Today, because of the very active new user acquisition strategy, we see a lot of new customers going to Alibaba ecosystem by firstly through a mobile payment. We are actually work closely with Ant Financial to transform these new users to create buyers in our ecosystem. Having said that, actually, we see the broader opportunities in New Retail landscape and for the retail partners, what they want is all-in-one solutions to help them to improve the user's experience and improve the operating efficiency in their existing retail formats. Payment obviously is one of the advantages. Because of the digital payment, the retailers can digitalize to have the data of the payers.
From AGH perspective, we will go even further to help the retailers to digitize their entire product assortment and the entire footprints in the physical store. Which will bring even more data. Together, actually, Ant Financial and AGH can help the retailers to transform to a totally digital operation, which will bring a lot of value for their operation in the future.
The next question comes from the line of Piyush Mubayi of Goldman Sachs. Please ask your question.
Thank you. My first question is, does the Ant stake mean that a Hong Kong IPO foreign ownership path is open? Also, theoretically, would you invest more into Ant to own more of it? A second question, if I might slip in one. Customer management revenue growth drivers have reversed this quarter from volume of clicks to price per click on higher conversion. Could you give us a sense of how much further the price per click improvement could be in the next couple of quarters, if possible? Thank you.
Hi, Piyush. This is Maggie. Okay. Ant hasn't talked about any IPO plan yet. That's Hong Kong, Asia, we don't know yet. For whether we gonna further investing in. 33% is the equity swap arrangement that stated in the 2014 agreement. That's pretty much the shareholding we could get from Ant based on this arrangement. In terms of customer management revenue, well, we're talking about PPC growth is stronger. To a lesser extent, we see the number of clicks growth. The reason is that basically the technology. One thing is that the technology improvements brings better conversion. Merchants are willing to pay for higher clicks because they're calculating their ROI. It must be whatever they pay, it's got a reasonable return before they're making that decision to invest. How much further this PPC can grow is, I think Okay.
First of all, you've seen this growth for customer management revenue, right? 39% year-over-year compared to previous quarter, appears to be a slower growth. We talked about the algorithm anniversary. There is another reason, is that we did proactively give return to merchants. We leverage our technology enhancements, and there are a couple of projects maybe we can talk more about in a later meeting. This is our voluntarily give returns to merchants, which have impacted a little bit on our monetization, the revenue. Going forward, I think when you look at the technology reserves, we do have many technology initiatives in our pipeline, and these are the potential assets for future monetization. We will launch these whenever it's ready in the due course. We're quite confident about the longer-term growth for our ecosystem since data technology do bring value to merchants.
Your next question comes from the line of Youssef Squali of SunTrust Robinson Humphrey. You may ask your question.
Thank you very much, and congrats on a good quarter. Maggie, just a quick question for you. I may have missed this, but ex Cainiao and ex New Retail, what was the organic growth in core commerce? I guess related to that, as we look out to fiscal 2019, in terms both of revenue growth and margin, can you just help us think through, or how do you guys think through the framework of organic growth and margin? I think in 2017, we've seen about a 400 basis point compression. In 2018, we're likely to see about 600 basis point compression in margins. Just how do we think through it for 2019? Thank you.
Okay. First of all, if you still remember eight months ago when we had our investor day where I gave the revenue guidance for fiscal 2018, the market consensus for our revenue growth was somewhere around 37%, 38% year-over-year. We guided 45% to 49% year-over-year growth. Now we adjusted that growth level to 55% to 56%. That's pretty much 18 percentage points higher than the original market expectation. Okay. Cainiao. You've seen that we're talking about this quarter, Cainiao added four percentage points to the revenue growth. Even if you take it out from the 55% to 56%, we're still growing 50% plus. New Retail is an integral part of our core commerce. We disclosed the number of the revenue amount and the percentage of revenue you can derive if you take it out, but it doesn't really make sense taking it out.
This business is going towards New Retail. It's going to be a very critical part of our core commerce. It is the core commerce. Margin, I talked about the structural changes to margin as a result of the business mix shift to New Retail. Basically, New Retail may have a different cost structure, which could show a lower margin going forward. This is not a concern to us because, remember, first of all, a lower margin does not necessarily equal to a lower profit because we're making the pie much bigger. 60% of apple compared to 40% of a watermelon. Which one do you want? The second point is that lower margin not necessarily equals to lower cash flow. For example, inventory can be a positive contribution to cash flow due to negative working capital nature of the retail.
The risk of inventory can be reduced with consumer insights and data technologies.
The next question comes from the line of Grace Chen of Morgan Stanley. You may ask your question.
Yes. Thank you. Thank you for taking my question. My first question is about the potential personalization in Alibaba's platform. I understand that the most recent key algorithm upgrade was in September 2016. This leads to a tough comp of the customer management revenue in the December quarter. Personalization should be in the beginning. We're wondering how big the tailwind remains coming from further algorithm upgrade in the future. My second question is about the changing dynamics in e-commerce competitive landscape. As we see fast growth in those emerging smaller social commerce players, what's your view for this recent phenomenon, and have you seen any impact to your ecosystem now or potentially in the future? Thank you.
This personalization algorithm, how much reserve we have and how much technology can help in the monetization and the revenue. What I can share about is that we do have a lot of things going on with this technology improvements and upgrading the AI, the neural network, et cetera. Later on, when we're starting the new fiscal year, we're also going to talking about revenue guidance. By that time, you will have a sense of that.
Just quickly, I just want to add to Grace, your question about personalization and technology. If the question is, do we still have sort of tricks in the bag when it comes to technology to improve personalization? The answer is absolutely yes. The one point that is not to be missed is Daniel earlier referred to this point is the fact that because we have a very robust user growth and a lot higher engagement by these users, we are now creating additional inventory. When you start thinking about whether changing algorithm will drive more revenue growth, I think don't forget to look at additional expansion in terms of ads inventory that we haven't even monetized. There's really no need to increase ad load, but think about increase in ad inventory. I think that's a point that you shouldn't miss.
Well, in terms of the new opportunities in social commerce and other initiatives, I would say actually what we have done in the past 18 years is always to make innovations in new initiatives and to apply the new technologies into the real commerce world and to enable our merchants and retail partners to be a digital operation. Today, I would say, with the development of the mobile internet and all the people are living on internet, more and more players are trying to take this opportunity to try e-commerce from different angle. We are happy to see that because this will make us move faster and make us continue our innovation. We are happy to see a growing platform in terms of customer acquisition, in terms of the customer retention, and in terms of the growth of our merchants.
As I said in my script, last year's 1111 is a very typical example on how many merchant sales exceed RMB 100 million in one day, which is a very solid evidence of the prospects of our ecosystem. We will continue to invest and innovate in our ecosystem and to make our platform valuable for both merchants and consumers as well as third-party service providers.
The next question is from Gregory Zhao of Barclays. Please ask your question.
Hi, management. Thanks for taking my question and congratulations on the strong quarter. I have two questions. The first one is, recently Alibaba appointed two very young, new presidents to Taobao and Tmall platforms. Those guys with pretty strong big data management and marketing experience. Can you share some colors and reasons of the new appointment and what kind of changes this will bring to Alibaba? A quick follow-up question is, the Chinese New Year holiday will come a little bit later this year, so would you please share some colors, like the potential impact to the coming quarter? Thank you.
Actually, we are very happy to have young people join our senior executive team. We think because if you look at our customer base, they are getting younger and younger, and we do need people who understand the young customers and to serve them. That's why we are so happy to have both Jiang Fan and Jet Jing to join our senior executive team. Both of them have been working with us for quite a few years and also demonstrate very proven results in each of their previous jobs. Today, actually, with their onboarding on the new role, I'm confident that they will take both Taobao and Tmall to the next step and to the next journey. In terms of the Chinese New Year, actually, this year, Chinese New Year will be on February 16th.
As usual, we are preparing for the Chinese New Year, and these days, we have a good Chinese New Year festival in Chinese, on our platform. We also see very good result in this and we are trying to serve our people and not only before the Chinese New Year, but also in the Chinese New Year. We'll also have a good marketing campaign during the Chinese New Year.
Thank you. Ladies and gentlemen, that does conclude our conference for today. Thank you for participating. You may all disconnect.