Good day, ladies and gentlemen. Thank you for standing by and welcome to Alibaba Group's September Quarter 2016 Results Conference Call. At this time, all participants are in listen only mode. After management's prepared remarks, there will be a question and answer session. I would now like to turn the call over to Mr. Rob Lin, Head of Investor Relations of Alibaba Group. Please go ahead, sir.
Good day everyone, and welcome to Alibaba Group's September Quarter 2016 Earnings Conference call. With us today are Joe Tsai, Executive Vice Chairman, Daniel Zhang, Chief Executive Officer, Maggie Wu, Chief Financial Officer. Also, as you know, we distribute our earnings release through Alibaba Group's investor relation website located at alibabagroup.com. Please refer to our IR website for our earnings release, as well as supplementary slides accompanying the call. You can also visit our corporate website for the latest company news and updates. This call is being webcast at our IR section of corporate website. A replay of the call will be available on our website later today. Now, let me quickly cover the Safe Harbor. Today's discussion will contain forward-looking statements made under the Safe Harbor provisions of the U.S. Private Securities Litigation Reform Act of 1995.
These forward-looking statements involve inherent risks and uncertainties that may cause actual results to differ materially from our current expectations. Factors that could cause actual results to differ materially are set forth in today's press release. To also understand 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, 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 EBITA, segment adjusted EBITDA, non-GAAP net income, non-GAAP diluted EPS, and free cash flow, are expressed on a non-GAAP basis.
Our GAAP results and reconciliation of GAAP to non-GAAP measures can be found in our earnings press release. With that, I will turn the call to Joe.
Thank you, Rob. Thank you all for joining us. We delivered another terrific quarter with 55% year-on-year revenue growth and CNY 2.1 billion in free cash flow. All of our business segments saw robust growth. For those of you who have tracked us for a long time, you would observe that beginning in the last quarter, we have accelerated our revenue growth compared to growth rates in the prior year. I want to provide my perspective on why Alibaba is growing faster this year than last year, even off of a bigger base. More importantly, why we think significant growth is sustainable into the future. First of all, our core commerce segment continues to be very robust, with year-on-year revenue growth of 41%.
On a basis of a very healthy China retail marketplace, now with 450 million mobile MAUs, we see tremendous opportunities for us to increase monetization of our user base. This is because user engagement of our platform is growing, and this generates strong value for branding and distribution to brands and merchants coming to our platform to reach consumers. In addition, we see significant upside in building out our international marketplaces, where penetration of Internet-enabled commerce is still relatively nascent. Second, the core commerce business throws off tremendous cash flow to enable us to make investments in important strategic areas. Two of these strategic areas are cloud computing and digital media and entertainment. Both segments are coming into their own in terms of scale and market position, each seeing triple-digit revenue growth this quarter.
Third, we're extremely patient when it comes to developing potentially high impact initiatives. A couple of quarters ago, I talked about investing for the long run and how we focus on initiatives with long gestation periods. In our experience, the investment cycle for incubating businesses that eventually become massive value drivers could take 7 - 10 years. We've seen this pattern in the case of Taobao, Alipay, cloud computing, et cetera, all of which we have developed organically in-house. As I said before, having the ability to remain patient and the strategic flexibility to invest with a long view is a huge competitive advantage. I would like to turn the mic over to Daniel. Thank you.
Thanks, Joe. Hello, everyone, thank you for joining our earnings call today. We enjoyed a stellar quarter and our businesses continue to thrive. Our mission to help make it easier to do business anywhere is more relevant today than ever before. Consumer behavior is evolving dramatically as the population getting younger and more proactive in upgrading their lifestyles. At the same time, merchants increasing dramatically with latest technologies inspires them to embrace new ways to improve business efficiency and serve customers.
We believe the convergence of these factors will bring about a significant disruption of the existing commercial landscape and emergence of a new retail model. Over the last 10 years, development of online shopping in China has been disconnected from brick-and-mortar retail. 3 trillion RMB in online sales was an important milestone because it was the clear inflection point that called for us to leverage the fundamental infrastructure for commerce that Alibaba has built. Marketplace, payments, logistic, cloud computing, big data to transform the 30 trillion RMB China retail economy. The most important opportunity on the horizon is helping traditional business to upgrade into a new retail model and not continuing to grow online business in isolation. Online and offline will be a single seamless experience, not just in consumer interaction, but also in the entire business operation and execution.
We want to improve efficiencies across the entire value chain of product design, manufacturing, distribution, and services. Taobao continued to flourish as a social commerce platform for China's millennials. As our mobile MAU expanded to 450 million, we are pleased that the DAU on MAU ratio and average daily time spent remains robust and constant. This is a resounding endorsement by users of an increasingly relevant and entertaining experience shaped by data-driven personalization, interactive innovations, and peer recommendations. A wide variety of original video content is being produced from brands to celebrities to entrepreneurial average Joe, adding even more richness to the Taobao universe on top of photo and text-based content. Close to 170,000 live streams were offered this quarter, with average view time of 11.2 minutes per user.
Tmall continued to provide unique value to brands and retailers that contribute to growth of their overall business. Our unified ID system, which allows merchants to trust and target customers effortlessly across our integrated retail marketplaces and the digital media platforms, continue to set us apart above the rest. More and more merchants are experimenting with live streaming to connect and engage with consumers. Our compelling see now, buy now feature built into the video stream technology enable merchants to provide instant gratification to customers. Merchants are increasingly leverage celebrity assets in campaigns to attract and convert their fan base. Our leadership in branding reach and distribution capability made Tmall Apple's only third-party platform partner for the global launch of iPhone 7. This year marks the eighth 11.11 Global Shopping Festival.
This year will be our most global ever with more than 11,000 international brands, including many first-time participants such as Sephora, Target, Maserati, Shanghai Disneyland, and Victoria's Secret. Continuing a new tradition that started last year, we will hold a countdown gala that will broadcast live on video, live on TV across China, Hong Kong, Singapore, Macau, and Malaysia, in addition to live streaming on our own mobile apps. Among the innovations this year is the launch of a pilot program enabling select merchants from around the world to sell to consumers in Hong Kong and Taiwan. Consumers will also experience the world's first end-to-end VR shopping experience and an interactive mobile game that leads them on an adventure across online and brick-and-mortar location of merchants such as Suning, Intime, Starbucks, KFC, Uniqlo, and many others.
Top brands and retailers are also capturing consumers' attention with exclusive new product launches and limited edition goods. Globalization continued to be an important growth driver. During the G20 summit held in Hangzhou, global leaders responded with overwhelming support for the formation of an electronic world trade platform that is dedicated to supporting truly free and fair trade of small businesses across global borders. We continue to expand selection of merchants with quality imported products to meet the demands of consumption upgrade. Our cloud computing continues to shine. Revenue increased by 130% year-over-year, and paying customers grew to more than 651,000. We launched a new clean energy data center in Northern China, capitalizing on the regional naturally advantageous weather conditions and innovated new ways to lower operational costs.
Over 40,000 developers from 58 countries attended our annual developers conference for cloud computing and artificial intelligence in Hangzhou, where we unveiled a City Brain project in collaboration with Hangzhou government to upgrade and transform citywide management and services. Our Digital Media and Entertainment business continued to broaden. Revenue increased 302% year-over-year from strong content acquisition and in-house original productions. Youku Tudou enjoyed blockbuster success with Chinese drama, A Smile is Beautiful, which set new viewership records. We announced the formation of Alibaba Digital Media and Entertainment Group, made up of Youku Tudou, UC, Alibaba Pictures, Alibaba Sports, Alibaba Music Group, Alibaba Games, Alibaba Literature, and our OTT TV set-top box business, and an investment fund focused on entertainment content acquisition and development. Finally, I'm excited to share some updates on our innovation initiatives.
AutoNavi is now the recognized market leader in mobile mapping and navigation in China. According to the latest data from iResearch, AutoNavi is active on more than 29.8 million devices daily, and users spend an average of 17 minutes on the app every day. We believe location-based services will play an important role in consumer services delivery in the future. Our travel business was rebranded Fliggy, flying pig in Chinese, to reflect its position as a leading leisure travel platform for Chinese millennials. To date, it has more than 200 million members and 10 million daily visitors to its mobile app. 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 very strong quarter. Total revenue grew 55% year-on-year to RMB 34.3 billion, with revenue from the core commerce segment growing 41% year-on-year. Mobile contribution continues to climb, reaching 78% of total China commerce retail revenue, as we added 23 million mobile MAUs to a total of 450 million MAUs in September. Cloud revenue grew 130% year-on-year, and the segment adjusted EBITA loss further narrowed to $8 million. Our core commerce segment generated adjusted EBITDA of $2.6 billion, representing 62% margin. Total revenue grew 55% year-on-year due to, first, continued accelerated growth of our core commerce business. Second, adding Youku to our Digital Media and Entertainment Group segment since the last quarter. Thirdly, robust growth of Cloud.
Number four, strong monetization of UCWeb users. The biggest component of the core commerce segment is China commerce retail, and its revenue growth was primarily driven by online marketing service revenue, which increased 47% year-over-year. Average merchant spending and the number of brands and merchants using our marketing services have continued to increase, reflecting the broader value position they derive from our platform. At the same time, our mobile Taobao app continues to see increases in user engagement, which, combined with personalized recommendations through data technology, resulted in continued year-over-year increase in number of clicks. Higher click-through is a more significant driver to online marketing service revenue as opposed to cost per click pricing. Talk about monetization. Our ability to monetize the users on our platform continues to improve.
Revenue per annual active buyer has continued its increase, reaching RMB 215 32 U.S. dollar. In the September quarter, on the mobile front, mobile revenue per mobile user has also seen increasing for several quarters, reaching RMB 151 in September. Quarterly cost trends. Cost of revenue excluding stock-based compensation was RMB 11.9 billion. As a percentage of revenue, it increased year-over-year, primarily due to an increase in costs associated with our newly consolidated businesses, such as Youku and Lazada, as well as the result of our investment in Tmall Supermarket. Product development expense excluding SBC was RMB 2.7 billion, which as a percentage of revenue decreased slightly year-over-year. Sales and marketing expense excludes SBC was RMB 3.4 billion, stable as a percentage of revenue year-over-year.
G&A expense excludes stock-based compensation was RMB 1.7 billion, also stable as a percentage of revenue year-over-year. Non-GAAP net income in the quarter was RMB 12.9 billion, an increase of 41% year-over-year. Free cash flow and capital expenditure and cash. We continue to generate significant free cash flow. Our cash flow allows us strategic and operational flexibility to invest in technology and acquire the resources to accomplish our strategic objectives. In the September quarter, we generated RMB 13.9 billion, or about $2.1 billion free cash flow. Total cash capital expenditures in the September quarter were RMB 3.6 billion. As of September 30, 2016, our cash equivalents and short-term investments were RMB 108 billion, or $16 billion.
This is an increase of RMB 18 billion from the end of June quarter, primarily because of our free cash flow generation from our operations. Segment reporting. Core commerce. Revenue from this Core commerce segment increased 41% year-over-year. China commerce retail revenue grew 40%, primarily due to strong growth of 47% year-over-year online marketing service revenue. The growth on online marketing service revenue also reflected the full effect of online marketing inventory we added in September 2015. As we anniversary these impacts, we expect the subsequent quarters to face tougher comparables for online marketing service revenue. Mobile MAU growth was very robust this quarter. In September, we had 450 million MAUs across our China retail commerce apps. This represents 23 million in net adds from just three months ago.
We ended this quarter with 439 million annual active buyers in our China retail marketplaces. We're encouraged by the level of user growth as well as engagement on our mobile commerce platforms, as our marketplace have become the destination for social commerce and brand engagement. The average spending per annual active buyer continued to increase in the 12 months ended September this year, reflecting buyers purchasing more and more often and across more categories. We feel very comfortable with the fundamental health of our China retail marketplaces. International commerce retail revenue increased to 178% year-on-year, mainly due to the consolidation of Lazada starting in mid-April, and re-acceleration of growth of revenue generated from AliExpress. Our strong margin in the core commerce segment gives us the ability to invest in our future growth.
You will notice that adjusted EBITDA margin in this segment was 62% this quarter, which is the same as the same period last year and 1 percentage point higher than the prior quarter. Due to operating leverage, margin is maintained despite our aggressive investments in the three highly strategic areas we talked about before. Rural Taobao, Southeast Asia through Lazada, and Tmall Supermarket. We will continue to make investments in these highly strategic business areas, and the investments might, from time to time, outpace operating leverage. Cloud computing revenue grew 130% year-on-year. The growth was primarily due to an increase in the number of paying customers, which has more than doubled since the year-ago quarter to 651,000. Also to an increase in their usage of more complex offerings, such as our content delivery network and database services.
Adjusted EBITDA margin of cloud computing segment significantly improved from negative 13% in the prior quarter to negative 4% this quarter, which demonstrate that this business has significant operating leverage once you reach scale and the product sophistication. As we communicated in the past, making the business profitable is not the top priority for AliCloud at this stage. The top priority is to keep expanding our market leadership. We will continuously make investments to develop our cloud business for rapid expansion. During the cloud computing conference, in mid-October, AliCloud announced price cuts across its product offerings, some as high as 50% cuts. Improvements in technology and economies of scale have driven our costs down, we are passing the savings on to our customers.
We do not anticipate materially negative financial impact from the price cuts, from a strategic perspective, it helps us expand our market. Digital Media and Entertainment segment revenue increased to 302% year-on-year, primarily due to the full effect of consolidating Youku, also to an increase in revenue from mobile value-added service provided by UCWeb, such as mobile search and news feeds. Adjusted EBITDA margin of this segment was negative 39%, primarily due to content acquisition and development costs of the Youku offset by improvement in UCWeb's margin. We're committed to investing in our content library and the proprietary IP as part of our digital entertainment strategy. Revenue from innovation initiatives and other segments increased 78% year-on-year, primarily due to an increase in revenue from new initiatives such as YunOS, our operating system for mobile phones, automobiles and Internet of Things.
Adjusted EBITDA margin of the segment was - 110%, reflecting our continued investment in automating and new business initiatives such as DingTalk. Finally, I'd like to provide an update on this, of the value of our various business segments. As you can see, different businesses are in different development stages. The approach to value each of these should be different. For example, our Core Commerce Business has high profit margin and can be measured using metrics such as profitable multiples, while our other businesses are currently in the investment stage. Investors can approximate their valuation using revenue multiples and operational metrics. In terms of the value of our portfolio of strategic investments, we have updated the valuation of our stake or economic interest in these investee companies.
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 the hash key. Please note, to give more people the opportunity to ask questions, please keep yourself to no more than two questions at a time. Once again, I would like to remind you, if you wish to ask a question, please press star one on your telephone and wait for your name to be announced. The first question comes from the line of Chi Tsang from HSBC. Please ask your question.
Great. Thank you very much. Congratulations on a very strong set of results across the board. I have two questions. Firstly, can you walk us through some of the drivers of revenue growth and engagement for the China retail business, please? Secondly, can you address the New York Post article on the SEC inquiry? Thank you.
Right. For the drivers of the revenue growth, we talked about the engagement. It's actually not one effort or two. There are many things we have been making effort on. You know, if you look at our Tao app, you probably have noticed that there are a lot of new products and functions that, you know, including like live broadcasting reviews, the seek for your advice and et cetera, that brings a tremendous, you know, new attraction to these users. This you can tell by looking at not only the daily active user growth, but also when you look at our DAU versus MAU, it still stays at very high levels.
Last quarter, we reported 40%. It's, you know, quite high level. When you look at the time spent, actually time spent, we talked about, it's, you know, about 20 minutes. It's even higher than some of the social platforms. Daniel, you want to supplement?
Yes. Actually, I would like to add more color on the revenue growth engine, especially in the China retail marketplace. I think the first engine is the continued growth of our traffic. Today, actually, most of our traffic now is on the mobile, and we are happy to see our mobile MAU continue to grow very rapidly. The net adds in this quarter is about 23 million. This is very strong net adds. At the same time, the user stickiness is continued to be very constant and robust. So actually, I think this is the first engine. Second, as Maggie mentioned, on our Taobao mobile app, actually, it's not only a shopping app, it's a social commerce app.
We add a lot of new product and features in the app like social, like recommendations, peers recommendations, like video streams. Actually, we also put a lot of opinion leaders to have their own actually mini sites on our mobile app to broadcast, to share their experience, their shopping experience, share their recommendations to their fans. All of these create a incremental inventory to be monetized. Today, I think in terms of the percentage of the inventory to monetize is still very low percentage. We have enough inventory in reserve in the future and to consider.
But we will consider to use a native approach to monetize this inventory and make sure the consumer experience is good enough. The last one actually is that improvement in technology. While the improvement in our pay-sub technology, improvement in our advanced advertising technology, not only in our retail market business, but also cross-platforms to digital content platforms. We can effectively improve the ROI of the advertiser, but also to improve the critical operating metrics like CPC, cost per click, in our P4P business, in our cost per play, per display, per impression in our display ads. I think all these factors give us enough space to continue to grow our revenue in our core business.
I'll address the second question. You know, as you know, we've been in the process of with the SEC, they sent us a letter inquiring as to a number of issues. On this, we've been very transparent with you guys about what's going on. We disclosed all the issues involved and the fact that we're voluntarily cooperating with the SEC in their inquiry. We don't think there's any factual basis to the New York Post story. On that score, when we have real news, we will update everyone. I just wanna say, I'm not surprised that in days leading up to Singles' Day, our detractors will want to divert people's attention. You know, we're not gonna be distracted.
We're gonna focus on what's really important, bringing the best Singles' Day experience to our customers. Thanks.
Operator, next question, please.
Thank you. The next question comes from the line of Mr. Robert Peck from SunTrust. Please ask your question.
Hi, thank you very much. Two questions, please. One, Maggie, maybe could we get a little more color on the revenue drivers? We had a tough time hearing some of your answers there with the analysts typing away loudly. What particularly I wanted to see if we get a breakout of what's driving revenue between CPCs, click-through rate, and ad load. Then as part as that, we know on slide five you give us a helpful chart on revenue per active buyer as well as revenue per mobile MAU. Can you help us equate those two numbers? Can we know what percent of mobile MAUs are active buyers so we can compare those two numbers and the eventual take rate uplift we can get? Thank you so much.
Sure. When you look at the revenue drivers, I think we see growth in many of these detail drivers. We talked about the continuing year-over-year increase in the number of clicks. This is basically coming from originally from the increase in DAUs. A higher click-through is more significant driver to online marketing service revenue as opposed to cost click per-click pricing. Regarding your question on the MAUs versus annual active buyer, MAU is actually users. The purpose of we showing that revenue per mobile revenue per MAU is to demonstrate you know the monetization ability on our mobile platform.
It's kind of different measures if you look at the active buyers. Those are the overall. There are overlaps, and I think it just we're trying to present different things. Our ability to monetize these things represents the value provided and being recognized by merchants, and the value actually originally coming from buyer and user, number of buyer and user, as well as the engagement of these group of people. The revenue. Another way to look at this revenue growth is that these are the two direct driver we talked about. One is the number of merchants, the other is the average spending of these merchants.
We see both have shown growth very in a very healthy way.
Thanks very much.
I think the reason we're presenting both charts, you know, revenue per active buyer and also mobile revenue per mobile MAU is that the monetization model, as you know, with online marketing services does not require someone to actually buy something. It is click-based and it's basically marketing service revenue. It is relevant for you to look at MAUs on mobile, these mobile users that are coming in. We now have 78% of our revenues in China retail marketplace that's coming from mobile. That is growing very robust. Daniel?
Yeah. Actually,
Thanks. Thanks, Daniel
In terms of how many active buyers, how many MAUs are active buyers, I think, this quarter, what we disclosed is that, 78% of our, of our GMV, of our transactions are from mobile. I think this number, 78%, it can well address your question.
Thank you.
Operator, next question.
Thank you. Thank you, sir. The next question comes from the line of Wendy Huang from Macquarie. Please ask your question.
Thank you very much. First, can you give us some updates on the cloud revenue models? I understand that with the cloud you have 600,000 paying customers. Only the service provider or partner you're working with, what kind of partners you are working with? What kind of revenue models are you charging on the cloud? Are you also having the revenue share with those service providers at the moment? Similarly, you mentioned in your press release that there is a standardization of the UCWeb.
Wendy, we can't hear you clearly, Wendy. Sorry. The line seems not to be good. Can you repeat?
Okay. Can you hear me better now?
Yeah. Right now.
Is it better now?
Much better. Thank you.
Yeah, sure. My first question is about the cloud business model. You mentioned about the price cutting and also the large paying customer base. I just wonder if you can give us some updates on the service provider you are working with. Also are you doing any revenue share with those service provider, just like what you are doing with the e-commerce merchants? Secondly, it's about UCWeb. You mentioned about the standardization of the UCWeb users. Can you elaborate the revenue models of the UCWeb at the moment? Is the revenue mainly from the newsfeed or other type of revenue streams? Thank you.
Okay. For the first question, Cloud business revenue engine. I think there are basically two engines for the Cloud revenue model. First is obviously the number of paying customers. Because Cloud is such a pervasive fundamental infrastructure to the new commerce, we believe today, even though we have very rapid growth in the user base, in the client base, this quarter reached over six.
CNY 600.
Over 651,000, we think we have a lot room to grow, and it can cover a wide range of the business, starting from the female enterprise government agencies to developers and to third-party business. The second one, I think even more important, is that we try to deliver first the in-house service, in-house developed services tools to our client on the Cloud. For example, we successfully convert our middleware services, which we get a very strong expertise from our e-commerce business. Actually, we converted middleware service from a in-house service to a third-party service to our client on the Cloud. We also leverage our expertise in the security service.
Now, security service is one of the main services in our cloud business. Looking ahead, we will continue to develop more services and to put it in our cloud. On the other hand, we will work with a lot of ISVs partners to power their services on our cloud. We can basically serve our mutual clients more successfully.
In terms of reaching customers, there's a number of different models of service providers of sales agents, where they get an agency commission. Also, resellers where they are basically systems integrators, and they buy the service from us and resell to the end customers. There's a range of different models to reach the customers. We also obviously have direct customers that come to our platform. There's a question on.
Thank you. How about UCWeb?
UCWeb monetization.
Right. UCWeb, we talked in our announcement that it grows, the growth of the business is very strong. It also shows in the revenue, shows in both revenue and profitability. At time we acquired that business, it was a browsing business. Nowadays, if you look at the business, it's been added many new elements, including mobile search, and news feeds. They also have a small gaming business. For mobile search, we are talking about it, we already become the number two mobile search service provider in China. It continue to grow very well. Although we haven't disclosed with the daily search query et cetera, but these operating metrics showing very encouraging growth trend.
For the monetization on that business is pretty much the same as other mobile search business. The other new areas that we develop very well is the news feeds. If you look at, when we compare our DAU for that business, it's already become one of the top three news feeds platforms or news distribution platforms in China. The way we monetize that, there are multiple ways. It's, you know, it could be pay per.
It's, you know, displays and also pay per many ways, per display, per impression. This is still in early stage, but it's we see great potential to grow. Another thing worth to mention is the international globalization of UCWeb. They have been into Indonesia, India and a couple other countries. They already become the number 1 browsing business service provider in Indonesia and India. We'll later on, you know, once the business get expanded, we're gonna monetize substantially on those business growth as well.
Operator, next question, please.
Thank you, sir. The next question comes from the line of Eric Sheridan from UBS. Please ask your question.
Thank you so much for taking the questions. First one really on the competitive landscape. Wanted to know if I could get an update on the way you're looking at the competitive landscape as we go into Singles' Day, as we come in and out of the end of the calendar year. The follow-up question will be on logistics. Maybe a little bit of discussion on the pace and velocity of the need to invest in logistics medium to long term, and how that improves the platform ecosystem and strength you're currently sitting with. Thank you so much.
Okay. First question. I think competition always exists. Actually, as a market leader, what we will always do is to rely on innovation, and we rely on meet the customer demand to enhance our market leadership, and we will continue to do so. Eight years ago, we created November 11. Now we are very happy that November 11 become the shopping festival for the consumer across the world. We are also very happy to see that a lot of peer players and online, offline, and they all view November 11 as a shopping festival. I think this is all good, all good for our mutual customers.
But obviously, when you ask people, the November 11, the mind share of November 11 belongs to Tmall, belongs to Alibaba. For the second question of logistics, I would say, actually, as we always do, we continue our partnership model in logistics. Recently, we are very happy to see a couple of our logistics partners, delivery companies, they successfully got listed, which proves again the magic of the ecosystem. We not only actually try to serve our customers by ourself, but also leverage the expertise of our partners, and we will continue to do so. We believe that with the mutual success of our business and our ecosystem will be more prosperous.
Next question, please.
Thank you. The next question comes from the line of Eddie Leung from Merrill Lynch. Please ask your question.
Good evening. Have two questions. The first one is about your commission revenue. We have seen a bit of slowdown in the commission revenues in the quarter. Could you comment on that? Is there any one-time factor behind it? Secondly, about international strategy. Just wondering how you guys decide on the timing and the pace of expanding into a new country, and how that could affect your investment and margins going forward. Thank you.
Right. Eddie, I'll answer your first question, and then Daniel will talk about the second one. The commission is mainly commission revenue from Tmall marketplace. We see top line Tmall as one integrated marketplace. Our value position has already gone beyond the GMV. Commission kind of reflect one thing, but online marketing revenue growth also showing the, you know, the other values we provided, which you can tell 47% year-on-year growth on online marketing. Overall, growth for the China retail marketplace is 40% year-on-year revenue growth.
To us, it's, you know, overall one marketplace providing different values that eventually, you know, we're gonna monetize all of them, not only one thing, but also others. We're satisfied with the overall revenue growth for our China retail marketplace. In terms of international strategy, when we look at the opportunities in new markets, we usually consider a couple of factors. First is population. Is there a big enough population? Second is about the mix of the population, you know, about young generation, and how big is the group of the young generation. Next one is about the retail landscape, and is retail as sophisticated and as segmented?
The next one is about the mobile penetration. I think mobile first is critical in developing the business in the new markets. Having said that, globalization is a long journey, and we have a clear vision. We have a great mission to start targeting consumers in next 20 years. We are now just at the beginning stage, and we will continue to invest in the international business as we just did it in Lazada. So far we are very happy about the integration process, and we are very happy to see the business growing very rapidly after our investment. We will continue to look at other opportunities in other markets.
Operator, next question.
Thank you, sir. The next question comes from the line of Scott Devitt from Stifel. Please ask your question.
Yes, hi, thanks. Google and Facebook have used a combination of price and volume to drive effective monetization and a very long duration of high rates of revenue growth. You've done a very good job of kind of articulating the opportunity, more similar to them than being tied directly to transactions over time. Be interested in your view, and how investors should think about, you know, some of the benefits to monetization annualizing, here in the coming year versus, you know, having a very long runway to drive monetization similar to those companies. Secondly, on cloud, if you could, maybe break down or help us understand better the customer makeup, SMB, mid-market enterprise, and how you see that changing over time as the capabilities of that platform get stronger and stronger. Thank you.
Scott, hey, I'll try to answer your first question. I think it's, you know, when you look at a marketplace where a big part of the monetization relates to online marketing services, sort of performance-based marketing, you have to look at the nature of the marketplace. I think we have a superior marketplace in that, you know, there's really no church and state when it comes to content and ads, because when the user comes to our marketplace, they have very high commercial intent. When you look at an ad listing versus a quote-unquote organic listing in our marketplace, it's basically the same thing.
It is basically an item that a merchant has put up for sale that they wanna sell. That has implications for ad load, for example. In a Google or Facebook context, ad loads are quite limited because if they start to load in a lot of ads, then that really affects the user experience. They have to be very careful about it. Now, we philosophically are very careful about layering ad load. As you have referred to last year, we had an ad load increase by increasing one slot in our P4P advertising, and now we're, you know, we've seen the full effect going forward. Maggie referred to sort of the anniversarying of that effect, making the, you know, year-on-year comp a little tougher.
Let me just say this. If for those users, for those of you who actually use our app, and our user interface, there's actually not a lot of ads. We're still being very, very conservative when it comes to ad load. Obviously that is a, that has implications to the volume question. The other driver of volume, which is clicks, is technology. If your recommendations for the ads are more relevant to the user, then the click-through rates can increase, and you get more clicks.
With our ability to basically personalize every single user interface, every person, every consumer coming to the platform can see different products and different recommendations, that's drastically increases our ability to generate, you know, relevant clicks, and drive performance on our online marketing platform. That's another driver to the volume question. As Maggie has referred to before, in her script, I think, you know, this quarter mainly we are getting the revenue increases in online marketing from the volume side of things, in other words, clicks and click-throughs, increasing click-throughs, as opposed to price increase of the ads. I hope that answers your question.
Right. In terms of cloud customer base, if we reported 651,000 paying customers at the end of this quarter, which doubled the same period as last year's. We still see great potential for this paying customer base growth. Our next milestone goal gonna be 1 million. When you look into the, the customer base, it actually shows a great variety. It's not only the Internet startups, but also financial institutions, also healthcare, public transportation, energy manufacturer, and the government agencies. If you look at ownership of this business, it varies from, you know, the private company, listing company, state-owned.
And our major customer base, although is SMB, we do see the big guys coming to us, you know, recently and more and more, you know, companies like Sinopec, a state-owned enterprise coming to us. There is one data point. We've seen that over 50%
Of the unicorn companies in China are paying for our AliCloud services. These are the companies that grows really fast and gets to a certain size in a very short period of time. They are, you know, more than half of them are using AliCloud service, which is very encouraging.
Operator.
Thank you.
Last question, please.
Yes, sir. Ladies and gentlemen, in the interest of time, we will take two more questions. The next question comes from the line of Alex Yao from JPMorgan. Please ask your question.
Hi, good morning and good evening, everyone. Thank you for taking my question. The first question is on the China retail marketplace. We understand that you guys have stopped disclosing the quarterly GMV starting from this quarter. Can you qualitatively give us some color on what's driving the 40% revenue growth for this segment? Is it more on GMV or take rate? Also can you share more insight in terms of how sustainable is the take rate improvement trend, particularly with the higher revenue base comp into the next couple of quarters? Secondly, you guys talked about that Tmall is playing an increasingly important role in large brands, brand building, channel expansion, and new product launches in the prepared remarks. Can you help us understand the commerciality of those relative position from monetization standpoint?
Thank you.
Yeah. For the first GMV question, yes, we will report GMV on annual basis. For the GMV so far looks good and growth is on track. For the second question about the growth of the big brands.
On Tmall.
On Tmall. I would say actually, today, all the brand companies, they are in the process of transforming to a digital operation. What they have done is that they decided to switch their marketing dollar budget from the traditional media to digital media. That give us a very good prospect to help them to spend their marketing dollar smartly. Via our unified ID and via our synergies between the retail marketplace and the digital media platform, we can successfully help our brand partner, which both our merchants on our retail platform and advertiser on either retail or the digital media platform to manage the customers effectively and in a digital way.
This actually we believe has great potential and so far we have a lot of, very, great examples and successful stories, and we will continue to roll this out to many more clients and to help them to do the digital transformation.
Thank you. Ladies and gentlemen, that does conclude our conference for today. Thank you all for participate. You may all disconnect the lines now. Thank you.