Earnings Call: Q2 2016

Oct 27, 2015

Good day, ladies and gentlemen. Thank you for standing by and welcome to Alibaba Group September Quarter 2015 Results Conference Call. I would now like to turn the call over to Jane Penner, Head of Investor Relations of Alibaba Group. Please go ahead. Good day, Vice Chairman Daniel Zhang, Chief Executive Officer Maggie Wu, Chief Financial Officer. As you know, we distribute our earnings release through Alibaba Group's Investor Relations website located at www.aligroupalibabagroup.com. So please refer to our IR website for our earnings releases as well as the supplementary slides that accompany the call. You can also visit our corporate website for the latest news and updates. Please check it out. This call is also being webcast from our IR section of the corporate website. A replay of the call will be available on our website later today. 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 non GAAP EBITDA, including non GAAP EBITDA margin and non GAAP net income, are expressed on a non GAAP basis. We have also adjusted our net cash provided by operating activities to remove purchases of property and equipment and intangible assets, excluding acquisition of land use rights and construction in progress and adjust for changes in loan receivables relating to micro loans of our SME loan business, which we refer to as free cash flow. 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 over to Daniel. Thank you, Jane. Good evening or good morning depending on where you are. Thank you all for joining us today. We had a great quarter with strong growth across our core operating metrics. Our ecosystem continues to thrive. GMV grew 28% year on year. This increase was driven by robust annual active buyer and mobile monthly active user growth. User engagement is very healthy, with more buyers purchasing across all categories. We are winning in mobile. Mobile users are highly engaged, and it drives online marketing spend by our merchants. In China retail business exceeded 60 percent. As a result, we saw robust revenue growth during the quarter. Overall, year on year revenue growth was 32%, and specifically, revenues from our China retail marketplaces grew 35%. We are fortifying our market leadership in the major cities. In addition to Beijing and Shanghai, we added Chengdu, Guangzhou, Hangzhou, Suzhou, and Wuhan for same day delivery for groceries. We continue to develop commerce in the low tier cities and rural areas. In the September quarter, we increased our presence in over 4,000 additional rural villages, where we provide purchasing and delivery services. At the same time, we remain committed to providing a trusted consumer experience with authentic products by driving merchants that handle counterfeit products off our marketplace. This commitment to the best consumer experience has clearly not heightened our ability to monetize GMV. We also want to call your attention to some recent developments in our cloud computing business. In the September 2015 quarter, revenue from cloud computing and Internet infrastructure continued to accelerate. We opened a data center in Singapore serving regional and global customers, and we'll continue to expand our customer base, geography and product offerings. We recently announced our Hangzhou plus Beijing Twin Hub strategy, and I want to share our thoughts on this. Beijing is a capital of China, and comments invaluable influence both domestically and on the global stage. Our base in Beijing will help us better serve and connect with customers in the northern region. Outside of Hangzhou, Beijing is our largest operations base. This was also an important quarter for our international business. Our globalization strategy is focused on cross border commerce. Our China retail marketplace platforms are engaging as a gateway for international brands and retailers to sell their products to Chinese customers. We are making good progress. Just 2 weeks ago, we hosted diplomatic representatives from 39 countries at our official kickoff ceremony for this year's November 11, and announced strategic partnerships with almost 100 customers. We also recently opened offices in London and Milan to serve European brands, retailers and trade associations who seek to access the large and growing Chinese customer class looking for high quality imported products and services. I want to give a quick update on the progress of our business collaboration with Suning. We are partnering with Suning in multiple fronts, including omni channel and logistics, and you will see this brought to life on November 11. For example, consumers can pay orders online, and goods will be fulfilled from Suning retail stores. We have also integrated Suning's logistics network and services, which will be made available to other merchants on our platform. On November 11, the Suning warehouses will be supporting fulfillment of FMCG products. In addition, Suning locations will offer after sales service for online purchase of goods. Finally, I just want to give a bit of preview to November 11. We are focused on 4 key areas this year: globalization, omnichannel, mobile, and logistics. We are taking November 11 global because our Chinese customers, as well as global brands and retailers, have demanded. Many well known overseas retailers will participate in November 11, and many countries are partnering with us directly to offer specialty fresh foods. In terms of omni channel, more than 180,000 offline stores across 330 cities will interact with our mobile commerce app and offer new shopping experience and services to customers. With that, I will hand over to Maggie to discuss our financial performance this quarter. Thank you, Daniel. Hello, everyone. Here are some financial highlights from the September quarter. Our GMV grew 28% year over year to RMB713 1,000,000,000. Excluding the effect of the suspended lottery business, GMV would have increased by 30% year over year. Our GMV growth was primarily driven by an increase in annual active buyers, which grew to 386,000,000 at the end of the September quarter. Mobile MAUs were RMB 346,000,000 in September. Revenue grew 32% year over year to RMB22.2 billion. The year on year performance was driven primarily by the acceleration of our China commerce retail business as well as the growth of Ali Cloud. Non GAAP EBITDA margin was 50%, same as in the year ago period. Non GAAP net income grew 36% year over year to RMB9.3 billion. Diluted non GAAP EPS, excluding SBC and amortization of intangible assets and certain other items, was RMB3.63, an increase of 30% compared to RMB2.79 in the same quarter of 2014. Now, let's get into the details. In the September quarter, In the September quarter, our blended monetization rate was 2.42% versus 2.3% in the year ago period. Our mobile monetization rate increased to 2.39% in September quarter, up from 2.16% in June quarter and 1.73% in March quarter. The trajectory is especially impressive because the suspension of larger businesses that began in late February has disproportionately negatively impacted mobile monetization. Going forward, we expect improvements in mobile monetization will be driven by our proven ability to deliver value to both buyers and advertisers on mobile devices, and increase engagement on our platform. In the long term, we still believe our mobile monetization rates will approach or even exceed historical PC monetization rates. We're also making steady progress in PC monetization, despite the slight year on year decline. In the long term, we're optimistic about our blended monetization rate. Having said that, in the near term, as you know, we don't forecast revenue growth or take rates. Keep in mind that the improvements to monetization may not always be linear due to a variety of factors. Year on year, our revenue grew 32% to RMB22.2 billion. This growth was primarily due to the acceleration of our core China commerce retail business, business, which benefited from our focus on high quality merchants and on delivering a better value proposition to our merchants. We optimized online marketing efficiency and increased online marketing inventory on both mobile and PC screens. Those also contribute to the revenue growth. Our mobile revenue from China retail marketplace was around RMB10.5 billion or US1.7 billion dollars representing a year on year increase of 183%. This year on year increase in mobile revenue in both absolute dollars and as a percentage of total revenue from the China commerce retail business was due to an increase in mobile GMV GMV and better monetization of mobile usage. Revenue from our international commerce retail business was RMB481 1,000,000, a year on year increase of 15%. Please note that our recent efforts in the cross border import business are not reflected in this revenue line. In the future, we will develop metrics that measure our progress in the cross border import efforts, such as BMO Global progress. Cloud computing and Internet infrastructure revenue grew 128% year on year, primarily due to an increase in the number of paying customers and also to an increase in their usage of our cloud computing services, including more complex offerings, such as our content delivery network and database services. Other revenue is flat year on year due to a tough comparison to September quarter 2014, when we booked interest income from SME loan business to this line. We no longer booked the vast majority of that interest income to other revenue. This is because of the restructure of our relationship with ANS Financial, which has been communicated earlier, and the restructure was completed in February 20 16. We expect this restructuring will continue to negatively impact the year on year growth of our other revenue line until we end up maturing in the June quarter next year. In this quarter, our non GAAP EBITDA margin was 50%, flat from the year ago period. Our message remains the same. We do not manage to our margin target. We will continue to make strategic investments into new and existing businesses to build long term value. We'll continue invest a portion of our free cash flow in new businesses, and the growth of this new investment spending may be higher than our overall revenue growth. Now, let's talk about our operating expenses. As in prior quarters, we used non GAAP numbers to exclude stock based compensation. So, non GAAP cost of revenue was RMB 6,600,000,000. Non GAAP product development expense was RMB 2,000,000,000 non GAAP sales and marketing expense was RMB 2,200,000,000 Non GAAP general and administrative expense was RMB 1,100,000,000. Non GAAP cost of revenue as a percentage of revenue increased year over year. This was primarily due to an increase in costs associated with our new business initiatives and an increase in traffic acquisition costs. The latter grew due to the expansion of our 3rd party affiliate ecosystem as part of the strategy to strengthen our ad platform business under Alibaba. Non GAAP product development expenses as a percentage of revenue decreased slightly year over year as we stopped paying royalty fees to Yahoo after our IPO in mid September 2014. Non GAAP sales and marketing expenses as a percentage of revenue is flat year on year, and non GAAP G and A expenses were year on year. We generated RMB13.6 billion or US2.1 billion dollars of free cash flow in the September quarter, an increase of 52% compared to RMB8.9 billion in the same quarter of 2014. HEPA expenditure in the September quarter was RMB3.2 billion, a slight decrease from RMB 3,400,000,000 in the same quarter last year. As of September, our cash, cash equivalents and short term investments were RMB 106,000,000,000 versus RMB115,000,000,000 in the June quarter. Despite our free cash flow during this quarter, the decrease was mainly due to the RMB17 1,000,000,000 or US2.7 billion in cash disbursed to repurchase our shares. We purchased 40,800,000 shares in the quarter, representing about 1.6% of our weighted average outstanding shares. That concludes our prepared remarks. Operator, we're ready to begin the Q and A session. Thank you. Thank you. Ladies and gentlemen, we will now begin the Your first question comes from the line of Eddie Leung of Merrill Lynch. Please ask your question. Good morning and good evening. I have two questions. The first one is about your retail business. We have seen Tmall outperforming Taobao in terms of growth rates in the past couple of quarters. And it seems like the trends are getting more obvious. So just curious to hear your thought on this. Are we seeing any structural change in user preferences and user behavior? And what could be the long term position of Taobao? And then secondly, we would also like to hear more about your progress in lower tier cities commerce. So wondering if you can share any metrics with us in terms of the business developments outside the so called Tier 1 and Tier 2 cities? Thank you. Thank you, Eddie. This is Daniel. For the first question, I would say, actually, as we always tell you that, in our China retail business, we manage our e commerce platform as a whole. Actually, Taobao and Tmall are 2 separate brands, and they have very clear market position, but they are integrated platforms, they are integrated marketplaces. So, actually, we always look at the growth of the 2 marketplaces as a whole. We have very clear operating goal, which is in 5 years, we want to achieve US1 $1,000,000,000,000 GMV. Today, we are happy that we are on track. For the second question, in the rural areas, we have our we initiated our rural Taobao program more than half a year ago. So far, we've made very good progress. As we said in our script, we added 4,000 villages in this quarter. Today, I think China is very big and we are still in early stage, but we believe the most important thing is to create value for the farmers. Today, we are focused on to help them to buy from our online marketplace to improve their lifestyle. Looking ahead, we will help them to sell their original products, produce in rural areas to the people living in the downtown, in urban cities. So, actually, we believe that we'll continue to expand our network in the rural areas to bring benefit for our customers. Thank you. Next question, operator? Your next question comes from the line of Robert Lin of Morgan Stanley. Please ask your question. Hi. Good morning, management, and congratulations on a very strong quarter. I got 2 questions here. I guess one is on brand commerce. Obviously, this year's Double 11 is very focused on omni channel. We've heard from retailers that about 20% to 50% of their sales from Tmall are now fulfilled from the stores, and this is one step forward. Can you give us a more near term metrics on this initiative? How would you record the GMV that is being fulfilled from the stores or experience from the stores? And I guess there's about $3,000,000,000 marketing dollar that's in different news sources talking about promotion this year. Can you share us the economics, how much are we bearing in that $3,000,000,000 marketing dollar cost for this Double 11 events? And I guess a more broad term, long term, what this means for Alibaba in terms of online, offline advertising revenue? And second question is more on the EBITDA margin. Obviously, we recently talked about Youku acquisition. If we were to there's a lot of consolidation going on in China Internet. Do we want to accelerate our potential acquisition of strategic assets, because I think the valuation has become more reasonable? Or do you feel that the EBITDA margin that we currently have is a suitable level we want to work with? Rob, this is Maggie. I'll answer your second question first, and then Daniel will answer it first. When it comes to margin, we still remain the message the same. We don't manage business by managing the margins. This is why we don't give margin guidance. Our core business generated high margins. We'll continue to make strategic investments in the new and existing business to fuel long term revenue and profit growth. Our investment may be long term nonlinear. So, when we assess the investments made, we have a very rigid process, and we have these post management tools and measures. Actually, for the first question, I would say today when we look at the O2O opportunities, actually, we should develop the solutions by category, by industry. Actually, in different sectors, in different industries, it has different O2O solutions. People will also always talk about the onlineoffline experience, but what we can share is first, when we look at our GMV, when we calculate our GMV, we only calculate the GMV process through our system, and paid by Alipay. This is our GMV, and the basis to calculate our GMV. Having said that, in the auto solution, part of this could be the orders are generated online, but fulfilled offline, or picked up by customers in stores, or people can enjoy the service. They can buy some product online or enjoy the service offline. So, situation varies in different industries. But, we will always follow our methodology, which is we will monitor the GME by the amount of the transaction processed in our system. As to the 3,000,000,000 market dollars, actually, we I'm not aware of this $3,000,000,000 market dollar story, and this is definitely not in our operating metrics. Next question, operator. Thank you. Your next question comes from the line of Carlos Kurtner of Bernstein. Please ask your question. Hi, thank you for letting me ask my questions. Can you help us understand the portion of GMV that is not monetized? For example, what portion of Taobao sellers do not pay Alibaba and what percentage of GMV do they correspond to? And secondly, of the $102,000,000 in the cloud computing line, how much is cloud computing proper such as infrastructure and platform as a service versus web hosting and other legacy services? And how fast is the cloud computing piece actually growing? Thank you. Yes. Carlos, this is Joe. To your first question, the way we look at this, we don't tie specific GMV to specific marketing dollars, because advertisers advertise on our platform not only to generate that direct GMV, they also look to acquire new customers to engage with their customers. So a scenario is, if somebody comes to us to a user comes to our site because of online marketing by a merchant and they buy something, and then they again come back a week later to purchase from the same merchant because they had bookmarked that merchant storefront. That is additional GMV that's generated not directly as a result of advertising, but that merchant has acquired the user. So, there is very so the point here is that merchants are buying online marketing to do a bunch of things rather than generating that direct GMV. And we feel that our entire marketplace provides a really terrific platform for merchants to market themselves, build their brand, engage with their customers. So it's way, way beyond just generating that specific GMV. And that's why our China retail marketplaces are such a robust platform for merchants. That's why the brands are coming to our platform. Yes. Carlos, this is Maggie. Regarding to your second question, what's the percentage of revenue in this Ali Cloud infrastructure representing the Ali Cloud Computing revenue? I should say that Next question, operator. Your next question comes from the line of Ming Gao of 86 Research. Please ask your question. Thank you very much for taking my questions. First question is, can management give us an the the maybe the apparel category is more maturing. Some of the new categories like food and beverage is going very strong. But we want to see if there's any color about new categories can bring more growth while offsetting the more maturing categories. So some picture would be better for us to understand the change there. The second question is a follow-up on the cloud computing. So assuming the triple digit growth is coming from mainly the number of client growth, so can you give us some metrics about how many clients are you servicing on the cloud computing side? And what is the profitability picture picture of that cloud computing? Thank you very much. Yes. Thank you, Ming. This is Daniel. For your first question, if we analyze the GMV by category, I would say, actually, our consumer electronics, mobile phone and larger clients in Tmall actually enjoyed rapid growth in the past quarter. On top of that, actually, we can see a very clear trend that people buy day to day necessities from online platform because this is much more convenient than the offline freight and motor chains. And food and beverage and especially fresh food are very popular online today. Thank you. Hi, Ming. Regarding your second question about cloud computing, the number of paying customers is growing very well. We haven't disclosed it on a quarterly basis. However, we did talk about it in our 20 F. So, the number of enterprises easing our cost services is already over $1,500,000 and there's a big group of people who are merchants on and Tmall platform. So, going forward, we might consider to add more disclosure at the due course. The question about profitability profile, Cloud computing is very nascent right now. The market is huge, and we're really not even at the first pitch of the 1st inning. So, not really thinking about the profitability because long term, we think that this is definitely going to be profitable, but that's not what we're focused on at this point. Thank you. Next question, operator? Your next question comes from the line of Erica Poon of UBS. Please ask your question. Thank you. Two questions on It seems that your role is shifting from a disruptor to a potential savior for offline retailers. Could you just share your perspectives on online retailing over the long term? And do you also expect Alibaba's penetration of China's overall retail will pick up meaningfully with more integration with offline retailers? And my second question is on OTA. In light of yesterday's deal among Ctrip, Junar and Baidu, could you just perhaps update us on your thoughts on the China OTA segment and also Alibaba's role in it? Thank you. Thank you. This is Daniel. For the first question, I would say today, if you look at the landscape in China, online shopping only accounts for 10% of the total retail in China. I would say that is a huge potential. If we look at the people geography spreading, and half of our population actually in the low tier city and in the rural areas. That's why we initiated our rural Taobao program and tried to engage these new customers who are living in the rural rural village. So, this is, I think, the dividend from the new customers. In terms of the category expansion, I would say, today, more and more daily necessities and household products are sold online. And for some of the categories today, if you look at the penetration rate, still far below 10%, far below the average. So, we believe which has great potential in the future. For the second question about OTA, yes, we observed the deal announced by and Ctrip. We believe the travel market is a very huge market and with over 500,000,000,000 market size. Chinese people, when their lifestyle is getting better, they will enjoy more and more travel products and services. Actually, in Alibaba, we have our own travel business, which is Chuye'er. Today, Chuye'er has already made a very big progress, and we are very happy with this result and business development. We will continue to invest in this travel business because this is the need for Chinese people when their lifestyle is getting better. Thank you. Next question, operator? Your question comes from the line of Ross Sandler of Deutsche Bank. Please ask your question. Great. Thank you. I just had one question on the macro and then one on the desktop take rate. So just on the macro, what does the environment look like heading into the December quarter in terms of GMV growth compared to the 28% reported in the September quarter? I know you don't guide, but just any thoughts on what kind of GMV growth you're expecting for singles day would be helpful. And then on the desktop take rate, so this has been declining for several quarters and it looks like you guys are starting to experiment with new ad insertions. So can we just get an update or talk about the trajectory of desktop take rate in the December quarter and potentially beyond? Thank you. Hey, Ross. It's Joe. Just commenting on your macro question. So, I mean, the way we look at it is this way. If the Chinese economy is growing gangbusters, are we going to benefit from this? Absolutely, we will. So I think it's something that is obviously influenced in both directions. Having said that, we just don't think that the current macroeconomic situation will fundamentally affect consumption patterns. You have a Chinese economy that is only 37% penetrated in terms of consumption relative to more developed countries, you're looking at over 60% of their economy is consumption. So there's definitely a secular tailwind driving consumption growth. When you look at the individual Chinese consumer, they are very liquid. They have a lot of liquid cash deposits in their bank accounts. Over the last several years, wage growth has been growing over 10% year on year, and there is a high savings rate. So people have lots of savings, lots of liquidity, and we expect that this is not so a temporary setback in the macro economy is not going to affect their consumption pattern in a fundamental way. And as you know, we don't forecast GMV growth. It's very hard to say what the next quarter is going to look like, and we don't give out any forecasts on that. Okay. Ross, your second question about PC monetization, you have noted that we have been making steady progress in PC monetization. What I would like to share with you is that the way to look at the monetization level, we think the blended ticket rate is a more meaningful measure. Then the second measure is mobile security. The reason is that we view our marketplace as of merchants. They're just behind 2 screens, the PC and the of merchants. They're just behind 2 screens, the PC and mobile. The take rates reflect overall value provided and recognized by this group of merchants. Going forward, when you look at the take between mobile and PC, mobile obviously is more important than PC because in the current quarter, mobile already contributed over 60% of GME and over 60% of China retail marketplaces revenue. We still remain the message and change that in the long run, mobile ticket rate will be approaching or even exceed the historical monetization rate. It's just in the near term, the growth may not be linear, but we're very optimistic that it will grow in long run. This is Daniel. I will add a few words on Singles' Day this year. As I said in my script, there's only 2 weeks ahead for this year's Singles' Day. We are preparing for this. All the merchants, service providers in this ecosystem are now preparing for the Singles Day. In terms of the strategy for this year's single stay, basically, we will focus on mobile. We believe the mobile transition has deeply changed people's consumption pattern. Today, I would say in Singles' Day, I can expect that a lot of people will enjoy shopping in the midnight when our singles day gets started. For the entire day, we believe that a lot of people actually will buy from mobile. 2nd, for this year's Singles Day, we will focus on globalization. That's why we kicked off our Singles Day ceremony by inviting so many foreign representatives to join us. This is a starting point for our globalization and we will actually today we have a lot of products supplied by overseas merchants. They are available on our platform for our consumers, and we will promote more products on the day. The third one, actually we focus on omni channel. As I said, we work with so many offline based motor chains in 330 cities to give people the integrated experience in the relevant industry. And so, we believe that this is a change of the people's experience when they consume offline. So, as we always do, and we don't want to give a guidance in terms of GMV of the single stay, actually, but we believe this will be the biggest stay for our consumers and for our merchants. Your next question comes from the line of Douglas Anmuth of JPMorgan. Please ask your question. Thanks for taking the question. I know you don't guide to margins and profitability specifically, but your margins were flat year over year in 2Q. I was hoping you could comment, give us some color just around the puts and takes as you think about fiscal year 2017, particularly as you're now past the at least annual impact here of UC Web and Auto Navi, where are the areas of leverage and then perhaps the offsets might be in fiscal 2017? Thanks. Right. So for fiscal 2020, it's still too early to comment on the margin. I think what we have shared is that our core business margin is very healthy at high-50s. And for the flat, if you compare the margin for this quarter and the quarter in last year, Actually, there are pluses, there are minuses. The plus is the operating leverage we generated, and then the minus represents the investments we made in areas like digital entertainment, our OTT set top box business, as well as our investment in our mobile OS business. And what I could share is that we're going to continue to make strategic investments. This margin question has been asked many, many times. We also look at the history of this business. When we make strategic investments, some of the big investments, there are always concerns on how much margin it's going to take. But if in the year 2003, we didn't make an investment in Taobao. That's a big investment. If we didn't make an investment in Alibaba in 2009, there were a lot of questions during those years. And it's hard to imagine how we could get where we are today. So, that's the thinking we have. UC and Automavies, the business progressed very well, although it's still relatively small. So, we'll disclose more on the progress of the business that is still closed. And we did comment on the margin impact from the possible YIKU deal. The comment is that overall margin structure would not be fundamentally changed. Next question, operator? Your next question comes from the line of Piyush Mubay of Goldman Sachs. Please ask your question. Thank you for taking my question. I looked at the delta in the growth for Tmall and it accounts for about 73% of the sequential growth in GMV terms, which is all time high. And I wondered if you could share some color on what led to this huge growth in Tmallvisavis Taobao and whether we can expect this drive the driver of the business to continue to remain Tmall to the same magnitude? That's my first question. The second question is about O2O space. And I wanted to know if you could share with us your core base strategy, mostly because it emerges an area of high level of cash spend. And we wanted to know whether you'd go down that path or you'd leverage your very deep customer presence and SME relationships. Thank you. Hi, Piyush, this is Maggie. Regarding the GMV growth in Tmall and Taobao, first of all, like Daniel just said, we do view these 2 platforms as one integrated marketplace. So, the overall growth means more to us. Secondly, we have communicated about our long term goal and near term goal on the GMV. So, we're talking about $1,000,000,000,000 GMV goal by the end of 2020 fiscal year. So, you could work backwards to get the CAGR for the overall GMV growth. So, it's either Taobao or Tmall. Obviously, Tmall contains higher brands and better service providing merchants, and the growth are higher. But overall, we're focusing on this longer term $1,000,000,000 goal. Piyush, I'll address the OTOO question. The OTOO market is huge. It's about $1,000,000,000,000 market in China. And so, first, we think that this is a space that can accommodate several very significant players. It's not a winner take all kind of market. So in terms of the investment that you're asking, what kind of cash spend, what kind of investments, we see a very aggressive and competitive market right now. But the place people are spending money on is user acquisition, rebates to customers that come to use their services. But that's where Alibaba with our unrivaled mobile leadership has an advantage. If you look at the mobile Taobao app and also the Alipay app, these are 2 of the largest apps in China that with users coming in to two apps are providing a great entry point for our Kobe service. So the places where we are going to spend money in terms of investment might not be what you think. We think that there are other areas, such as merchant acquisition and things like that where you need to be very innovative, and building out a huge sales force on that front is not the way to go. So, we hope to run the Covay business as a light business and as an innovative business. Thanks. Next question, operator? Your next question comes from the line of Robert Paik of SunTrust. Please ask your question. Two quick questions. One, I was wondering if you could talk a little bit more about where desktop monetization could go. It looks like last quarter declined about 50 bps year over year, while this quarter only declined 7 bps. Joe, is this something where we can see this going positive next quarter? And then second question is the Yahoo! Spin of Abaco. Could you just talk about that asset in relation to Alibaba? Is that something that's of interest in buying shares in that? Is that something you could acquire? Just curious on your views on Abaco. Thank you. So I'm going to ask Maggie to address the first question and I'll take the second one. Hey Bob, regarding the desktop take rate, like I said earlier, we have been making efforts to continuously optimizing the online marketing efficiency, as well as increased ad inventory. Those old countries made the PC take rate grow at a steady pace, so we're making progress there. But overall, the take rate, the way we look at it, 1st of all, is one marketplace, and blended take rate is more important. Secondly, mobile already accounts for 60 2% of GMV, and we still see that trend going up. Eventually, this is going to be a mobile business. For the mobile ticket rate, we said that we're very optimistic for longer term growth. On Abaco, we're reading the news just like you are. Don't have any information on that in addition to what was already known by the market. Well, we know recently from reading news is that they are going to delay the spin until sometime in January. We don't really speculate on what happens after that. Just wanted to just make an overall comment. Just like our share repurchase program, we will buy shares or buy back our shares if it is very significantly accretive to our shareholders. And that's the principle we operate on. Next question, operator? Your next question comes from the line of Vic Wei of Credit Suisse. Please ask your question. Hi, thank you for taking my questions and congrats on the strong Two questions. First question is on the public overall take rate for the company. So I think this is the Q1 that the mobile take rate surpasses the PC take rate. I wonder what kind of ROI that we observe from this kind of the currently between PC and mobile and probably more importantly, with some of the changes in the PC kind of the ad format, what kind of ROI at some of our emergencies on the PC front? And maybe my second question is that, I think the company has made quite a few of the last M and As this year, adding more than $10,000,000,000 kind of investment this year. I wonder how should we think about going forward if there's any like some of the important opportunities like any kind of the reference size investment that we may be thinking about? Thank you. Hey, Dick, It's Jane. Could you just repeat your first question for us? Okay. Yes, sure. Yes, so first question is basically how do we see the ROI differences on PC and on mobile, given the PC take rate now is below that of mobile take rate? And also what is the kind of the return investment impact given some of the new formats that we have on PC side? Hi, Dick. It's Maggie. I think, again, when we look at take rate, either PC, mobile, we think it's more meaningful to look at it blended because we're facing the same group of merchants. So, they either spend on PC or mobile. It's just 2 pieces of screen. The ROI of the merchants means more to us before we consider ROI. So, the ultimate measure for us to look at to ensure the value provided is these merchants continue to stay in our program. They have their single store growth and they continue to spend on our platform. So, we're very happy to see that that is the trend. On your second question, obviously, I'm not going to telegraph the forward looking M and A activity. But the one thing that I just want to say is we do M and A and acquisitions and investments consistent with our core business strategy. And on the business strategy, we have seen that consumption growth is something that we want to leverage our business to. And consumption is not just about online shopping, but also consumption of digital goods. It's about consumption of services. So we are looking at things that will enhance our position in the consumption economy and the growth in consumption economy. We're ready for the next question, operator. Your next questions come from the line of Chi Seng of HSBC. Please ask your question. Hello. Hi, thanks very much for taking my question. I just had one question. I'm wondering, as it relates to Singles' Day in particular, your strategy regarding this year globalization and also multi channel. I'm wondering if that is positive or negative to your margins. Thank you. This is the 7th year since we started our single stage big campaign. Actually, we never connect single stage with margin. What we want to do is to create a day for the consumers to make the day for the festival of the shoppers. So, that's our purpose. In our operating methodology, we don't connect this with margin, and we don't manage our business by margin, as we always said. Operator, we're ready for our final question. Sure. The final question comes from the line of Mark Mahaney of RBC. Please ask your question. Thank you. Could you talk about some of the cohort trends, so of the active buyers you brought on in the last year? How do they compare with active buyers you've had on in the past? Are they ramping up relatively similar early in terms of spend or the categories that they shop in? Or do they are they somehow different than the cohorts that you brought in, in the past? And then when you talk about globalizing November 11, could you talk about how much maybe in marketing or in merchant outreach you plan to spend maybe this year or you have been spending this year in preparation for that? Can you help us think about how much of an effort you're making to truly globalize November 11? Thank you. Sure, Mark. According to the cohort analysis we have done, it still shows the same pattern, which is for the same group of consumers longer to stay with us, more they can spend on an annual basis. And you're asking about comparing the 1st year consumer that joined us this year and in previous years. The average spending level actually is not any lower. We do observe new buyers come more to our mobile platform, which could have smaller ticket size, but the frequency of the purchase engagement is higher. For the second question about November 11 and spending for this big event, I would say, yes, actually, we positioned globalization as our core strategy for the coming decade, and we prioritized localization in November 11 this year. But, as always, we are the entry point of the online shoppers, and the people have high recognition of November 11, so we enjoy the massive organic traffic in November 11. Actually, this won't cost us a lot to get the traffic and to get people's recognition. On top of that, we do spend some marketing dollars to acquire new customers and to get them to recognize new offerings on our platform, like the offerings from other countries, supply from other countries. But, on top of that, when we look at November 11, this is not only the day for the consumer, but also the day for the merchants. So, all of the merchants, they were very active in participating this November 11, and they will spend their marketing dollar on our marketplace to get more traffic and get people's recognition of their services and products. Thank you. I think we're finished with the Q and A and we can close the call. Thank you everyone for joining us today.