Good day, ladies and gentlemen. Thank you for standing by. Welcome to Alibaba Group's March quarter 2015 and full fiscal year 2015 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 Miss Jane Penner, Head of Investor Relations of Alibaba Group. Please go ahead.
Good day, everyone, and welcome to Alibaba Group's March quarter 2015 and full fiscal year 2015 earnings conference call. With us are Joe Tsai, Executive Vice Chairman, Daniel Zhang, incoming CEO, Maggie Wu, Chief Financial Officer. Also, as you know, we distribute our earnings release through Alibaba Group's investor relations website located at www.alibabagroup.com. Please refer to our IR website for our earnings releases as well as for the supplementary slides that accompany the call. You can also visit our corporate website for the latest company 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. 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 Form F-1 as amended, originally filed with the U.S. Securities and Exchange Commission on May 6, 2014. 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 microloans 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. I will now turn the call over to Joe.
Good evening or good morning, depending on where you are. Thank you all for joining. Before we get to the results for the quarter, you will have seen that we reported some important news. Today, we have announced that Daniel Zhang will become CEO of Alibaba Group effective May 10. Our current CEO, Jonathan Lu, will work with Daniel to ensure a successful transition in the coming months. Jonathan will remain on the Board of Directors of Alibaba Group as Vice Chairman. In this capacity, Jonathan will play an important role in developing the future leaders of Alibaba Group. We have a strong and deep bench of talented executives who will help lead the company for years to come. Today's announcement reflects our commitment to continuing to develop strong leadership from within.
On behalf of Jack Ma and the entire Alibaba family, I want to express our personal gratitude to Jonathan Lu for his strong leadership and management over the past several years. We all look forward to his continued contribution as a key leader. Most of you have met and know well our new CEO, Daniel Zhang. Daniel has been with the company for eight years. He has successfully managed important businesses across our organization. He is one of the founding members of the Alibaba Partnership. Daniel is a proven business leader and innovator with a strong track record of delivering results. He has the confidence of our entire management team. There is no better person to lead Alibaba Group as we embark on the next stage of our growth. This management transition is part of our progress to build the commerce infrastructure of the future.
In addition to investing in cloud computing, logistics, big data technology, cross-border trade capability, our ecosystem partners, we believe it is important to invest in and strengthen our talent. This is needed in order to embrace the challenges of high growth, scale, and complexity in executing against our vision for consumers and businesses around the world to meet, work, and live at Alibaba. I also want to note that today we are pleased to announce the appointment of Börje Ekholm to the Alibaba Group Board of Directors. Mr. Ekholm will serve as an independent director of our board. He will also serve as a member of the Audit Committee. Mr. Ekholm brings extensive experience in the areas of business, finance, capital markets, corporate governance and technology. We are thrilled to have a director of Mr. Ekholm's caliber. We look forward to working with him.
Turning to the quarter. I will begin with a few brief comments. Daniel will provide a business review of the past fiscal year. Maggie will present the financials. Daniel will then discuss our strategic priorities going forward. In the quarter that ended March 31, which is our fiscal fourth quarter, I am pleased to report that we saw continued strong growth across our core operating metrics. We grew gross merchandise volume across our China retail marketplaces by 40% year-over-year. In just the three months ended March 31, 2015, we achieved $97 billion in China retail GMV. A key reason for this strong GMV growth is the continued growth in active buyers across our platforms, driven by the increased reach of our mobile commerce apps to users across China. Our successful execution in converting users to buyers.
An active buyer is someone who came to our retail marketplaces to make at least one purchase during the period of measurement. For the 12 months end of March 31, 2015, our annual active buyers increased to 350 million, compared to 255 million in the 12 months end of March 31, 2014. This growth represents an increase of 37% year-on-year. We continue to expand our strong position and competitive advantage as the unrivaled leader in mobile commerce across China. In March this year, we achieved 289 million monthly active users on our mobile commerce apps, which is a net increase of 24 million monthly active users from December and a 77% year-on-year increase from the 163 million reported in March last year.
The strength in mobile commerce demonstrates our ability to attract mobile users with strong commercial intent on a scale that we believe is unrivaled by any of our peers in China or globally. Turning to mobile GMV. For the quarter, we saw $49 billion in mobile GMV, an increase of 157% compared to the same quarter a year ago. It is very important to note that mobile GMV now accounts for 51% of total GMV transacted on our China retail marketplaces in this quarter, compared to 42% in the prior quarter and 27% for the quarter end of March last year. Maggie will address the financials in more detail in her comments. Our overall revenue in the quarter end of March 31, 2015, increased by 45% year-on-year.
We are also reporting today that mobile revenue from the China commerce retail business increased by 352% to $846 million in the quarter end of March 31, 2015. Mobile revenues in the current quarter now make up 40% of our China commerce retail revenue, compared to 12% in the same quarter last year. With increasing mobile GMV and mobile revenue, we're executing well against our strategy of aggressively transitioning existing users and acquiring new users to our mobile platform, as well as increasing monetization of the mobile interface at a steady pace. Looking ahead, we believe that the continued trend towards mobile provides us with a unique advantage to deliver a better consumer experience as well as more value to merchants. Therefore, we believe the increasing use of our mobile e-commerce apps will continue to fuel significant future growth.
Taken together, the results we are reporting today show our strong foundation for future sustained growth. I would now like to turn the call over to Daniel.
Thank you, Joe. Hello, everyone. I'd like to start by reviewing some highlights of our fiscal 2015 operational and financial results. $394 billion of GMV was generated on our marketplaces in fiscal 2015. Active buyers in the last 12 months grew to 350 million. Mobile MAUs grew to 289 million. We earned RMB 12.3 billion in revenue, representing a 45% increase from the revenue generated in fiscal 2014, and our non-GAAP free cash flow generated in fiscal 2015 was RMB 7.8 billion. Looking back at fiscal year 2015, I want to briefly discuss our key strategic accomplishments. Number one was the significant expansion of our ecosystem. We grew our active buyers, especially in rural areas, and improved services and tools for our sellers. We also expanded key categories and upgraded our logistic infrastructures. Number two was our unrivaled mobile leadership.
It was very successful. Our mobile GMV grew 212% in fiscal 2015, driven by incredible net adds of 126 million mobile users. Over 50% GMV came from mobile devices during the final quarter of 2015, and we ended the year with 289 million mobile MAUs. Number three was our investment in data and cloud computing platform. We remain the number one cloud service provider in China. In fiscal 2015, we made technology improvements. With that significantly increased our power efficiency. We expanded and diversified our customer base. Number four was our pioneered cross-border commerce. Tmall Global captured consumer mindshare as a source of high-quality products, and we attracted major global brands and retailers to our platform. We also established a strong cross-border logistic infrastructure. Number five was strategic M&A investments and alliances.
We invested or partnered with the five different areas in 2015, Mobile entertainment, e-commerce and logistics, auto, hotels/travel, and healthcare. That's the end of business review. I'd like to turn back to Maggie for financial review.
Okay, thank you, Daniel. Hello, everyone. Here are some highlights for the financial results. GMV grew 40% year-over-year to RMB 600 billion. Revenue grew 45% year-over-year to RMB 17.4 billion. Non-GAAP EBITDA margin was 49%, down from 57% in the year ago period. Non-GAAP net income grew 16% year-over-year to RMB 7.7 billion. Diluted non-GAAP EPS, excluding SBC and amortization of intangible assets and certain other items, was RMB 3, an increase of 7% compared to RMB 2.8 in the same quarter of 2014. In the March quarter, our blended monetization rate was 2.17% versus 2.18% in the year ago period. The PC monetization rate was 2.63% versus 2.62% in March quarter 2014. Our mobile monetization rate has continued to improve from 0.98% in March quarter last year to 1.73% this quarter.
However, please note that we implemented certain measures in the year ago quarter that artificially constrained mobile monetization rates in order to ensure user experience. This quarter's mobile monetization rate has a relatively easy comparison to our March quarter 2014. Starting mid-June quarter 2014, we began to phase out these measures. Going forward, we expect improvements in mobile monetization to be driven by our ability to deliver more value to customers. Remember, improvement in mobile monetization may not always be linear, given seasonality and other factors that change each quarter. We continue to strongly believe that the long-term trend in mobile monetization is positive. Year-on-year, our revenue grew 45% to RMB 17 billion, primarily driven by an increase in new active buyers. Both Taobao and Tmall GMV grew very well this quarter.
Taobao GMV year-on-year growth was disproportionately impacted by the late timing of Chinese New Year holiday, while Tmall was not impacted as much due to special holiday promotions. Other revenue grew 169% on year-on-year basis in this quarter, driven by the consolidation of UCWeb and AutoNavi. The restructuring of our relationship with Ant Financial was completed in early February 2015. This had two impacts on the other revenue. A loss of interest income generated from the SME loan business, and the addition of a new income from Ant Financial equal to 2.5% of the average daily balance of SME loans pursuant to our agreement with Ant Financial. As I noted last quarter, this restructuring has a net income neutral impact on our financials. The decrease in revenue related to the SME loan business was offset by a decrease in expense related to managing the loan portfolio.
In the March quarter, our non-GAAP EBITDA margin was 49%, lower than 57% in the year ago quarter. Our full fiscal year 2015 non-GAAP EBITDA margin was 53.5% versus 58.5% in full fiscal year 2014. The decrease in non-GAAP EBITDA margin was due primarily to the consolidation of acquired business, mainly UCWeb and AutoNavi, and also to investments in new business initiatives such as cloud computing, digital entertainment, mobile operating system, and local services. Without the impact of the above factors, which totaled more than $1 billion, the non-GAAP EBITDA margin in fiscal year 2015 would be comparable to that in fiscal year 2014. This amount was less than 20% our free cash flow in fiscal year 2015. We believe that a non-GAAP EBITDA margin in the high 50s in our core commerce business will remain stable going forward.
In fiscal year 2016, we will continue to invest a portion of our free cash flow in new businesses. We expect the growth of our new investment spending to be higher than our overall revenue growth. Let's talk about our operating expenses. Non-GAAP cost of revenue was RMB 5.1 billion. Non-GAAP operating expense was RMB 4.4 billion. Non-GAAP product development expenses was RMB 1.4 billion. Non-GAAP sales and marketing expenses was RMB 1.9 billion. Non-GAAP general and administrative expense was RMB 1.1 billion. Non-GAAP cost of revenue as a percentage of revenue increased year-over-year, primarily due to an increase in costs associated with our new business initiatives, as well as an increase in the traffic acquisition costs as we expand our third-party affiliate marketing ecosystem.
As noted last quarter, our fixed costs have increased during the year, which gives us operating leverage in a seasonally strong quarter such as December quarter, but put downward pressure on our margins in seasonally weaker quarters such as the March quarter. non-GAAP product development expenses as a percentage of revenue decreased year-over-year as we stopped paying royalty fees to Yahoo after our IPO in mid-September. Excluding that factor, non-GAAP product development expense, non-GAAP sales marketing, and non-GAAP G&A, all increased due to the investments mentioned above. We generated CNY 5.7 billion of free cash flow in March quarter, an increase from CNY 2.3 billion in the same quarter of the prior year. Our significant earnings and capital-efficient business model enable us to generate strong free cash flow.
This provides us with the flexibility and the confidence to invest in new initiatives to add new users, improve engagement and customer experience, and expand our ecosystem. Capital expenditures in March quarter were RMB 1.5 billion, an increase from RMB 0.4 billion in the year ago period, and a decrease from RMB 1.5 billion in December quarter. Our cash and cash equivalents position as of March 31st, 2015, is very strong at RMB 108 billion. In addition, we have RMB 14 billion in short-term investments. Before I turn to Daniel to discuss about 2016 strategy and plan, I would like to address the issue of our headcount that received some media attention last week. I think Jack's comments was taken out of context. Our policy this year is to have no new net adds in headcount other than incoming employees to whom we have already made offers through campus recruiting.
Just to put this in context, in year 2012, we enacted the same policy. We had almost no new net adds in headcount, and the GMV growth that year was 62%, which helped us reach our GMV milestone of RMB 1 trillion in fiscal 2013. At that time, we enacted the policy to encourage innovation and efficiency, and our reasons this year are exactly the same. Now I would like to turn to Daniel.
Thank you, Maggie. Finally, I would like to add a few words about our priorities in the coming year. Our 2016 priorities fall into 3 main categories: expanding and upgrading our existing platform services, developing new businesses, and people development. In the first category, expanding and upgrading our existing services, we will focus on quality GMV growth, customers acquisition, with particular emphasis on mobile and rural users, empowering sellers to better serve customers, especially on mobile, local services. In the second category, developing new businesses, our focus will be preliminary on cloud computing, specifically extending services to a broader base of third-party customers, cross-border, especially the import business, building up our affiliate marketing network, developing mobile Internet services, and investing in entertainment. Finally, underlying all of these priorities is the ongoing necessity of developing talent and building up our organization and culture.
The size and scope of our ecosystem requires us to hire, retain, and cultivate employees who can adapt to a dynamic, competitive, and challenging business environment. Our success in doing this is the foundation of the future growth and sustainability of our business, and it will be one of our biggest priorities in 2016 and beyond. That is the end of our prepared remarks. Operator, let's open the phone line for Q&A.
Certainly. The question and answer session of this call will start in a moment. To give more people the opportunity to ask questions, please keep yourselves to no more than two questions at a time. If you have more than two questions, please request to join the question queue again after your first two questions have been addressed. To raise a question, please press star one on your telephone and wait for your name to be announced. Should you wish to cancel your request, please press the pound or hash key. Your first question comes from the line of Erica Poon Werkun from UBS. Please go ahead.
Congratulations on your results, thanks for the presentation. My first question is on monetization. Can you give us an update on how the merchants have responded to the changes in advertising tools, including the longer tail keywords and ranking algorithms? I note that after the year-on-year decline in the non-mobile take rates in both the September and December quarters, the take rate stabilized in the March quarter. Would you say that you've seen an inflection point? What's your outlook on the trend for non-mobile take rate, please? My second question is on your ever-growing ecosystem. Can you just share some color on what will be some of the key focus areas of expansion in fiscal 2016? Thank you.
First of all, I would like to say that we don't manage our business by mobile and non-mobile, we view this as an integrated platform, our consumers do online shopping across platforms. It's a unified platform. In terms of take rate, I would say today, more and more sellers, they get used to do business on mobile because they observe that consumers shift from PC to mobile. They are doing business on mobile, they start spending money on mobile to promote their storefront and items. If you look at our take rate on the PC side, I would say, actually, the marketing revenue on the PC side, in terms of the CPC and the click-through rate, and the spending, actually, it still decreased this quarter, offset by the increase in the commission revenue in this quarter.
Actually, in this quarter, we had quite a good promotion in Tmall, in the Chinese New Year and in March. This is an offset. On the mobile side, actually, with development of the marketing tools, and people will spend more money on mobile to promote their storefronts.
In terms of the area we're going to keep investing, as we mentioned, the areas we invested in the past year, including these cloud computing, digital entertainment, local service, and our mobile internet services, we're going to continue making investment in these areas, keep expanding these new business.
Thank you.
Thank you.
Thank you.
The next question comes from the line of Chaoming from 86Research. Please go ahead.
Thank you very much. Congratulations, Daniel, on your new role. Two questions. The first question is actually about the management change. We see that happening to the head of Tmall, we see that happening to the head of Alibaba, and now CEO of the group. My question is, should we understand that this management change, or restructuring in the group, is pretty much done, and we should see some positive change in the business starting from second quarter? That's my first question. The second question is a housekeeping question about your lottery business. It's been seized in March month. How much of an impact that is on your GMV in March? Would you say it's kind of low single-digit GMV and mid-single-digit revenue? Any color would be helpful. Thank you.
Yeah. Hey, Chaoming, this is Joe Tsai. I'll talk about the management change question. Alibaba is always very good at continuously developing and improving the management of our company. I think with the CEO transition of Daniel, we have also brought in some younger folks to run some of the core businesses, like Tmall. As you know, Jeff Zhang, who was running Taobao Marketplace, is now running both Tmall, Taobao Marketplace, and also Juhuasuan, so he has all the e-commerce marketplaces underneath him. We also have some other terrific executives in other leadership positions in B2B, in cloud computing. In the case of the Alibaba marketing platform, through the acquisition of UCWeb, we were able to brought on board a very strong executive in Yu Yongfu, and he has proven over the months of integration to bring a lot of value to, and insight to, our business.
We decided that it was appropriate and the right time for him to take over the Alibaba business. This is a process that we are continuously undergoing. We always are looking for talented young executives to take on more responsibility. We're extremely thrilled to have Daniel taking over the leadership of this group with the wholehearted support from management.
Thanks, Chaoming. This is Maggie. Regarding your second question on the lottery business. The lottery business grew really fast, and it suspended according to the new rules policy by the end of February. It still represents a small portion of our business. It represents low single digit, regarding the GMV as well as the revenue.
Thank you, Joe and Maggie.
Thank you. The next question comes from the line of Eddie Leung from Merrill Lynch. Please go ahead.
Hi. Good evening. Thank you for taking my questions. Two questions. The first one is a little bit follow-up on some of the reported potential regulation changes. Recently, Ministry of Commerce proposed to require all online merchants to have business registration and operating licenses. I'm just curious, would that affect the individual sellers on Taobao? I'm not too concerned on Tmall, but more on Taobao. Separately, another question is about your cloud computing initiatives. Just wondering if Daniel could provide a bit more color in that business. For example, what would be the key customer industries you have right now, the key services that they are using? Any color along that line would be great. Thanks.
Okay. For the first question, actually, we have very smooth conversation with the government. For the Ministry of Commerce, they are talking about the new regulation, so far, we don't think this will impact our merchants. Because today, the government, actually, they encourage the SMEs and the entrepreneur to start new business and create jobs. We believe that in our Taobao marketplaces, we really give people the chance to start a new business. We think that this ultimately is helpful for the business development and for the new entrepreneur.
Yeah. Eddie, for customer type with our cloud computing business, it includes startups, it includes enterprises, government, it's pretty diversified.
Thank much.
Thank you. The next question comes from the line of Robert Lin from Morgan Stanley. Please go ahead.
Hi, management team. Thank you for taking my questions. Two questions. I think, overall, it appears our business unit are under a lot of restructuring, and we're verticalizing, meaning our three business unit is now doing a lot more deeper things in restructuring. Can you help us to understand the key objectives of some of these key BUs? We noticed that Juhuasuan and Tmall, a lot of big brands, we are encouraging them to come into the platform. Maybe give us a sense on what we expect from these new restructuring goals. I guess the second question is related to mobile GMV. I think a conversation of Jeff Zhang to some of the sellers in recent weeks was that GMV from mobile could potentially be 70% by the end of the year. Is that something we can confirm for the audience? Thank you.
Okay, this is Danny. I will answer the first question. When we look at the restructuring of the team and business, first thing we will think, in what kind of organizational structure is a benefit for the customers. For example, today, a lot of Tmall merchants, they are the power seller, and they doing the day-to-day operation on Tmall platform, but they need a space to have a big event for them. That's what exactly the Juhuasuan can provide. To put all of these Tmall business and Juhuasuan into one head, that Jeff Zhang, actually it's benefit for the customers and can give customers a one-stop solution in terms of the day-to-day operation and promotion events. Second factor when we consider in the restructuring is that how to leverage our internal resources and improve the operating efficiency.
Put all the Taobao, Tmall, and Juhuasuan under one head. Actually, we can have each of these three platforms have their very strong unique position. The BU head, he can oversee the entire business, and to promote the SMEs in Taobao and to serve the brand company, the retailers in Tmall, and give the promotion platform in Juhuasuan. We believe this can help us to improve our efficiency and reduce our internal conflicts.
Yeah. Regarding question on the mobile GMV as a percentage of total GMV, I think it's hard for us to tell precisely whether it's gonna be exceeding 70% in the coming year. What I could share with you is that when you look at this quarter's mobile GMV, it already accounts for more than half of our total GMV. That growth on mobile business pretty much exceeds everybody's expectation, and that trend is continuing.
Okay, great.
Thank you. The next question comes from the line of Alan Hellawell from Deutsche Bank. Please go ahead.
Hi, Zhang. Congratulations on a strong quarter. We saw a nice rebound in year-on-year ad revenue growth in the March quarter, I think at 29% versus 18% in the December quarter. I think you've probably mentioned some constituent factors behind that. I think Maggie mentioned the relaxation of measures around mobile monetization. I was hoping you could give us a hierarchy of the most important drivers behind this recovery, and also how you think about growth over the next few quarters. As my second question, would love any additional color about actual mix shift as a driver of commissions, and how we see that going forward. Thank you very much.
Yeah. Alan, this is Maggie. In terms of the online marketing revenue, the growth rate is much higher than what you see last quarter. The growth is actually coming from the mobile part of the online marketing revenue. In the mobile part, you can see that the mobile GMV grows so significantly. That's the key driver. Going forward, it depends on the mobile GMV and how we improve the mobile monetization, then that could all impact the online marketing revenue growth.
Sorry, Maggie. Just on that topic, can you give us a little more detail on the relaxation of mobile monetization that you mentioned? Can we quantify some of the measures that were taken?
Yeah. We're not actually disclosing any further granularity, but what I can share is that from all of these traffic, and CPC, and the conversion, all of these are factors we see pretty encouraging growth.
Got it. All right.
Thank you. The next question comes from the line of Alicia Yap from Barclays. Please ask your question.
Good morning, everyone. Thanks for taking my question. I actually have a follow-up question on Alan's question previously. I guess on the re-accelerations on the online marketing, wanted to also get some update, if you have any latest update on the algorithm change that we mentioned last quarter, and also wanted to see will these re-accelerations to continue going forward? For second question is on the Taobao GMV. Can we also quantify or maybe give us some color, how should we look at the growth trend going forward? Thank you.
Yeah, Alice. All of the efforts we are making, we mentioned last quarter, these are all continued efforts, these are not limited efforts we make. The purpose of all of this is to improve user experience, enhance the user engagement. That process will be a continued process. We believe that as long as we keep improving the user experience, then the monetization will come. The second question.
Yeah, for the second question, Taobao GMV experienced a slowdown in the first quarter. The main reason is quite simple, is a late Chinese New Year. We saw a rebound in March in Taobao GMV, we will continue to promote the SMEs in Taobao marketplaces, we think that Taobao can show people a very unique experience, to give people a very unique experience in-depth selections.
I see. Can I follow up, Daniel, on that Taobao GMV on the Chinese New Year reasons? Will that also impact Tmall, or is it less on Tmall?
Well, it's a good question. Actually, this really impact less on Tmall. The reason is that in Taobao, most of the seller are small sellers. When they are coming to a holiday, because their cash flow is quite tight, small business always have a relatively tight cash flow, they will pull back the inventory purchase and the stock to reduce stock to a lower level. For large sellers in Tmall, and they have quite flexible cash management. That's why in Taobao, a lot of individuals, they were planning their storefront during the Chinese New Year. Actually before Chinese New Year until two weeks after Chinese New Year. This year, because of the late Chinese New Year, we also have some impact in early March.
The business rebounded in the second half of the March, so that's why we experienced a slowdown in the first quarter in Taobao.
I see. Can I also follow up on Monetizations actually help the online advertising revenue side. Should we assume that also mainly come from the Tmall merchants that also putting more ads on the mobile?
Yeah. Alice, we don't really separate the Taobao, Tmall merchants revenue contribution. Tmall merchants can also put down ads, P4P, on Taobao Marketplace. Yeah, we just look it as a whole, overall, one marketplace.
Thank you. The next question comes from the line of Carlos Kirjner from Bernstein. Please go ahead.
Thank you. Two questions. Can you talk a little bit about the adoption of the Tmall mobile app versus the Taobao app? Do you see a future where users have two apps, one app, two apps that are deep linked? If that's the case, why would you have two? How does that evolve? Secondly, Joe, in the transcript, you said that mobile gives you an opportunity to offer better service to users and value for merchants. Why is that? Is there better conversion in mobile than PC? Hypothetically, if it was up to you, in three years, would you have users coming to the marketplaces over a mobile platform or over the PC? Thank you.
Okay, for the first question, actually, last year, we viewed the Taobao mobile app as a top priority. We input a lot of resources in the company in the development of our Taobao mobile app in the promotion of our Taobao mobile app. This also gives a very good result. Today, people can go into Taobao mobile app to search and to navigate and find whatever they want from Taobao and Tmall. Also people can go into Taobao mobile app first, click the button of Tmall, go to the webpage of Tmall and start their journey in Tmall. As you said, actually, we do understand that for Tmall, actually they need a separate app. We have to make sure that this separate app should give these people a different shopping experience and shopping journey.
That's why we work very actively on the development of our new Tmall app. We will promote this app when it is ready.
Carlos, on your second question, when a user has a mobile device, the user tends to use it more frequently. Number one, the frequency of purchases go up, because mobile is just so convenient. Anytime, anywhere you are, when you think about buying something, especially in sort of impulse items, it's just very easy to get on the mobile and buy something. The second thing on user experience is that because of mobile, the collection of data can be more customized. For example, location-based data. That could help us target the users better. On the seller end, we have recently launched a tool integrated into our mobile Taobao app that enables the sellers to manage their entire storefront through mobile. They don't even need to own a PC or a notebook computer to manage their storefront.
We made it very, very easy for them to manage their storefront. We're doing all these things to make it easy for both buyers and sellers to transact on the mobile platform.
Thank you. The next question comes from the line of Alex Yao from J.P. Morgan. Please go ahead.
Hi, good morning and good evening, everyone. Thank you for taking the question and congrats on the good quarter. I have a follow-up question on Daniel's comment on the PC monetization. You discussed the CPC and the CTR, the click-through rate, in this quarter still declined on a year-over-year basis. I'm wondering, can you share with us the trend of these two metrics since you introduced the mechanism to change the algorithm and encourage the long-tail bidding? Then, the path for these two metrics to recover and increase on a year-over-year basis. Should we think about this a few months' story or a few quarters or a few years? The second question is about the Taobao versus Tmall. This quarter, the growth rate is very, very different. I think you also mentioned one of the reasons because Tmall has done some events to drive the GMV.
Should we think after the management change in the China Retail Marketplaces, you guys are increasingly prioritizing Tmall a bit more than Taobao? I'll stop here. Thank you.
For the first question, let me explain again. On PC, because more and more merchants, they observe that traffic are shifting to mobile, they start to spend money on mobile and bid the keywords. That's why the CPC, cost per click, reduced on PC side, because of lack of competition. I try to correct that. On the PC side, it's not a CTR reduction. It's because of part of the traffic shifting to the mobile side. The search traffic actually is going flat. We believe that it's a reason why we saw a decrease in the marketing revenue on the PC side. For the second question about the growth of the GMV in Tmall versus Taobao, we don't try to prioritize Tmall or prioritize Taobao, as they are equally important to us.
For this quarter, why we had two promotions for Tmall. One is in Chinese New Year, because in Tmall, we have partnered with a logistics company, which can help us to deliver the large appliance across China, even in Chinese New Year. We encourage our sellers on our platform who are selling large appliance, to do the promotion during Chinese New Year. The second one is the promotion in March. In March 8th, we launched a promotion that encouraged consumers to scan the barcode and purchase. The vast majority of the items selected in this promotion are the groceries from Tmall. That's why Tmall enjoyed benefits in this quarter from the promotion.
Alex, to just add a little bit to Daniel's in terms of with talking about PC, the traffic CPC. To us, we really see this PC mobile as one integrated marketplace rather than two businesses. Think about how many It's about user, right? People, they're surfing on PC screen to put the products in their shopping carts, and then they confirm orders on mobile. This has just become very common. These two channels to us, they are really serving the same group of consumers in one marketplace. To us, overall GMV growth, the overall revenue growth, that's what represents the business growth rather than just separately seeing each PC and mobile business.
Thank you. The next question comes from the line of Scott Devitt from Stifel. Please go ahead.
Thanks for taking the question, congratulations on a great quarter. The one question, it relates to long-term take rates. As I think about your business historically, merchants have been willing to pay a certain % for the access to customers and an ability to actually conduct commerce on the site. That rate on the desktop historically has been higher than on mobile. Just trying to understand, as mobile matures over the long term, is there any reason to think that mobile monetization or take rate shouldn't converge with where the historical desktop take rate has been? Is there something that's done by merchants in terms of advertising spend that's not tied directly to the transaction that would lead that line of thinking to be inaccurate? Thank you.
In terms of the mobile take rate, I think we remain bullish on mobile monetization in the longer term. We do believe that mobile take rate should approach PC or even higher than PC. The reasons are very simple. Three things. We see more consumers from mobile. This, you can already tell from the MAU growth. More buyers, second one is higher engagement. People come to the mobile more often, more frequent than they did on PC. The third one is higher value. That's because we have more data on mobile, the location-based data and buyer behavior data. That's the reason made us believe that the value generated through the mobile platform could be very significant and could be higher. Eventually, that will drive the mobile monetization, the take rate.
Thank you. The next question comes from the line of Dick Wei from Credit Suisse. Please go ahead.
Hi. Thanks for taking my questions, and congrats to Daniel for his new role and good quarters as well. I have two questions. The first question is on maybe the Tmall GMV growth, maybe if I look out for next couple of quarters. I understand there's some new kind of merchants recruitment policies and other customer-related usage experience policies implemented. Wonder, should we expect the Tmall growth to kind of continue to accelerate going to next couple quarters? Second question is more on the O2O and some of the local services initiatives. Wonder if management can discuss more about some of the investment plans and some of the other cooperation with the Ant Financial side. That would be great. Thanks.
Okay. Thank you, Dick. For the first question, we adjust our recruitment policy in Tmall in early March, and we upgrade our entry standards. The purpose of this is to increase the quality of the merchants. When we look at the Tmall operating methodology, we don't try to grow our business by number of merchants. Instead, we try to help our merchants to grow their business, to help them to increase their sales, to enjoy a high same-store growth. We believe that by adopting this new policy, and people will enjoy a better experience because we give them more confidence in the high-quality products. All the merchants here are high quality. We believe ultimately, this should be benefit for all the merchants here and also benefit for the long-term growth of Tmall.
For your second question, O2O, I would like to say that O2O to me actually, O2O cannot be a unified platform. It's very difficult to be a unified O2O platform because in each business, there is a O2O opportunity, and the online-offline business in a certain business should be fully integrated. Our strategy is to identify and focus on some of the key areas, key industries, and to restructure the business using the internet technology and thinking. For example, in the food and catering, in the car booking, and we participate in the travel sector, either we do this business by ourself or we enter this sector by investment.
Thank you. The next question comes from the line of Thomas Chong from Citigroup. Please go ahead. As a reminder, the line of Thomas Chong is now open. Please remember to unmute your phone.
Hi, can you hear me? Thanks for taking my questions. I have two questions. The first question is about the cross-border e-commerce strategy. Can management provide us some color about the GMV potential in the next couple of years? What's the expectation from Alibaba perspective in terms of serving two billion consumers in the next few years' time? Secondly, is about the M&A strategy. Can management talks about what's your overseas strategy in e-commerce? Thanks.
For the cross-border business, this is one of our priorities in the next year, we observe huge demand from Chinese consumer for high-quality foreign products. This is also, we believe, the starting point of our globalization. We will start with the import business to bring more and more high-quality foreign brands, retailers, and their products to China market. Today, we are in early stage, we believe that consumer will welcome this high-quality product, we will enjoy a rapid growth in this sector.
Yeah, in terms of GMV, I still remember two years ago, when we were asked about GMV growth. We were at around $250 billion USD GMV, we said that in the next two to three years' time, we see that number get doubled. Right now, you can tell that we are well on track towards that target. Going forward, we do believe that there is market for more than $1 trillion USD GMV worldwide.
Yeah.
Thank you.
Just want to comment. There's a question on the M&A strategy, especially overseas. Just wanted to comment on that. We're looking at M&A outside of China in 2 types of situations. The first one is we're always looking to invest in minority stakes in companies that we see as having disruptive technology or business ideas. There, the main purpose is to back entrepreneurs, establish the relationship, and learn from these entrepreneurs. That is 1 type of category. The other, when we venture out of China to do something, it is usually with a view toward improving the customer experience that tie back to our core business.
For example, we made an investment in Singapore Post because we are looking at cross-border logistics, making sure that sellers that are selling from China to all over the world, especially Southeast Asia consumers, can have a better experience when it comes to logistics. Okay.
Thank you. The last question comes from the line of Cynthia Meng from Jefferies. Please continue.
Thank you, management, for giving me the chance, and congratulations for a good quarter. My question, first of all, is a housekeeping one. For the SBC to sales ratio, could Maggie give some more color on the trend of this ratio and whether we will see a step down at some point? Secondly, is any update on Alipay. We are interested to know the percentage of Alipay's payment that came from Alibaba's China commerce retail marketplace. If management could give us more color there. Thank you.
Talking about SBC, we stated in the announcement that there are two parts included in this SBC. One part is our normal performance on higher grant. The other part is purely according to the GAAP, we got to mark certain assets to mark to market. This part relates to the shares awards of Ant Group granted to our employees, and the shares AGH grants to Ant employees. Going forward, I think it is hard to say because to market relates to the valuation of both groups. What I can share is that this second part of expenses is non-cash, and it is not going to dilute any of our shareholdings. We believe that the dilution coming from this SBC will be still stay at around 1% going forward. What was the second question? Sorry, I missed the second question.
Is on update on Alipay and the percentage of Alipay's payment that was contributed from Alibaba's China-
Yeah
commerce retail marketplace.
Right. The Alipay transaction, how many percentage? We discussed in the prospectus that around 78% of our total transaction get paid through Alipay. In the coming 20-F, we're going to give another update. There is no significant change over that ratio.
Thank you. Unfortunately, we have run out of time for any further questions. Ladies and gentlemen, this concludes the presentation for today. Thank you for participating. You may all disconnect.