Good day, ladies and gentlemen. Thank you for standing by. Welcome to Alibaba Group December quarter 2014 results conference call. At this time, all participants are on a listen-only mode. After management's prepared remarks, there will be a Q&A session. I would now like to turn the call over to Jane Penner, Head of Investor Relations of Alibaba Group. Thank you. Please go ahead.
Hello, everyone, and welcome to Alibaba Group's December quarter 2014 earnings conference call. With us today are Joe Tsai, Executive Vice Chairman, Jonathan Lu, Chief Executive Officer, Daniel Zhang, Chief Operating Officer, Maggie Wu, Chief Financial Officer. As you know, we distribute our earnings press 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 the supplementary slides for the company's 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 the IR section of our 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 also 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. 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. With that, I will now turn the call over to Joe.
Thank you, Jane. Good evening or good morning, depending on where you are. Thank you all for joining. Jonathan, Maggie, Daniel, and I look forward to discussing our business with you today. In the quarter that ended in December, which is our fiscal third quarter, I am pleased to report that we saw continued strong growth across our core operating metrics. Those who follow our company closely know that we analyze the health of our business by focusing on a few select core metrics. On each of these metrics, we continue to see strong growth. We grew gross merchandise volume across our China retail marketplaces because of robust growth of active buyers. We continue to expand our strong position and competitive advantage as the unrivaled leader in mobile commerce across China.
Our business continues to perform well, our results this quarter highlight both the strength of our ecosystem and the strong foundation we have for sustainable future growth in China and beyond. My colleagues will provide you with a more in-depth look at our business operations and financial results. Before they do that, I want to highlight a few of our key growth areas. We grew gross merchandise volume across our China retail marketplaces by 49% year-on-year, driven by strength in both Taobao Marketplace and Tmall. In just the three months ended December 31st, 2014, we achieved $127 billion in China retail GMV. For the calendar year 2014, we achieved [RMB 327] billion in China retail GMV, which demonstrates the unparalleled scale we have been able to achieve. A key reason for this strong GMV growth is the continued growth in active buyers across our platforms.
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 ended December, our annual active buyers increased to 334 million, compared to 231 million in the 12 months ended a year ago. This growth represents an increase of 45% year-on-year and was driven by an increase in active buyers throughout China, with substantially faster growth from lower-tier cities. For context, when you consider our 334 million annual active buyers, this means that a number of consumers that now surpasses the entire population of the United States is shopping and buying annually on our China retail marketplaces. Yet, this 334 million Chinese consumers represents only about half of the Chinese Internet user population and about a quarter of the total population in China.
These numbers highlight the significant growth opportunity we have before us. I next want to touch on an area that I know you are watching and analyzing closely, that is our progress in mobile commerce. Alibaba continues to be the unrivaled leader in mobile. For this quarter, we achieved 265 million monthly active users on our mobile commerce apps, which is a net increase of 48 million active users compared to 217 million monthly active users in the prior quarter. This is a sequential growth of 22% and a year-on-year growth of 95%. Alibaba leads the China mobile commerce market with an 86% share of total mobile GMV, according to iResearch. Our mobile Taobao app continues to be the number one mobile commerce app, and in fact, one of the most popular mobile apps in all of China.
This 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. In the December quarter, we saw $53 billion in mobile GMV. This is a 213% increase compared to the same quarter a year ago. Mobile GMV now accounts for 42% of total GMV transacted on our China retail marketplaces in this quarter, compared to 36% in the September quarter, and 20% in the December quarter a year ago. Stepping back, if you look at how much mobile business we do every year, for the 12 months ended December, we saw $130 billion in mobile GMV on our China retail marketplaces.
It is safe to say that Alibaba is today very much a mobile company, and we have positioned ourselves for more growth in mobile users in the future. Our mobile strategy is helping us to attract new consumers to our retail platforms that we might not otherwise reach. For example, through our strong success in the past quarter with both the Double 11 Single Day shopping festival and the Double 12 promotion, we introduced a large number of new mobile users to our platforms, and overall, we saw significantly increased and sustained mobile usage. These new mobile customers have now experienced the ease and convenience of shopping on our platforms, and we believe these new consumers will help to drive even more GMV growth in the future.
Maggie will address the revenue in more detail in her comments, but we are reporting today that mobile revenue from the China commerce retail business increased by 448% year-over-year, primarily due to a greater proportion of GMV being generated on mobile devices as well as an increase in the mobile monetization rate. In absolute dollar terms, for the quarter ending in December, we delivered over $1 billion in mobile revenue. We're seeing sustained progress in how we monetize mobile. That's because consumers who come to use our mobile apps to shop for goods and services have clear commercial intent, and we are able to effectively convert that commercial intent into purchases that benefit our merchants and increase their appetite and propensity to allocate more of their marketing dollars to our mobile interface.
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. Because mobile users shop more frequently and we can serve them more targeted search results, we believe the increasing use of our mobile apps will fuel significant future growth in our China commerce retail business. Taken together, the results we are reporting today show our strong foundation for future sustained growth. Now, before I turn the call over to Maggie to go through the quarterly results, I want to address the news reports you may be seeing related to our interaction with the State Administration for Industry and Commerce, or SAIC, in China. Let me first say that Alibaba is a company with strong values.
Nothing is more important to us than the trust we earn from our stakeholders, including our customers, business partners, regulators, and shareholders. This trust is built on the expectation that everyone at Alibaba will act with absolute honesty and integrity, and to conduct our affairs with the highest standards of ethics and transparency. Our commitment to ethical and transparent behavior is why we were so deeply troubled by an SAIC report released on January 23rd that purported to publish the results of a product sample check in online commerce. As we said before, we believe this report was flawed and was based on arbitrary methodology, and we gave our views to the SAIC. Yesterday, a so-called white paper was posted on the SAIC website that specifically identified Alibaba and referred to a meeting between Alibaba and the regulators in July last year.
We believe the flawed approach taken in the report and the tactic of releasing a so-called white paper specifically targeting us was so unfair that we felt compelled to take the extraordinary step of preparing a formal complaint to the SAIC. I want to make sure you know the facts behind this so-called white paper. Number one, the first time we saw the white paper was when it was posted on the SAIC website yesterday. Number two, like all international companies across the globe, we, from time to time, meet with regulators in the normal course of business. The meeting last July was no different, and at this meeting, we discussed working together to create a process to address key areas of consumer protection and orderly marketplace operations in online commerce. Number three, today we observe that the SAIC has removed the white paper from its website.
Fourth, I want to make it absolutely clear that Alibaba has never requested the SAIC to delay the publication of any report. At Alibaba, we believe in fairness. We support rigorous supervision of our company, but we also feel compelled to speak out when there are inaccurate and unfair attacks being leveled against us. The issues of counterfeiting and IP protection are a part of the problems in a growing economy today, whether it is online or offline. We have a zero-tolerance policy towards counterfeits on our platform because the health and integrity of our marketplaces depend on consumer trust. To protect consumers, brand owners, and legitimate sellers, and to maintain the integrity of our marketplaces, we have a broad range of measures to prevent counterfeit and pirated goods from being offered and sold on our marketplaces.
For example, we use data technology to analyze and track infringing products and identify hotspots for counterfeit distribution and sales. We work closely with Chinese public security, copyright, quality inspection, and intellectual property agencies to take the online fight against counterfeits to offline perpetrators. We conduct periodic checks by using third parties to identify suspected counterfeit products on our marketplaces. We have established cooperative relationships with over 1,000 major brand owners and several industry associations in connection with intellectual property rights protection to enhance the effectiveness of our takedown procedures. When we receive complaints or allegations regarding infringement or counterfeit goods, we follow well-developed procedures to take swift action.
If allegations of posting or selling counterfeit products are substantiated, we penalize the parties involved through a number of means, including enforcing the seller to reimburse the buyer, assessing penalties against the seller for limiting their ability to add listings, adopting a name-and-shame policy, closing down storefronts and permanently banning the seller from establishing another storefront. In the case of Tmall sellers, confiscating the consumer protection security deposits that they have paid. These policies and procedures are tough, and we work very hard to enforce them. In addition, we're devoting more resources to the fight against fakes. For the past two years, Alibaba invested over RMB 1 billion in the fight against counterfeiting and to enhance consumer protections.
In addition, the special task force of thousands of employees who are focused on the urgent fight against counterfeiting, and we have just announced that we are adding 300 more people. Our efforts of taking the online fight to offline perpetrators are yielding results. Last year, Alibaba cooperated with Chinese law enforcement agencies in over 1,000 counterfeiting cases. As a result of this collaboration, 400 suspects from 18 counterfeiting rings were arrested, while 200 brick-and-mortar stores, factories, or warehouses involved in production and selling of counterfeits were closed. When you step back and look at our overall efforts to combat illicit activities, our track record is clear. We're certainly not perfect, and we have a lot of hard work ahead of us. In the global e-commerce marketplace, there will always be people who seek to conduct illicit activities.
Like all global companies in our industry, we must continue to do everything we can to stop these activities. We take these issues seriously because we are an organization built on the value of integrity. We also take these issues seriously because we are also victims of counterfeiting. Our entire success as a company is built on the idea that customers can come to our platforms and have trust in the quality of the products they purchase. Customers clearly continue to give us their votes of confidence, especially when you consider the 334 million annual active buyers and 45% year-on-year growth in active buyers we reported today. With that, I would like to turn the call over to Maggie, who will walk everyone through our financial results for the quarter.
Thank you, Joe. Hello, everyone. Joe discussed our key operating metrics for the December quarter. Now I'll walk through the details of monetization and our financial performance. First, the highlights. GMV grew 49% year-over-year to RMB 787 billion, and it was up 42% sequentially. Active buyers in the last 12 months grew to 334 million, up 45% year-on-year. Mobile MAUs grew to 265 million in the month ended December, a record high. Net add of 48 million MAUs in three months' time. Revenue grew 40% year-over-year to RMB 26.2 billion and was up 56% sequentially. Non-GAAP EBITDA margin was 58%, down from 60% in the year-ago period and up from 51% in September quarter. Non-GAAP net income grew 25% year-over-year to RMB 13.1 billion.
Diluted non-GAAP EPS, this is excluding SBC and amortization of the intangible assets, et cetera, was RMB 5.05, an increase of 13% compared to RMB 4.45 in the same quarter of 2013. Year-on-year, our revenue grew 40% to RMB 26 billion. China commerce retail revenue grew 32% to RMB 21 billion and accounted for 82% of total revenue. The lower revenue growth rate relative to GMV growth rate was mainly a result of the greater percentage of total GMV coming from mobile GMV, which monetizes at a lower rate than PC GMV. Long term, we see this as a positive trend for our business. Mobile devices are extremely data-rich and will eventually offer much better buyer experience, both organic and commercial. We believe will create significant long-term value for our merchants and for our group.
The rapid growth of our mobile GMV may give us some near-term growing pains, but it bodes well for the future success of our entire ecosystem. In addition to a mix shift to mobile, lower monetization on PC interfaces also contributed to the slowdown of China commerce retail revenue. This was driven by user experience improvements to our ad targeting and our P4P ranking algorithm, which lowered CPCs. I view this user experience improvements as an investment in future revenue growth because they make our marketplace an increasingly attractive place for buyers and merchants to do business. Other revenue grew 266% on a year-on-year basis in this quarter, driven by the consolidation of UCWeb and AutoNavi, as well as the growth of interest income generated by our SME loan business. This business will be transferred to Ant Financial very soon.
As we posted in the IPO prospectus, we agreed to sell our micro loan assets business to Ant Financial. After the closing, which is going to be very soon, in days' time, we will no longer consolidate revenue generated by the sold asset in our financial results. Please note that we will also stop consolidating the cost associated with lending of this business, and we'll begin collecting an annual fee of 2.5% of the average daily book balance of the micro loan made by Ant Financial. We expect this transaction to be complete this quarter, actually very soon. I believe the net financial impact of sale will be roughly neutral for Alibaba Group. In December quarter, our blended monetization rate was 2.7%, versus 3.05% in the year-ago period.
The lower blended rate year-over-year was primarily due to lower revenue growth in our China commerce retail business, which was driven by the factors I just discussed. As we've said many times, we operate the marketplace as a whole rather than thinking of it in terms of PC versus mobile. Our buyers experience it this way, too, we optimize for their experience across several platforms. That said, we currently break out our mobile take rate for investors in order to make our progress monitoring mobile transactions and traffic more transparent. Our mobile monetization rate has continued to improve. As you recall, in the March quarter, it was 0.98%. In June quarter, it grew to 1.49%. In September quarter, it was 1.87%, and now it's 1.96% for December quarter.
In the future, we expect mobile monetization rates will be driven by our ability to deliver more value to buyers and advertisers as we develop mobile-specific ad formats, continue to refine P4P targeting, and improve our ranking algorithms. These increases may not always be linear, given seasonality and other factors that change each quarter. We continue to strongly believe that the longer-term trend in mobile monetization is positive. In the December quarter, our non-GAAP EBITDA margin was 58%, improved from 51% last quarter. Please note that our fixed costs, including payroll, colocation, etc., have increased, which gives us operating leverage in seasonally strong quarters, such as the December quarter, but can significantly pressure margins in seasonally weaker quarters, like March quarter.
We consider discretionary spending on new initiatives a strategic priority to drive future growth, and as such, that spending will likely continue at similar or greater levels in future quarters. In any case, please remember that we do not manage to a margin target. Rather, we invest optimistically in the overall growth of the entire ecosystem. Let's talk about our operating expense. Non-GAAP cost of revenue was RMB 6.1 billion. Non-GAAP operating expense was RMB 5.6 billion. Non-GAAP product development expense was RMB 1.8 billion, and non-GAAP sales and marketing expense was RMB 2.6 billion. Non-GAAP general and admin expenses was RMB 1.2 billion. Non-GAAP product development expense as a percentage of revenue decreased year-over-year as we stopped paying royalties to Yahoo after our IPO in mid-September.
Non-GAAP sales and marketing expense as a percentage of revenue increased year-over-year, largely because of the consolidation of marketing expense of our investee companies, such as UCWeb, AutoNavi. An increase in advertising spending in lower-tier cities as well as the promotion of new business initiatives also contributes to that result. Non-GAAP G&A expense as a percentage of revenue decreased year-over-year because of a one-time IP settled donation expense of RMB 1.3 billion made in quarter ended December 31st, 2013. Our GAAP net income in the quarter decreased 28% year-on-year. I have to say, that seems to be a big decline, but on operating basis, we're doing just fine. The decrease in GAAP net income was primarily due to three things. Number one, an increase in share-based compensation expense, including the effect of mark-to-market accounting of share-based awards in an amount of RMB 1.5 billion.
Number two, an RMB 830 million one-time charge for financing-related fees as a result of the early repayment of our RMB 8 billion bank borrowings. Number three, a year-on-year increase in income tax expenses, primarily as a result of the expiration of the EIT exemption period for one of our major subsidiaries, as we discussed in last quarter as well. On a non-GAAP basis, net income increased by 25% year-on-year. We generated RMB 23 billion of free cash flow in December quarter, increased from RMB 9 billion in September quarter and RMB 17 billion in the same quarter of prior year. Capital expenditures in the December quarter were RMB 1.5 billion, a decrease from RMB 1.6 billion in year-ago period, and RMB 3.4 billion in September 2014 quarter. There are two reasons on the fall in CapEx. First, we incurred lower real estate-related CapEx in this quarter.
Second, non-real estate CapEx decreased sequentially as we invested last quarter to build our infrastructure ahead the peak shopping season of the year. Our cash and cash equivalents position as of December 31st, 2014, is very strong at RMB 107 billion. In addition, we have RMB 23.7 billion in short-term investments. That's the end of our prepared remarks. We would like to open up for questions.
Thank you. Ladies and gentlemen, we will now begin the question-and-answer session. If you wish to ask a question, please press *1 on your telephone and wait for your name to be announced. In order to be fair to all callers who wish to ask questions, we will take two questions at a time from each caller. If you have more questions, please request to join the question queue again after your two questions have been addressed. Thank you. Your first question comes from the line of Dick Wei from Credit Suisse. Please ask your question.
Hi. Thanks for taking my questions, congrats on the very strong GMV and active buyers growth. My first question is on the take rate. I guess, on the take rate, the primary reason is a mobile shift as well as PC take rate is lower. I wonder, how long does this lower take rate is going to last, and what was the rationale for the changes during the quarter compared to prior quarters? I have follow-up questions. Thanks.
Hey, Dick, this is Maggie. Take rate, the decrease is coming from two reasons. One thing is, like we said, mobile monetization rate, although it's continuing to improve, but the take rate level is lower than PC's. While you see we have a much higher mobile GMV as a percentage of total GMV, so that's number one. Number two is all the efforts were made on PC, which improves user experience, but may impact take rate. I think we're going to continue to make efforts on user experience improvement. In terms of how that turn up, as I mentioned earlier, we believe that long-term, this will benefit the whole ecosystem, and then the take rate will reflect the improved user experience and merchants returns. It's hard for us to say which quarter it can be.
Also, in the following quarters, there are also seasonality. For example, in Q1, normally it's a low season. Yeah.
Okay. Thanks, Maggie. Maybe just a quick follow-up. How about for the commission rate itself? If I just do a simple math on the commission rate revenue, it seems to come down as well year-over-year. Was it mainly due to some of the rate changes, or what are the reason behind it? Maybe lastly, just wonder, I guess Joe commented on some of the news on the SAIC issue. Wonder, is it going to have an impact maybe in the Q1 or in the near term? Thank you.
Do you want to talk about SAIC? Okay. Yeah, the commission rate changes, it reflects certain category mix changes. That's truly the reason.
Hi, Dick. As you saw, the SAIC report, we believe, was based on flawed methodology, and we have been very vocal about protesting, and we're prepared to file a complaint about that.
Obviously, anytime you have a situation like this, it doesn't help. I think we want to take a step back and look at the bigger picture. In Q4, we added 27 million new active buyers. Now we have a base of 334 million active buyers. These people wouldn't come to our website to purchase things if they are getting bad quality stuff on our site. It's really a vote of confidence from our consumers that we're seeing. The other thing is, we're seeing very good mobile growth. We are generating 265 million monthly active users. If you compare that to the last quarter, that is a net add of 48 million new monthly active users on mobile, just in three months. We're very excited about that. This is long-term positive for the business.
Thanks, Joseph.
Great. Thanks a lot, Joe and Maggie.
Thank you.
Thank you. Your next question comes from the line of [Angela Mel] from Morgan Stanley. Please ask your question.
Thanks. I just have a couple questions on more on the top line and users. First, on the GMV, could you provide a little bit more color on the trends? Given Double 11, we would have expected a little bit of potential pull forward. If you could comment a little bit on December quarter, do you see any general slowdown? Also the trends in January so far. That's the first thing.
Angela? Angela, it's Jane Penner. We're having a very hard time hearing you. I'm not sure if your connection is bad. Could you try that again?
Yeah, sorry. Is this better?
Yeah, it is better.
Okay. First question on the GMV, if you could provide a little bit more color on the general trends on a monthly basis, given Double 11 probably resulted in a little bit of a pull forward in demand. Did you see any slowdown in December and the trend so far in January? I guess looking out into the March quarter, given Chinese New Year is later this year, do you expect that to add on a little bit of a boost for the quarter?
Yeah. Actually, the GMV in Double 11, we hit a new high, and in that day, we achieved RMB 57 billion in a single day. We do see some seasonality in the Q1 because actually the Chinese New Year will be in this February. We see the trend actually is in line with what happened in the previous years. We believe that our GMV will continue to grow as a result of our continuous acquisition of the new customers, especially in the low-tier cities.
Okay.
Thanks, Angela. Next question.
I guess the second question.
Oh, sorry.
Sorry, just one other question on the CPC rate. I think you mentioned that that was down, and Maggie had talked about increasing the user experience, et cetera. Is this sort of related to the more targeted customization of the web pages? Essentially, you're helping your merchants improve their conversion rate. As you do and leverage all the data more going forward, should we continue to expect this to essentially result in a little bit of pressure on the monetization rate?
Yeah, actually the CPC.
Based on the personalization of the web pages.
Well, the CPC actually had some decline, and because we launched a keyword recommendation tool, and this tool will suggest to our advertisers some long-tail keywords. Obviously, these long-tail keywords will have lower CPC because there is less demand for them. The second reason is that in July, we decreased the weight of the keyword bidding and add more customization components in our ranking methodology. We believe this change will improve the relevance of the people who search. Obviously, it will lower the CPC. The last reason for which might have some negative impact on CPC is that we continue to deliver personalized and customization of search results in our organic search. Then people will actually pay more attention to this organic search result because it's more relevant to them.
Okay. Thank you.
Thanks, Angela. Next question, please.
Thank you. Your next question comes from the line of Alan Hellawell from Deutsche Bank. Please ask your question.
Thank you very much. Two questions. One of them, would love to get a little more clarity on your promotional spending. I assume that ranges from subsidies on Kuaidi taxi hailing to other things. Would love to get a better sense as to what the magnitude of that was in the quarter and how you think about these O2O initiatives going forward. Then I think my second question was largely answered, but net, it looks as though ad revenues grew really 20% year-on-year. In addition to the tweaks around the pay-for-performance algorithm, is there any other color you can bring to bear? It would imply that commissions obviously grew much more strongly than ad revenues. Thank you very much.
Yeah, Alan, in terms of the sales and marketing spending, you see that this quarter, we just talked about the spending on the promotional activities for our own core business, as well as consolidation of some of the investments. This actually didn't include the significant spending on the taxi business, because currently, that business is promoting the online payment, which the cost is kind of borne by the Ant Financial. I think going forward, as I said, we're going to continue to invest, including invest in sales marketing, because the new business, as well as the existing business, we see the potential, and we still have the relatively high margin to invest. Overall, I think I will not change my message based on one quarter on the margins. That also gives you a sense of our continued spending and investment in sales and marketing.
Your second question is about the commission. Yeah, I think if you compare to online marketing revenue, commission grow at a higher rate. Going forward, as Daniel talked about our continuous efforts on our user experience improvements, et cetera, that will put more impact on the P4P. Yeah, that's why when you compare the growth rate for the two revenue items, the online marketing, which mainly includes the P4P, shows a relatively slower growth rate.
Thank you.
Thank you. Your next question comes from the line of Alex Yao from J.P. Morgan. Please ask your question.
Hi, good morning, and good evening, everyone. Thank you very much for taking my question. The first one is, can you guys help us to understand the 2015 investment strategy and the priority? Where do you look at for the bigger opportunities, and how do you want to prioritize your resource allocation? Secondly is, can you give us an update on the integration with UCWeb and AutoNavi, the financial impact in the-
[inaudible] That accounts for only 50% of the internet population in China and only one quarter of the whole population in China. That's going to be continuing to be one of our focus, to keep expanding the buyer base. That actually has been the driver and will be the driver of the growth of our GMV. That's the policy for the core business growth. At the same time, we also have other initiatives, and to integrate those target companies we acquired, invested, and as well as keep exploring the globalization strategy. In terms of the integration of the invested companies, maybe Daniel
Yeah. This is Jonathan. I give you the update of the UCWeb and AutoNavi investment. On the group view, the investment for UCWeb is very strategic and important to our group, as UCWeb has good understanding of mobile users' behavior and also of mobile traffic. UCWeb Shenma Search right now is the number two mobile search player in China, tied with Baidu in terms of unique visitors. UCWeb has more than 100 million daily active users. After acquisition, UCWeb has improved the mobile aspect capability and mobile experience of Taobao users. Regarding the AutoNavi provides essential LBS and mapping information to our marketplace. After acquisition, AutoNavi is the sole supplier of mapping service of Alibaba marketplace. Amap is the number two mobile map app in China and provides key support for Taobao local service. Due to its
solid navigation business. AutoNavi has strong collaboration and working relation with the automakers in China, and can support Alibaba Group growth of Tmall auto channel and YunOS installation into automobiles. Yeah, that's it.
Great. Next question, please.
Thank you. Your next question comes from the line of Alicia Yap from Barclays. Please ask your question.
Hi. Good evening, everyone. Thanks for taking my questions. I actually have follow-up questions regarding the comment on the lower pay-for-performance monetization on the PC this quarter. I think, Maggie, or maybe management, can I just get some more color that when was the adjustments first roll out? It does seem that it will also impact the coming quarter. How should we expect that to affect the marketing revenues? Then in relation to that, how should we reconcile the comment that you have last quarter when you say you guys actually roll out the new recommendations to improve the conversion rate. For this quarter, we also see the Taobao GMV growth continue to reaccelerate.
I just wanted to, maybe you guys can share some color, how should we reconcile the two different kinds, like one is impacting the revenue versus the other one supposed to be improving. Thank you.
Yeah, this is Daniel. Let me try to give you more color of our pay-for-performance business. As I said before, we did a lot to try to improve the ROI of the advertiser rather than just look at the revenue. We try to make sure that people spend money on our pay so that they can get a better result, a better ROI. That's the principle of our PPC business. That's why we try to continue to personalize our PPC results and to add more features of the personalization, and also consider the quality of the promoted items. The result is that the bidding process, it's only one of the components to win the PPC, and we also have to consider other factors.
The main purpose of this is to ensure the merchant can get the benefit and continue to spend money on our platform in the longer run. We believe that PPC model actually is a discovery mechanism by the market. We believe as long as our market can continue to bring value to our merchants, our consumers can stay with us. Our user base continue to grow. The merchants were willing to spend more money on our platform.
How long should we expect this to affect the marketing revenues in the coming quarters? How long should we expect that to normalize on a year-over-year basis?
It's hard for us to give a near-term guidance accurately saying how long. Okay, what we believe is that eventually, as long as we bring the benefits to merchants, it will get there. However, there are some near-term impacts since we just started this personalization efforts and other efforts improve. There will be some impacts for near term.
Okay. I see. Okay. Understood. Thank you.
Thank you. Your next question comes from the line of Piyush Mubayi from Goldman Sachs. Please ask your question.
Thank you. In the December quarter, you have benefited from new categories such as auction transactions. Could you talk about new categories that we could see come on board in the near future, such as pharmaceuticals? If possible, give us a sense of how large these new categories could be. My second question, addressed to Maggie is, Maggie, we see EBITDA margins on a non-GAAP basis have bounced around in the past three quarters. Maybe if you could help us quantify the impact of consolidation for the quarter, and if possible, give us a sense of how we should be thinking of the next few quarters. Thanks.
This is Daniel. Let me answer the first question. Actually, what we can see in Q4 is that car accessories and furniture and decorations and also the other auction model actually experienced a high growth. Actually, when we look at these categories, actually they generally have a lower internet penetration in China, so we can see a great potential in the future for the further growth. In terms of the pharmaceutical, again, in China now, the online sales of pharmaceuticals is actually very low compared to what it is in the U.S. You may know that we have our pharmaceutical business. Today, on our platform, we have a lot of merchants who have the license to sell the pharm online, actually, the online pharmas. Today, they only sell the OTC drugs.
What we are doing right now is try to work with the government and with the partners to see, is it possible to sell the drugs and the prescription. What we can see is that these new categories will continue to grow in the future. Thanks.
Yeah. Please, regarding the EBITDA margin, I will not change my message of EBITDA margin just based on this one past quarter. If you look at our fixed costs, like payroll, co-location, et cetera, they have increased. This gives us operating leverage in seasonally strong quarters. For example, December quarter, when you look at the revenue, right, RMB 26 billion versus the previous quarter, it is a lot higher. Operating leverage in what is seasonally strong quarters, and pressurize the margin in seasonally weaker quarters because there are certain costs fixed over there. Furthermore, we consider the discretionary marketing spending on new initiatives, such as our local service, our mobile OS, the digital entertainment, et cetera. These are strategic priorities to drive future growth. As such, that spending will likely continue at similar or even greater levels.
In any case, please remember that we don't manage to a margin target. Rather, we invest in new and existing business in order to create long-term growth.
Thank you.
Overall, yeah, EBITDA margin message remain unchanged for the year.
Thank you. Your next question comes from the line of Thomas Chong from Citigroup. Please ask your question.
Hi. Thanks for taking my questions. I have two questions. The first one is your rural cities initiative. Can management give us some color, what's the goal in 2015 about the rural cities penetration? My second question is about the expansion in product categories. Apart from healthcare, what other product categories do management think will further penetrate in 2015? How should we think about your digital entertainment initiative for this year? Thank you.
Yeah, thank you. This is Jonathan. Regarding to the rural areas strategy, I'd say right now it's in the early stage. As you know that 34% of Chinese people in urban areas use e-commerce, but only 9% of Chinese people in the rural areas do. This is a big opportunity for long term. Our vision is that we'll enable the farmers to sell their farm products to city people, and at the same time, we'll encourage China, 600 million farmers to buy online from Taobao. There are also an opportunity to bring some large agriculture categories that are currently offline, including fertilizer and farm equipment. Right now, we are starting to build village office managed by local residents, who are not our staff, but our partners. This village office managers get commission from the sellers.
These are recruited by on behalf of the local committee, help them select products and arrange payment because the villagers often do not have Alipay or internet. Village residents pay cash to village office, who pay via Alipay. They then help them to receive the package. Alibaba will establish operating center managed by our staff in county, managing these village office, and in charge of making campaign locally. We just begin this rural strategy, and we have already established village office in some provinces. In terms of the fast-growing category in 2015, I would say, in addition to the furniture and the decorations and car accessories, I said that large electronic appliances and food and groceries, and these categories will continue to grow online because actually, for large appliances, actually now experience a transition to the smart equipment.
All the large electronic appliances will be the internet equipment, a smart equipment. We can see the large transition. In terms of food and groceries, what we can see is that, actually, people buy this stuff. Most people are actually repeated buyers. They buy again because of the use of the food and they eat up the food and use up the groceries. People buy for convenience. Online shopping gives them the most convenient way to do that. In terms of the digital entertainment, this is very important strategy to us.
We are working on this very hard and as you know, we have already invested in Youku Tudou, and on top of this PC and mobile channel to distribute the digital content, we are also working very hard to promote our OTT box and to promote a smart TV of our partners which embedded our YunOS. We believe that living room is a very important channel, and we try to reach the consumers in this new channel, and we can distribute the various digital content to them. Of course, in the digital strategy, content is very important, and we will be very disciplined and selective to purchase the very unique content as well as to self-produce some unique content to give people very unique experience on our content operation platform. Thank you.
Thank you. Your next question comes from the line of Carlos Kirjner-Neto from Bernstein. Please ask your question.
Thank you. I have two questions. If my math is correct, Taobao GMV accelerated 400 basis points, while Tmall decelerated 1,800 basis points sequentially. Can you help us understand the drivers for both the Taobao GMV acceleration, but most importantly, the Tmall GMV deceleration? Secondly, over the last few weeks, we saw several events that suggest that Ant Financial and Alibaba will build some type of consumer credit business, including the notice about the preparation of personal credit rating by the PBOC to Ant Financial, and the launch of Sesame Credit by Alipay. Can you tell us what are your aspirations in consumer credit? Maybe help us understand the role that Alibaba will play versus Ant, and if you're going to take credit risk and the potential implications on the balance sheet. Thank you.
For the first question, the growth of Tmall, and actually, on an absolute dollar basis, Tmall GMV still grows of RMB 110 billion year-over-year and RMB 117 billion sequentially. Actually, this is very clear that Tmall still expects a robust growth. Since in Q4, we have November 11, and the year-over-year growth of GMV on November 11 and also the Double 12, December 12, compared to what happened in year ago, actually, the growth rate in 2014 is lower compared to the previous year because the size is already very huge. We didn't achieve the same growth rate in November 11 and Double 12. This has some impact on our year-over-year growth rate. This deceleration of Tmall GMV growth is also affected by the people shift to the mobile.
Actually, when we look at our mobile strategy, we promote very heavily our Taobao mobile app in the past year. As a result, our users tend to use Taobao app, even though they want to find Tmall listings, because they can find Tmall listing on Taobao app. Actually, that's resulting effect that Tmall actually gets less organic mobile traffic on this mobile app compared to on the PC side. Looking forward, we will work very hard to promote the Tmall mobile app and to get more and more organic traffic on the mobile side. Thank you.
Yeah, Carlos, address the thinking on financial services. First of all the financial services business will be carried out through Ant Financial. Alibaba Group will benefit from that through our profit share arrangement with Ant Financial. If we get into a credit business where credit risk is being undertaken, being underwritten, Ant Financial is going to do that, and any loans, consumer credit, or SME credit will be on the Ant Financial balance sheet. Alibaba Group will participate in the profitability of Ant Financial. Sitting where we are at Alibaba Group, you sort of get the best of both worlds. Now, the thinking on financial services, for Ant Financial, there are really two reasons why we believe an internet business can execute a sound financial services strategy. Number one, internet businesses have a lot of data on users.
With e-commerce related data and payment data, you can create very good credit profiles of potential borrowers, that is merchants and also consumers. Number two, internet platforms are very good distributors of financial assets. We have already seen the success of Ant Financial in distributing money market fund products. We think having those advantages of data and distribution capability, Ant Financial is very uniquely positioned to execute its financial services strategy.
All right. Thank you. Your final question comes from the line of Erica Poon Werkun from UBS. Please ask your question. Erica, your line is open. Please ask your question.
Yes, hi. Thank you. My first question is for Joe. Just wanted to ask you, in three years' time, how much do you think the mobile will contribute to your overall GMV in sort of rough term? Do you expect that after all the efforts in improving the user experience and the ROI of the advertisers, that your mobile take rate at that point will be closer to your PC take rate? That's the number one question. The second question is, we've been hearing recently potential changes in the VIE structure. Just wanted to check, what do you think are the potential changes for Alibaba. Thank you.
Yeah. Okay. Well, it's also always hazardous to do a three-year projection of mobile, just look at the facts, right? In this quarter, we have 42% of the GMV already coming from mobile. Having said that, we don't think the desktop computer is going away. E-commerce is the kind of activity where people want to sit down and spend time, especially on large ticket items, and that usually will happen still on a desktop computer. We see people buying stuff on mobile that are more impulse buy items. Over the longer term, we think that probably most of our users will have both purchased on PC but also have purchased on mobile. We now have 334 million active buyers. Our monthly active user base on mobile is already at 265 million. I think the future is very much mobile.
On your VIE question, these are draft rules that the regulators are proposing, and various employers and parties are going to submit comments. We're taking a wait-and-see approach. We're not going to comment further on that question at this point.
Thank you. Ladies and gentlemen, that does conclude our conference for today. Thank you for participating. You may all disconnect.