Earnings Call: Q2 2015

Nov 4, 2014

Good day, ladies and gentlemen, and thank you for standing by. Welcome to Alibaba Group's September Quarter 2014 Results Conference Call. I would now like to turn the call over to Jane Penner, Head of Investor Relations of Alibaba Group. Please go ahead. Good day, everyone, and welcome to Alibaba Group's September quarter 2014 earnings conference call. With us today are Joe Tai, Executive Vice Chairman Jonathan Lu, Chief Executive Officer Daniel Zhang, Chief Financial I'm sorry, Chief Operating Officer 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. So please refer to our IR website for earnings releases as well as the supplementary slides that accompany the call. You can also visit our corporate website for the latest news and updates. This call is also being webcast from our IR section of the corporate website. A replay of the call will be available on our website later today. Now let me quickly cover the Safe Harbor. Today's discussion will contain forward looking statements made under the Safe Harbor provisions of the U. S. Private Securities Litigation Reform Act of 1995. These forward looking statements involve inherent risks and uncertainties that may cause actual results to differ materially from our current expectations. Factors that could cause actual results to differ materially are set forth in today's press release. To also understand these risks and uncertainties, please refer to our Form F-one 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 and adjust for changes in loan receivables relating to micro loans of our SME loan business, which we refer to as free cash flow. Our GAAP results and reconciliations of GAAP to non GAAP measures can be found in our earnings press release. With that, I will now turn the call over to Joe. 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 on our first earnings call as a public company. In the quarter that ended in September, which is our fiscal Q2, I'm pleased to report that we saw continued strong growth across our core operating metrics, which drove our strong financial results. We grew gross merchandise volume across our China retail marketplaces and we increased the number of active buyers across our ecosystem. As a result of this strong performance, we grew revenue significantly, and 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 and our results highlight both the strength of our ecosystem and the strong foundation we have for sustainable future growth. My colleagues will provide you with a more in-depth look at our business operations and financial results. But 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 of 49% year on year is an acceleration from the GMV growth rates achieved in the previous two quarters of 46% 45 percent respectively. One key reason for the strong GMV growth is the continued growth in active buyers. Our platform engages users with strong commercial intent and you will recall that 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 September, our annual active buyers increased to 3.70,000,000 sorry, 307,000,000. Annual active buyers for the year ending in September amounted to a 52% year on year increase from $202,000,000 a year ago and continues the strong growth trend we have seen over the last several quarters. The robust growth of active buyers reflects the position of Taobao Marketplace and Tmall as the first and most important destinations that Chinese consumers choose when they embark on a shopping journey, whether they are shopping through their desktop computer or mobile device. Overall, for context, when you consider 307,000,000 active buyers, this means that a number of consumers that equals almost the entire population in the United States is shopping annually on our China retail marketplaces. Yet 307,000,000 Chinese consumers represents only about half of the Chinese Internet user population and less than a quarter of the total population of China. These numbers highlight the significant growth opportunities we have before us. I next want to touch upon an area that I know you are intensely focused on and that is our progress in mobile commerce. Alibaba continues to be the unrivaled leader in mobile. You are already well aware that Alibaba leads the China commerce market with 86% share of total mobile GMV according to iResearch. You will also remember that our mobile Taobao app has been and continues to be the most popular mobile commerce app in China by monthly active users in every month for the past 2 years. Our reported results today show that our leadership position in mobile continues to strengthen. In September, we saw 217,000,000 monthly active users across our mobile commerce apps and the most important of which is the mobile Taobao app. This is an increase from the 188,000,000 MAUs we reported for June. This is a net add of 29,000,000 mobile users in just 3 months. For context, 29,000,000 people is larger than the population of Texas. In the September quarter, we saw US32 $1,000,000,000 in mobile GMV, up from US9 $1,000,000,000 a year ago, representing more than the tripling of mobile GMV year on year. Today, we are reporting that mobile GMV now accounts for 35.8% of our total GMV for the September quarter, up significantly from 14.7% a year ago. With more than 1 third of our China retail business on mobile, Alibaba is very much a mobile company. If you look at how much mobile business we do every year for the 12 months end of September, we saw US95 $1,000,000,000 in mobile GMV on our China retail marketplaces. I don't think you can find another company in the world that drives US95 $1,000,000,000 in consumer retail transactions through their mobile apps. Maggie will address mobile revenue in more detail, but we are reporting today that 29% of our total revenue across our China retail marketplaces is now being derived from mobile. This shows significant growth from the prior quarter that ended in June when we had 19% of our revenue being derived from mobile. And looking at the year on year comparison, mobile revenue in this quarter represents a more than 1,000% increase from a year ago. As we have said many times, we don't manage the business by take rates. Having said that, we have decided to break out mobile take rates for your analysis in order to bring more transparency into the progress we're making in monetizing our mobile transactions and traffic. The mobile monetization rate, which is mobile revenue divided by mobile GMV on our China retail marketplaces increased to 1.87% in September quarter. This is a meaningful improvement from the 1.49% from just a quarter ago. We're clearly seeing sustainable progress in how we monetize mobile. That is 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. This benefits our merchants and increases 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 of the higher frequency of shopping through our mobile apps and more personalized and location based data, we can use to deliver a highly targeted experience, we believe the value of our ecosystem will continue to be enhanced by the consumer shift to mobile. Taken together, the results we're reporting today show our strong foundation for future sustained growth. And I would now like to turn the call over to our CEO, Jonathan Lu, who will provide more color on our business for this quarter. Jonathan? Thanks, Joe. Hello and welcome to our first earnings call. Joe gave a good overview of the progress we have made in our key operating metrics. And I want to give you a sense of how we achieved these results, namely, what we are doing to drive GMV and active buyers. Let's start with the GMV growth. Tmall GMV continues to grow extremely well, but in the September quarters, Taobao marketplace grow faster year on year than in the past three quarters, a clear acceleration of a very large business. This acceleration was due to a number of factors. First, we have made several product changes on Taobao to improve our virus experience, including a new recommendation engine based on data. Search results are now more personalized, which increased commercial rates. 2nd, we have promote new categories that are growing fast, including furniture and decoration, car accessories, household products, sports gear and baby maternity. It's clear from the list of categories that our buyers are beginning to live at Alibaba. Taobao is now a destination that can meet every immeasurable need. Of course, GMV growth is fundamentally driven by our ability to attract and retain active buyers. Our extremely popular mobile Taobao app has been one important source of new buyers on our platform. We have recently add feature to increase usage of the app, including our fresh sales and encourage mobile virus to return several times a day. In addition, more buyer from smaller cities are using our retail marketplace every year. Even though these new buyers initial transact less than buyer from 1st tier cities, We believe they will be an important engine of GMV growth in the futures. In general, our data suggests that the longer a buyer stay on our platform, the more they spend across a greater variety of categories. I want to mention a few highlights from our long marketplace business. We in our cloud computing business this quarter. At our Anying Worldwide Developer Conference in Hangzhou, we host more than 10,000 developers and partners from around the world. Cloud Computing put more small business on the same playing field as big corporations. And Alikao is helping SMEs to start building lasting and sustainable companies. I also want to let you know that we are just to integrate our newly acquired business UCW and Auto Laving, both bring crucial strategic advantage to Alibaba, namely mobile browsing and mapping products. The business leader of UCF, Yu Yong Fu, has joined our senior leadership team, and we feel very lucky to have him. Finally, I want to call your attention to Double 11. An important day for Alibaba and shopping and societal phenomenon for China. At Alibaba, we are proud we have created an ecosystem that has revolution ize the China retail landscape in service of the little guy. Double 11 was start in 2,009 for merchants and consumers during the seasonal changeover, filling a major gap in the traditional off line retail vendor in China. In 2013, 11 achieved the milestone of surpassing Black Friday and Cyber Monday combined in online GMV. This year, Double 11 will expand its scope to include cross border retail for the first time ever. This is in response to the increasing around Chinese consumer for imported goods from foreign brands as well as the ability by China's small businesses to provide quality products among global consumers. On this stage, you truly see Alibaba's ecosystem at work. Our robust technical infrastructure, scalable logistic network and the magnitude of the active participants and what is shared on our platform. Now, we'll hand off to Maggie, who will walk everyone through our financial performance in the quarter. Thank you, Jonathan. Hello, everyone. Jo and Jonathan have already operating metrics in the September quarter. So now I'll walk through the details of monetization and our financial performance. First, the highlights. GMV grew 49% year over year to RMB556 1,000,000,000 and was 11% sequentially. Revenue grew 54% year over year to RMB16.8 billion and was up 6 point 7% sequentially. Our blended monetization rate was steady at 2.3% versus 2.31% a year ago. Non GAAP EBITDA margin was 51%, down from 59% in the year ago period. I'll dig into details on this in a few minutes. By the way, the non GAAP EBITDA was also caused adjusted EBITDA, same thing. Non GAAP net income grew 16% year over year to RMB6.8 billion. Non GAAP diluted EPS was RMB2.79, an increase of 9.4% compared to RMB2.55 in the same quarter of 2013. So moving on to monetization. I want to make it very clear that we manage the business to promote growth in G and A and active buyers, not to maximize our own monetization rate. We view monetization rate as merely an output of our success in driving GMV active buyers as well as improving the customer experience and their returns. That said, we are monetizing our GMV very well. The blended monetization rate across PC and mobile devices is stable at 2.3%, consistent with prior years. This blended rate is lower especially due to strong GMV growth on top of marketplace, whereas GMVs are less monetized since it's literally still a free marketplace. As Joe noted, our performance in mobile this quarter has been particularly strong. The mobile monetization rate increased to 1.87% from 1.49% in June quarter and from 0.61% in the year ago period. Our mobile multi addition rate is now 74% that our PC monetization rate. Year on year, our revenue grew 54%. We got a small revenue tailwind from consolidating UCWeb and Auto Navy. But even without revenue from these new businesses, our revenue growth this quarter would have increased 48% year on year. As you can see from the chart detailing the revenue growth of our major businesses, we have strong growth across the quarter across all the businesses. Before diving into Sequium Asset Margins, let me be very clear that we do not manage to a margin target. Instead, we have made and will continue to make strategic investments to grow our revenue at 2 profit dollars and to strengthen our ecosystem for a long term. In the September quarter, lower non GAAP EBITDA margin was largely driven by reinvestment made in the following areas as planned. Number 1, consolidation of newly acquired businesses, mainly UCWeb and AutoNavy. Number 2, investments in new initiatives, including our mobile operating systems, local services and digital entertainment. Number 3, tactical brand marketing to promote our China region marketplaces during this quarter. While intense global income in Alibaba enhanced the effectiveness of marketing campaigns. We're now providing margin we are not providing margin or expense guidance, but our overall view is that our core business and cash flows are very healthy. So we have the luxury to continue to invest in new initiatives such as category expansion, including digital entertainment, multi screen strategy, etcetera and other efforts to attract new users to improve engagement and user experience and expand our products and services. Now let's talk about our operating expense. Pre SPC cost of revenue was RMB4.4 billion. Pre SPC operating expense was RMB4.5 billion. Pre SBC product development expense was RMB1.9 billion. Pre sales and marketing expense was RMB1.6 billion and pre SBC channel and admin expense was RMB978 RMB978 1,000,000. Sales and marketing expense increased largely due to brand expanding to promote our group businesses during this when intense global interest in Alibaba to enhance the effectiveness of marketing campaigns. Additionally, the consolidation of marketing expense in our marketing expenses as well as the increase in spending on new business initiatives contributed to the increase of sales and marketing expense in this quarter. Our adjusted effective tax rate was 17.6%, up slightly sequentially. We also generated RMB8.9 billion of free cash flow in the September quarter. CapEx expenditures were RMB3.4 billion, an increase from RMB1.1 billion in the year ago period and RMB1.3 billion in the June quarter. The sequential CapEx increase was due to the purchase of land for office space and the cost of the land was around $1,400,000 dollars and the non re asset CapEx increase due to the investment in Ali Cloud and our data platform, as well as as non invested CapEx acquired by UC and Auto Group. Our cash and cash equivalents position as of September quarter is very strong at RMB88 1,000,000,000. In addition, we have RMB21.8 billion in short term investments. So that's all for our prepared remarks. Now let's open the floor for questions. Thank And our first question comes from Alex Yao from JPMorgan. Your line is open. Please go ahead. Hi, good morning and good evening everyone. Thank you very much for taking my question and congratulations on a very solid quarter as the first as a public company. My first question is about the monetization rates. Can you comment what is driving the improvement of the mobile monetization rate during the quarter? Is there any one off events attributable to the increase? Or you guys drive a lot of sales margin effort to drive the merchant adoption? And then secondly, on the PC monetization rate, if my calculation is correct, it seems to decline a little bit compared to the same period last year. Why did the PC side decline? Thank you. Okay. I will take this question. For the mobile monetization rate, I think the key reason for the increase in the mobile monetization rate is that the continued increase of the mobile traffic. And because today, more and more Chinese people, they get used to shopping online by mobile device. And on the other hand, when our merchants witness the behavior change and they will spend actually today are spending more money on the mobile side to bid for the keyword and buy the online marketing services. I think these are the key reasons for the increase in mobile monetization. Yes. Alex, this is Maggie. In terms of PC take rate, it's lower than previous quarter slightly. And the reason is that we have a very strong G and A growth on Taobao marketplace. If you look at the growth rate, it's actually accelerated compared with previous quarters. And the top of marketplace GMVs are relatively less monetized since it's still literally free marketplace. So that's the reason. Having said that, we manage business to promote the overall growth of G and A active buyers. Really, Tigray is just the output as a result. And we look at PC and mobile as an integrated marketplace. Got it. That's very helpful. Thank you. Our next question comes from Alan Halliwell from Deutsche Bank. Your line is open. Please go ahead. Fantastic. Thank you very much for taking the question. And again, congratulations on your Q1 out of the gate. I had a question about the interplay between commissions and marketing services revenues. If I'm not mistaken, commissions in the quarter may have doubled year on year and marketing services may have risen by a bit more than 30%. I was wondering if you could just give a little color as to what the drivers were between these different trajectories, whether you do it as a function of PC or mobile, but get some color there. And would simply love to get a refresh on how you are contemplating your M and A strategy over the next couple quarters? Thank you very much. Yes. I'll take the commission versus online marketing revenue question and then to Joe talk about M and A strategy. Yes, you're right, actually commission revenue grow faster year on year than the online marketing revenue growth. As we disclosed in the announcement that our retail revenue consists 33.5 percent commission revenue in the quarter compared to 24.8%. And the reason for to rest of the slower growth in the online is pretty much the same reason as when we talk about PC take rate, because Taobao GMV grows so much faster. And when you look at a PC versus mobile GMV mix, Taobao has a higher PC CMV percentage than in Tmall. And as I said, Tahoe is relatively less monetized. So that's the impact, which resulted to kind of a slower growth. Not really slower, but just compared to the much faster growth on the commission. Okay. Alan, how are you? This is Joe. Thanks for the question on M and A. You asked about M and A strategy for the next couple of quarters, but I think we always look at M and A as a long term strategic thing. So the horizon is much longer than the 2 quarters. And the kind of criteria that we use in terms of making investments and acquiring companies is that, number 1, we always like opportunities that will help us add more users and also additional engagement of these users in terms of converting them into e commerce users. And number 2, we are always interested in improving customer experience. So for example, we have previously said we have a partnership with the Hyre Logistics business where we had both a commercial relationship on logistics as well as an equity relationship to bring the 2 companies closer together in order to bring better logistics service to the large appliance category and that has worked out really well for us. And number 3, we're always interested in adding additional product and service categories that will enhance our position in terms of getting the consumers' wallet share. So that's what we're looking at in terms of the strategy. Thank you. Yes. I just want to add a little bit to the Taobao GMV growth. I keep saying that it grows faster. They're a reason behind. And we see this as very positive because Taobao is our core traffic engine and a critical source of eventually, in monetize for all of our marketplace, including Tmall. So we have been making a lot of efforts to grow the GMV in total marketplace. Thank you. Our next question comes from Angela Mo from Morgan Stanley. Your line is open. Please go ahead. Hi, thanks. Again, congratulations on the results. Just a couple of questions from me. On the average spend, if we just take the number of buyers and kind of back out the average GMV per person or per buyer, That's kind of down about 2% year on year. I mean is that something that you guys are worried about? Or because you mentioned the about the investment of about, I think, dollars 10,000,000,000 over 5 years on the Tahoe Village. Could you also maybe give us a little bit more color on the underlying Right. The second question, the line is not that good. Could you please repeat the second question, Angela? Sorry. So the second question is recently we saw an announcement about investment of I think about RMB10 1,000,000,000 over 5 years on top of that trend, right? So going down into a rural village setting up these stations. Can I Yes? Okay. I'll answer the first the TME per buyer question, then Daniel will answer the real one. The slight decline of this so called RAV4 or GMV per annual active buyer does not really worried us. It's just slightly decreased due to the significant growth of the new buyers in the past year. As you could recall, we have been talking about the rule on our platform is that the longer consumer stays, the more they spend annually. So not only the new buyers' spending are relatively lower, but we'll catch up as they buy from more categories of the number of orders. So if you really break it down rather than look at the average of that spending level, we do see that trend. Yes. Hi, this is Jonathan. I'll take the second question. Right now, there's 34% of the Chinese people in urban area use the e commerce, but only 9% of Chinese people in rural areas use e commerce. So this is a big we consider this as a big opportunity for long term. Our vision is that we will enable the farmers to sell their farm products to city people and globally. At the same time, we encourage Chinese 600,000,000 farmers to buy online from Taobao. So this is a long term view. Thank you. Our next question comes from takeaway from Credit Suisse. Your line is open. Please go ahead. Hi. Thank you for taking my questions and congrats on a strong quarter. My first question is on the Ali Trip. I wonder if you have any updated strategy or investment plans or any area of focus for the Ali Trip new subsidiary? And then I think the other side, the other questions I have maybe in terms of the other income line, I suppose that mainly comes from the Adi I guess, from end financials. I wonder any kind of sense or directionally how does the margin trend coming along from the end financial side or any details we can add? Thank you. Okay. This is Daniel. I will take the first question about travel. And actually late last month, we just launched a new brand name of our travel business. And the purpose is quite clear and we believe that travel market is a fierce market for Chinese people. And today, when we look at the market, we want to launch our services to the Chinese consumers to not only for the tourism domestically, but also to bring more Chinese people to other countries. But we don't want to do this like others does as an OTA. We will still stick to our platform model. We will try to connect the service provider, the hotels, the airlines and the pricing connect with end customers directly. Actually, we have we made a recently, we made an investment in a Chinese software ERP company, it's a travel ERP company, which is Asia Xi Jinping. And the purpose is that we want to work with them to connect with the system of the hotels and restaurant to so that the merchants at the hotels and restaurants can supply their inventories on a real time basis. And by this way, they can sell their product and service more efficiently. Yes. Dick, your question about our small micro dense service group profitability, you can see from our disclosure that our profit sharing from the group is slightly down. The reason behind is that based on our restructure agreement, the 49.9 percent profit sharing having changed to 37.5 percent, a bigger pie. But currently, the profit mainly coming from Alipay. Other businesses are still in the very initial stage. And one thing I do want to mention about is that the overall ANS, our ANS Small Microfinance Group is still in its very early investing stage and growing profit is definitely not their priority. So we do not expect very high on the significant profit sharing growth. Thank you. Our next question comes from Carlos Kershner from Bernstein. Your line is open. Please go ahead. Thank you. Two questions. Can you give us some direction on how much more user cohorts have spent as they stay longer in the platform? For example, if you take users who joined 2, 3 or 5 years ago, how much more are they spending today versus in their 1st year? 2nd, can you also give us some direction on what EBITDA would have been ex the impact of UCWeb and also Navi and talk a bit about the rationale for developing your own OS given the strength of Android and iOS? Thank you. Yes. Let me share with you some color on this average spending per buyer. As I said that longer customers stay with us, more they get a spend annually on our platform. I'll give you example, like a customer who stays with us within a year time, their average spending annual spending level is somewhere around RMB1000. And for the ones who stayed with us for 5 years' time, their spending level is somewhere around RMB 15,000. And then for the ones that is around 10 years, their level is going to be above RMB30,000. So this is the trend we see so far as our consumers base for their spending patterns. Okay. Carlos, this is Joe Tsai. Your question, I think, is about the why we're investing to develop our OS. Operating system is a very long term strategic project for Alibaba, especially for the China market. As you probably know that Google has a strong franchise in Android, and although a lot of phones in China are operating on the Android system, there there's not a lot of Google services that operate with these phones. And the whole thinking behind developing Internet services on top of that operating system, for example, maps, for example, for us, in our case, e commerce. And we feel that we are a very strong Internet service company in China and developing an OS for the mobile device, not just phones, but also other mobile devices will be a long term winning strategy for us. And I just want to emphasize that it's a very long term game. The dominant player today may not be dominant tomorrow. So we're that's why we're continuing to investing in ROS. Thank you. Our next question comes from Piyush Mubayi from Goldman Sachs. Your line is open. Please go ahead. Thank you for taking my question. Can I just ask you the question about I think Carlos asked this question earlier? Would it be possible to break down the higher expenses for the quarter between the impact of consolidation and the higher spending on the core business? That's the first question. And second, you've got a strategic position in ASEAN with the investment in Singapore. Could you give us a sense of how you'd like to see this evolve? Thank you. Yes. For the investment we make, you see ultimately, if we exclude the impact of that to company from the non GAAP EBITDA, our non GAAP EBITDA margin would have been somewhere around 54%. Yes. For the global strategy, we believe that Southeast Asia is a very important area we have to explore. And in this area, a lot of Chinese people live in there and they are familiar with Taobao and they like to buy from Taobao. So today what we are doing is that we try to develop to collaborate with our partners to make the logistics system and the network system ready. For example, early this year, we made investment in Singapore Post. And the reason is very obvious, we want to work with them to build up the logistics network in Southeast Asia to help our merchants to deliver products to their to this region more efficiently. Thank you. Our next question comes from Thomas Chong from Citigroup. Your line is open. Please go ahead. Hi, Joe, Jonathan and Maggie. Thanks for taking my questions. My question is about Zhuhua Shan. Given recently there are a lot of useful talking about the revamp of Zhuhua Shan, can you comment about the long term strategy for this business line? And would you doing your own merchandising to grab the share for the discount retail sector in China? Thanks. Okay. This is Daniel. I will answer this question. For QiuBaoza, it's a very unique platform. Actually, people for Taobao actually this platform is the purpose to first to serve our Taobao seller to help them to sell in a model sort of group buying the product to the Kaobao consumers. And we limited SKUs, but it's a very deep stock level that the merchant can sell overnight. So without any distribution cost, so the sales could be very efficient. And the other purpose for the QHuaza is to not only to help our merchants to sell products, but also to help them to promote their storefronts. So we so in this case, we merchant will do Zhihuahua Zhang as a marketing platform and they will use some products to be promoted in this Zhihuahua Zhang platform to make people aware of their storefront and go into their storefront for repeat purchase. Thank you. Our next question comes from Alicia Yap from Barclays. Your line is open. Please go ahead. Hi, good evening, everyone. Thanks for taking my questions and congrats on a strong quarter. My question is regarding the AliExpress. I wanted to know what are the categories that are most attracted to the global consumer on this marketplace? And how should we think about this marketplace with the upcoming November promotion? Thank you. Yes. AliExpress is a platform to help Chinese consumers Chinese merchants to sell to the consumers in other countries. And when you look at the top selling categories in AliExpress, actually in different countries, the top selling category could be very different. And today, for example, in Russia and apparel is obviously the number one category because everybody understands in Russia and the consumer market is not so mature and people cannot find good apparel, good jacket with high quality but low price. But China is famous for the manufacturing base of apparel. And for other countries, actually for some countries, consumer electronics and the digital product and phone are very popular. For this coming 11/11, AliExpress will also join this campaign and they will sell actually, they will promote the products and as well as the brand and the merchants on our platform and to the people in other countries. Thank you. Our next question comes from Eddie Lang from Merrill Lynch. Your line is open. Please go ahead. Hi. Good evening. Thank you for taking my questions. I have two questions. The first one is about your active buyers. Could you share with us some metrics about the retention rate you have seen of your active buyers in the past, let's say, a year as well as the organic user growth you have seen on your platform? And then secondly, about your merchant base, could you give us the number of merchants on your Taobao and Tmall platforms in the past quarter? Thank you. Yes. For the first question, the active buyer attention, as Maggie mentioned just now, we our platform have a very good stickiness to the consumers. People usually start with some light category. When we call it light category, for example, like virtual items, people for the new customers, they will start with some virtual items like Perfect Cards, cellphone Cards, game cards. And when they get used to online shopping, they will switch they will buy items from other categories, and they will spend more and more money on our platform. So when you look at our active buyer every quarter in the past few quarters, you can see the net add is very material. And we are confident that these people will spending more in the future as they get used to shopping online. Thank you. Our next question comes from Erika Poon Werkink from UBS. Your line is open. Please go ahead. Congratulations on your results. My first question is about mobile GMV. We've seen continued fast growth in the mobile GMV contribution. How do you see that contribution to trend over the next couple of years? And how do you expect that to influence the company's average take rates and also gross margin? The second question is on 11111. Just wondering if you expect it to be a bigger event this year versus last year. Could you share with us how many sellers are participating this year versus last year? And if there's any early indication on consumer responses? Thank you. Right. In terms of the mobile GMV as a percentage of total GMV, we're already 35.8 percent. We see it still going up. And we believe that in the following quarters, you'll see the increasing trend. However, we do see PPC has its role, right, in this e commerce people will not switch 100% to mobile. So and having said that, to us, mobile is just another piece of screen. So what we are focusing on is are the people behind the screen. So to us separating the mobile DME and PC DME is really for the purpose of in this early stage for mobile progress, investors are really integrated our and it's one marketplace, the users are ones we want service to and focus on. So the take rate, right, the monetization, you have seen that our mobile take rates grow really fast. And whereas a lot of times that where the mobile ticket could be and our expectation is that mobile ticket could be approaching PCs. The reasons are, ticket rates reflects the value we provided to the merchants. And we do believe that we have a higher chance to provide higher value to our customers. What I mean by saying that is, first of all, we see more customers we can provide service to for this mobile platform. So it's more buyers, more merchants. And secondly, high engagement. We do see people come from Moa and more often, many times than we do. And third one is we could utilize more on the data side to drive and to provide more value to our customers. So in summary, we do see the mobile take rate could keep grow and approach PCs. And I just wanted to sort of talk a little bit about just taking a step back to talk about mobile monetization. As you can see, we're disclosing mobile revenue as a percentage of our China that has really generated substantial revenues from mobile and clearly disclose it. And the reason why mobile monetization rates continue to increase is that when we look at a user, they're a consumer. When they come to use our mobile app, their commercial intent is extremely strong. In fact, that commercial intent is no different from when they visit a desktop computer. When they come to the Taobao app, they want to buy something. And that leads to very strong conversion rates, which then benefits the merchants, which then allows the merchant the confidence to allocate more of their book marketing budgets on us. So our mobile users actually generate transactions. And as I have said, over the last 12 months, dollars 95,000,000,000 of GMV generated on our mobile platform. So we see that this strong commercial intent applies across the board, whether it's on desktop or mobile. Yes, this is Daniel. I will take the second question, 11.11. And there will be 1 week ahead and for this year's 11.11, and this will be our 6eleven-eleven promotion. And last year's promotion was very successful. The sales volume was RMB5.8 billion, which is very huge. And this year, we don't want to focus on a single number. Instead, we want to achieve some other objectives. First is that globalization. We want this year to be the starting point of our global single sales promotions. And we are trying to we have already trying to bring more and more overseas high quality products via our platform to Chinese people. I'm sure many of you very successful in our presale campaign. Very successful in our presale campaign and which is just accomplished. And the other thing we focus on is mobile. As you can see, more and more Chinese consumers, they're shopping via mobile device. We want our 11 promotions that could be more fit to Chinese consumers' experience and to give their good experience and look and feel and the shopping selection on the mobile side. And the last one is to how to introduce how to attract more participants in our ecosystem to this big campaign. This year, for example, we invited 100 of game developers to develop small games and tens of thousands of shoppers tens of thousands of merchants, they use these small games in the storefront to impact with consumers. And we also have a lot of movie stars. They are interacting with their fans, and they help us to distribute the coupon to these fans. So generally speaking, November 11 is not a game for Alibaba Company. It's a game it's a 5th day for the ecosystem. Today in China and tomorrow, we think it's a global day for the consumers and merchants and ecosystem in e commerce. Thank you. Our next question comes from Ming Chao from 86 Research. Your line is open. Please go ahead. Yes. Thank you. I have two questions. First question is, we don't see the guidance. So is this company's policy of not giving guidance for the future quarter or future year? Or can you share some color about the December quarter in terms of GMV revenue? That's my first question. The second question is about the accounting of the smart logistics. So, Maggie, you just mentioned that the profit sharing percentage change has led to a slightly decline in the below the line other income. Does that mean there isn't really not any significant number there for the smart logistics? Or in the future, if that company is aggressively investing, we're going to see some loss there? Thank you. Yes. Qingming, it's Maggie. Yes, it's our company policy not giving our guidance. The reason is because we're really long term view rather than focusing on the near term profitability or revenue, etcetera. So we will be continuing to communicate with investor analysts closely on our business progress and report on performance, but not giving guidance. So in terms of profit sharing, I guess you're talking about profit sharing with the small micro financial group. This for the logistics, the Cainiao group, we're not having a profit sharing arrangement, neither we consolidate them because that's the company we own 40 percent. So not more have a control in that. So our profit sharing with the Small Backer Finance Group, what I'm trying to say is that, that group's business has tremendous potential, but it's still in a very early stage. So they are not really after a high profitability, high growth in the profit. So we do not expect a significant share from that group in many near term. That's the yes, For the Smart Logistics, we have actually accounting for that part of the investment. And the total investment commitment for that company is 48% of RMB5 1,000,000,000. So that gives you a sense about the impact. Thank you. Our next question comes from Scott Devitt from Stifel. Your line is open. Please go ahead. Hi. Separate question on China Smart Logistics. Could you just provide an update on the progress of it? And then generally any improvements or changes in merchant delivery times or other fulfillment measures that you track in the quarter? And then secondly, could you talk a bit more about international efforts and the way you're thinking about growth outside of China? Thus far, Alibaba has benefited internationally, partially through organic growth and also made some minority investments. And I'm wondering how you would depict future growth Logistics. Point number 1, we are still working closely with our logistic partners to connect our system with their system so that we can track the status of the orders for every single orders generated on our platform. And today, we are order system from our 14 major degree company partners. Actually, we have already connected the system with them. And today, we are working heavily with them to prepare for the coming November 11. And hopefully, we can track every single order from November 11 from our system integration. And the point number 2 for the hardware infrastructure, today we are still looking at the infrastructure resources that land use right in the critical areas, And we have already made some investment to acquire some land use right to but we will when we launch these warehouses and we construct and we will basically share these resources with our logistic partners to help them to expand their capacities. And for the second question, for the international expansion, today, we view the global strategy is one of the important strategy in our group, but we will start with the cross border right now. And as we said, today when we look at the cross border, we try to leverage what we have today. Basically, there are 2 things. First is our we have the huge consumer base in China, and China is the largest consumer market base in China and China is the largest consumer market in the world. So what we are doing right now is to help more and more overseas merchants. Most of them they don't maybe most of them they don't have China presence right now to help them sell their products and services via our online marketplace to Chinese consumers. And the second strength we have is that China is the largest merchant is a manufacturing base. And today by our AliExpress platform, we help Chinese merchants to sell through to the consumers in other countries. And sir, we do have time for one more question. Thank you. Our next question comes from Mark Mahaney from RBC Capital Markets. Your line is open. Please go ahead. Yes. I'll just thank you and good evening. I'd just like to follow-up on an earlier question about Alipay. Any more details you can provide on how that investment is faring for you? And overall, the increased penetration of AliPay across the Alibaba platform and off of Alibaba? Thank you. Yes, Mark. So first of all, Alite is with the ANZ, we changed the name to ANZ, Small Microfinance Group. It's a totally separate group business. But having said that, the growth of Alunty Business is very well. It's still a private company. We're not they're not the business grow very well. TPV's total payment volume grows very well. And Ali Wallet, is in a very healthy growth trend. And the impact to our group are really two lines. One line is the processing fee we paid to Alipay. So that still stays at the same price level, which is very favorable to Alibaba Group. And the other line is the profit sharing I discussed. Yes, that's about the value pay. With that operator, I think we need to close the call. Thank you. Ladies and gentlemen, thank you for participating in today's conference. This