According to the latest China monitoring report issued by the China E-Business Research Center, the transaction values of B2B, B2C, and C2C e-commerce services in China reached RMB2.25 trillion (~$337 billion) in the first half of the year. The transaction value of B2B services topped at RMB 2.05 trillion (~$307 billion). The total trading value of e-commerce is expected to exceed RMB 4.3 trillion (~$644 billion) for the year 2010. China’s leading internet e-commerce player, Alibaba, is also having a good run.
Alibaba’s Financials
Alibaba’s (HKSE:1688.HK) Q3 revenues grew 40.4% over the year to RMB 1.45 billion (US$214.1 million) driven by growth in registered international users and overall paying members, which surpassed 1 million in the quarter. EPS for the quarter grew 57% over the year to RMB 8.27 (~$1.06).
International registered users grew 42% over the year to over 14.9 million. For the quarter, registered users in China grew 20% over the year to 41.8 million. Storefronts also saw significant growth in the quarter, with international storefronts growing 32% over the year to 1.6 million and Chinese storefronts growing 36% over the year to 4.8 million.
Alibaba’s Acquisitions
Alibaba has been acquiring steadily to build their operations. They recently acquired export service provider Shenzhen One-Touch, a provider of one-stop services for exporters in China. One-Touch provides export-related services customized to meet the needs of small businesses in China. Their services include customs clearance, logistics, cargo insurance, currency exchange, tax refunds, financing and certification, and so on. With the acquisition of One-Touch, Alibaba is looking to introduce the export-oriented services to their China Gold Supplier members to enable them to conduct export transactions more effectively.
Alibaba’s Future Expansion Strategy
Alibaba is expected to announce additional acquisitions in China to build up their business platforms. Additionally, they are investing heavily in setting up over 32 distribution centers in China in the next two years. They are planning to expand their operations from 20 cities to 52 within the next couple of years. Additionally, the company is working with private equity companies to buy out Yahoo!’s 40% stake Alibaba.
Alibaba and Search
Alibaba is also developing search engines in partnership with Microsoft. The public beta version of Etao, a shopping search engine powered by Microsoft’s Bing, launched in October of this year. Given the popularity of Taobao, the online auction and shopping site, in China, analysts expect Etao to easily capture search market share from Google and give some competition to Baidu, the Chinese search market leader.
The stock is trading at HK$12.92 (~$1.65), taking its market capitalization to HK$65.2 billion (~$8.35 billion). It touched a 52-week high of HK$19.96 (~$2.55) in January of this year.
Baidu’s Financials
Meanwhile, Baidu (NASDAQ:BIDU) too delivered strong results. Q3 revenues of RMB 2.256 billion (~$337.2 million) grew 76.4% over the year and exceeded the market’s projected target of $333.3 million. EPS of RMB 3.07 (~$0.46) was also ahead of the market’s expected EPS of $0.41.
During the quarter, Baidu had 272,000 active online marketing customers, representing 26% growth over the previous year and a 7% increase over the previous quarter. Revenue per online marketing customer for the quarter grew 41% over the year and 11% over the quarter to RMB 8,300 (~$1,241)
For the current quarter, Baidu is looking for revenues of $354.2 million–$364.7 million compared with the market’s expectations of $348.5 million.
Baidu Gains Google’s Market Share
According to Analysys International, China’s search market recorded 57% growth over the year to RMB 3.15 billion (US$460 million) in the September quarter. Baidu continued to feed off Google’s retreat from mainland China. Their market share for the September quarter rose to 73% compared with Google’s 21.6%. A quarter ago, Baidu had recorded a 64% market share while Google had owned 31% of the market.
Baidu’s Strategy
Baidu is focusing on continuously improving their online marketing system and customer engagement while building awareness of search engine marketing. Their Phoenix Nest platform is now fully implemented and is enabling the company to provide new value-added tools to customers to optimize account management and improve ROI.
They also enhanced their search tool, and earlier this quarter introduced the Baidu open application platform in recognition of the fact that over 30% of user queries were for applications and not just information. On this platform, Baidu can embed information and a wide range of applications such as Web-based games, e-books, and popular software that are directly and dynamically accessible in search results. They claim to be the first search engine company to integrate these functions.
The stock was trading at $105.05 with a market capitalization of $36.6 billion. It touched a 52-week high of $115.04 in August of this year.