MANAGEMENT DISCUSSION AND ANALYSIS

Topics: Income statement, Operating expense, Revenue Pages: 16 (7167 words) Published: October 27, 2014
Alibaba.com Limited Annual Report 2011

MANAGEMENT DISCUSSION
AND ANALYSIS
WE ARE CONFIDENT THAT THE
SHIFT AWAY FROM AGGRESSIVE
MEMBERSHIP ACQUISITION TO FOCUS
ON STRENGTHENING BUYER’S TRUST
ON ALIBABA.COM WILL BENEFIT OUR
CUSTOMERS AND OUR LONG-TERM
BUSINESS GROWTH.

BUSINESS ENVIRONMENT
The global economy was sluggish in 2011 due to lackluster
economic conditions in the major developed markets. Downside risks have been increasing as the Euro zone crisis unfolds without solution and the U.S. recovery falters. Cautious sentiment is restraining consumption in developed economies, which is

negatively impacting emerging economies and developing
nations. China is unlikely to prove immune to the global
slowdown. China’s economic performance was hurt by a greaterthan-expected dampening of export growth, which declined from 31% in 2010 to 20% in 2011. In addition to falling global demand, small businesses struggled with surging production

costs, high labor costs and a stronger Chinese currency. A
credit squeeze caused by China’s tightened monetary policy also added pressures to small businesses. Nevertheless, many

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small businesses have remained competitive by tapping China’s fast-growing domestic market and other regions through
geographical expansion, thus diversifying their customer base. More businesses also appear to be leveraging e-commerce to
become more flexible, efficient and competitive.
Another phenomenon that we have observed is the increasing
demand by small businesses for online sales and marketing
services. Small businesses usually prefer variable, performancebased services as they aim to maximize their return on investment for the marketing dollars they spent. This trend supports our view that e-commerce is becoming indispensable for small businesses. Going forward, we will continue to serve our customers by

developing additional performance-driven and online transactionbased services.

Alibaba.com Limited Annual Report 2011

BUSINESS OVERVIEW
Since early 2011, we have reiterated our focus on our long-term strategies of 1) building a trustworthy e-commerce platform
by enhancing user quality and user experience, as well as
strengthening the depth and the breadth of user information
captured on our platforms; and 2) evolving our business model by developing performance-based and transaction-based services. Although we are faced with a complex economic environment,
we remain focused on the execution of our strategies to build a scalable and sustainable business model, driving long-term growth by increasing online activities between buyers and sellers. We have made significant progress in enhancing user quality

in 2011. During the year, we stepped up our efforts to combat fraud, strengthen the authenticity of user information and
improve trust and safety measures. Although our efforts resulted in a decrease in paying members, as expected, we saw material improvement in increased traffic and reduced disputes on
both our international and China marketplaces. In 2011, we
added 14.5 million registered users and more than 1.4 million storefronts in these two marketplaces. As of December 31, 2011, we had a total of 76.3 million registered users, 10.0 million storefronts and 765,363 paying members in both marketplaces. In addition, we mobilized more resources to develop

performance-based and transaction-based services in order to expedite our business model upgrade. We also streamlined our

service offering and made our value proposition clearer to our users. Although new business lines associated with these initiatives are still in early stage and require continued investment, we are pleased with their growth momentum.

In 2011, we saw solid revenue growth despite a decline in
membership base. Our total GAAP revenue grew by 15.5%
year-over-year to RMB6.4 billion. Profit attributable to equity owners grew 16.1% year-over-year to RMB1.7 billion. We strongly believe that...
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