INSUBCONTINENT EXCLUSIVE:
Hello and welcome back to TechCrunch China Roundup, a digest of recent events shaping the Chinese tech landscape and what they mean to
people in the rest of the world
The earnings season is here
This week, long-time archrivals in the Chinese internet battlefield — Alibaba and Tencent — made some big revelations about their future
First off, let look at Alibaba long-awaited secondary listing and annual shopping bonanza.
Forget about the number
It that time of year
On November 11, Alibaba announced it generated $38.4 billion worth of gross merchandise value during the annual Single Day shopping
festival, otherwise known as Double 11
It smashed the record and grabbed local headlines again, but the event means little other than a big publicity win for the company and
showcasing the art of drumming up sales.
GMV is often used interchangeably with sales in e-commerce
That problematic because the number takes into account all transactions, including refunded items, and it by no means reflective of a
There are numerous ways to juice the figure, too, as I wrote last year
Presales began days in advance, incentives were doled out to spur last-minute orders and no refunds could be processed until November
12.
Don&t be fooled by the big numbers (yes, $38B GMV is BIG), the major growth times are over for Alibaba Singles& Day
Today it functions
as a massive marketing/user-acquisition event with generous subsidies — in other words: loss-making not profitable
pic.twitter.com/S4Wzmudgkz
— Jon Russell (@jonrussell) November 12, 2019
Even Jiang Fan, the boss of Alibaba e-commerce business and the
youngest among Alibaba 38 most important decision-makers, downplayed the number: &I never worry about transaction volumes
What most important is making Single Day fun and turning it into a real festival.&
Indeed, Alibaba put together another year of what
equivalent to the Super Bowl halftime show
Taylor Swift and other international big names graced the stage as the evening gala was live-streamed and watched by millions across the
globe.
.@taylorswift13 performing at the 11.11 Global Shopping Festival Countdown Gala last night in Shanghai
The gala was produced by Youku, Alibaba video streaming platform
For more coverage on 11.11, check out our dedicated #Double11 page: https://t.co/VeupwMr5WT pic.twitter.com/suLvCd4Y3m
— Alibaba Group
(@AlibabaGroup) November 11, 2019
Returning home
Alibaba is going ahead with its secondary listing in Hong Kong on the heels of reports
that it could delay the sale due to ongoing political unrest in the city-state
The company is cash-rich, but listing closer to its customers can potentially ease some of the pressure arising from a new era of volatile
U.S.-China relationships.
Alibaba is issuing 500 million new shares with an additional over-allotment option of 75 million shares for
international underwriters, it said in a company blog
Reports have put the size of its offering between $10 billion and $15 billion, down from the earlier rumored $20 billion.
The giant has long
expressed it intends to come home
In 2014, the e-commerce behemoth missed out on Hong Kong because the local exchange didn&t allow dual-class structures, a type of
organization common in technology companies that grants different voting rights for different stocks
The giant instead went public in New York and raised the largest initial public offering in history at $25 billion.
&When Alibaba Group went
public in 2014, we missed out on Hong Kong with regret
Hong Kong is one of the world most important financial centers
Over the last few years, there have been many encouraging reforms in Hong Kong capital market
During this time of ongoing change, we continue to believe that the future of Hong Kong remains bright
We hope we can contribute, in our small way, and participate in the future of Hong Kong,& said chairman and chief executive Daniel Zhang in
a statement.
Missing out on Alibaba had also been a source of remorse for the Stock Exchange of Hong Kong
Charles Li, chief executive of the HKEX, admitted that losing Alibaba to New York had compelled the bourse to reform
The HKEX has since added dual-class shares and attracted Chinese tech upstarts such as smartphone maker Xiaomi and local services platform
Meituan Dianping.
Tencent new fuel
Content and social networks have been the major revenue drivers for Tencent since its early years, but
new initiatives are starting to gain ground
In the third quarter ended September 30, Tencent &fintech and business services& unit, which includes its payments and cloud services,
became the firm second-largest sales avenue trailing the long-time cash cow of value-added services, essentially virtual items sold in games
and social networks.
Payments, in particular, accounted for much of the quarterly growth thanks to increased daily active consumers and
number of transactions per user
That good news for the company, which said back in 2016 that financial services would be its new focus (in Chinese) alongside content and
The need to diversify became more salient in recent times as Tencent faces stricter government controls over the gaming sector and intense
rivalry from ByteDance, the new darling of advertisers and owner of TikTok and Douyin.
Tencent also broke out revenue for cloud services for
The unit grew 80% year-on-year to rake in 4.7 billion yuan ($670 million) and received a great push as the company pivoted to serve more
industrial players and enterprises
Alibaba cloud business still leads the Chinese market by a huge margin, with revenue topping $1.3 billion during the September quarter.
Also
worth your attention…
Luckin Coffee, the Chinese startup that began as a Starbucks challenger, is starting to look more like a convenient
store chain with delivery capacities as it continues to increase store density (a combination of seated cafes, pickup stands and delivery
kitchens) and widen product offerings to include a growing snack selection
Though bottom-line loss continued in the quarter, store-level operating profit swung to $26.1 million from a loss in the prior-year quarter
30 million customers have purchased from Luckin, marking an increase of 413.4% from 6 million a year ago.
Minecraft is on the brink of 300
million registered users in China, its local publisher Netease announced at an event this week
That a lot of players, but not totally unreasonable given the game is free-to-play in the country with in-game purchases, so users can
easily own multiple accounts
Outside China, the game has sold over 180 million paid copies, according to gaming analyst Daniel Ahmed from Niko Partners.
Xiaomi founder
Lei Jun is returning a huge favor by backing a long-time friend
Xpeng Motors, the Chinese electric vehicle startup financed by Alibaba and Foxconn, has received $400 million in capital from a group of
backers who weren&t identified except Xiaomi, which became its strategic investor
The marriage would allow Xpeng cars to tap Xiaomi growing ecosystem of smart devices, but the relationship dates further back
Lei was an early investor in UCWeb, a browser company founded by He and acquired by Alibaba in 2014
A day after Xiaomi began trading in Hong Kong in mid-2018, He wrote on his WeChat feed that he had bought $100 million worth of Xiaomi
shares (in Chinese) in support of his old friend.
