Alibaba Strong Revenue Growth Targets Driven By Advertising

Alibaba, the Chinese eCommerce giant, wowed investors and analysts last week when it projected revenue growth for its fiscal year, which ended in March, of 45 percent to 49 percent, ahead of analysts’ already bullish expectations.

While the company is benefiting from an expansion into new markets, including cloud computing with Alicloud and digital payments with Alipay, a lot of its growth is coming from its core advertising in retail. During a presentation with analysts covered by eMarketer, Alibaba’s Chief Financial Officer, Maggie Wu, said 60 percent of its sales come from its advertising platform Alimama.

E-Marketer is projecting Alibaba will account for 31.9 percent of the digital ad revenues in China in 2017, surpassing any other company. By 2019 the research firm projects that will increase to 34.3 percent, outpacing Baidu and Tencent, its rivals in China.  All told, retail shopping and digital spending in China is expected to reach $50.3 billion, noted eMarketer, accounting for 59.6 percent of its total media ad expenditures.

As a result, the research firm said Alibaba will trail only Google and Facebook in terms of its share of digital ad revenues globally. Alibaba is forecasted to generate 7.8 percent of worldwide digital ad revenues in 2017, behind Google’s 33.0 percent and Facebook’s 16.2 percent.

“Alibaba has built one of the most dominant advertising businesses in China simply because of its scale and access to data of nearly 500 million shoppers across its marketplaces,” said eMarketer Forecasting Analyst Cindy Liu. “The data generated through their platforms has attracted advertisers who want greater insights into potential customers.”

One of Alibaba’s advantages — and one that is getting analysts even more bullish on the company — is the data it collects on retail customers, thanks to its eCommerce platforms. It gives it an edge when it comes to market segmentation and ad targeting, noted the research firm in a report. Alipay adds to the insight Alibaba can get on its customers who purchase things outside of its eCommerce platforms.