Alibaba Group Holding Ltd: Not Amazon Or eBay


Alibaba Group Holding Ltd (NYSE:BABA) is often compared to eBay Inc (NASDAQ:EBAY) or, Inc. (NASDAQ:AMZN), but Bernstein analysts say these comparisons just aren’t accurate. They discuss their shopping experiences on Alibaba’s Taobao and TMall in their report dated Oct. 14, 2014.

Alibaba’s Marketplace offers more services

Analysts Carlos Kirjner and Peter Paskhaver said in their shopping experiences with Alibaba’s online properties, they found that services like insurance, prepaid mobile phone service top-ups, maid services, dental services and even food delivery have a big presence on the Chinese ecommerce sites. They think services are becoming a bigger and bigger part of Alibaba’s gross merchandise volume, especially on TMall.

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As a result, they say that worries about Alibaba’s gross merchandise volume already being a big part of Chinese product retail are exaggerated. They say there’s still plenty of room to grow in the company’s addressable market.

Alibaba pushes mobile adoption

The Bernstein analysts also found that Alibaba is really pushing use of its mobile app by offering subsidies or discounts for advertisers on its mobile app and introducing QR codes on the web experience. They link to Alibaba’s landing page, which then launches the company’s mobile app if the user installed it. Otherwise there’s a download app button that links to a store.

The result is a simpler and faster mobile order flow for users compared to the web order flow. In addition, merchants have incentives to promote their services and products on Alibaba’s mobile platform.

The Bernstein team believes that mobile will become a larger and larger chunk of Alibaba’s gross merchandise volume and expect the monetization gap between web and mobile to close over the next few quarters.

Alibaba sees better monetization opportunities

The analysts also found that Alibaba has room to improve advertising monetization for both mobile and web. They say better monetization on mobile can come through a higher ad load in the company’s apps. Also more competitive auctions on the mobile platform should drive more monetization on mobile as well.

They continue to value Alibaba Group Holding at $85 per share.