About a year after Alibaba went public amid much fanfare, shares of the Chinese e-commerce giant have fallen below its IPO price of $68. Alibaba stock closed Friday at $63.92 after reaching the all-time high of $120 in November last year. Fears of a hard landing for the Chinese economy have weighed on the stock. However, the slowing Chinese economy and stock market turmoil have had little impact on certain consumption categories, including e-commerce.

Can Alibaba Group Holding Ltd Replicate Facebook's Mobile Success?

Alibaba’s revenue growth lags behind GMV growth

Despite a slowing Chinese economy, Alibaba’s gross merchandise volume (GMV) grew at 34% YoY to $109 billion in June quarter. That’s still an impressive growth rate for a company that generates about $500 billion in annual GMV. A major challenge for Alibaba is to effectively monetize mobile users.

Customers are moving rapidly to mobile. In the first quarter, the Hangzhou-based company had 307 million mobile monthly active users. The company’s revenue grew at a lower pace than GMV in the latest quarter as more customers purchased goods via mobile devices. Alibaba’s June quarter revenue jumped 28% compared to 34% growth in GMV.

One fundamental reason for Alibaba’s slowing revenue growth rate was the decline in the take rate, or the amount Alibaba earns from each transaction on its marketplaces. Alibaba monetizes mobile transactions at a lower rate because there is much less screen space to show ads. Alibaba’s mobile take rate was 2.16% compared to PC take rate of 2.55% in June quarter.

Alibaba confident of boosting mobile take rate

Now Alibaba needs to replicate Facebook’s success in mobile monetization to win back investors’ interest. Facebook did not generate any meaningful revenue from mobile in 2012. But about 45% of its ad revenue came through mobile ads in 2013. According to eMarketer, mobile is expected to contribute up to 75% of Facebook’s worldwide revenue in 2016.

Alibaba is confident that its mobile take rate will eventually exceed the PC rate. If the company could squeeze more revenue out of mobile transactions, it would be a major catalyst for the stock.

Alibaba shares jumped 3.65% to $66.25 in pre-market trading Tuesday.