Alibaba is increasingly becoming dependent on mobile devices, so its success in the future will rely on its ability to monetize this dominant channel. Currently mobile represents around 75% of the Chinese online retailer’s total GMV. Its mobile monetization rate has superseded the PC monetization rate now, notes Business Insider.
Alibaba fulfills the claim it made in 2014
Alibaba has managed to fulfill a claim it made in 2014 during its IPO Roadshow. The e-commerce company claimed to be able to boost its mobile monetization rate to surpass the PC monetization rate or at least be on par with it. The mobile monetization rate is also known as the take rate and is actually mobile revenue as a share of mobile GMV on its China retail marketplaces.
For Alibaba, mobile revenue represented 2.8% of its overall mobile GMV in Q2 2016, whereas for the PC, it was at 2.78%. The mobile monetization rate was only 1.87% around the time of the Roadshow in 2014 when investors were questioning whether the Chinese retailing giant could monetize mobile more effectively. It has reached as high as 2.88% in Q4 2015, whereas the PC monetization rate was 3.03% in Q2 2014 has been falling slightly since then.
The high GMV made it possible for the China-based e-commerce giant to see such strong mobile revenue streams. In Q2 2016, the retail giant’s mobile GMV stood at $94.3 billion, up 69% YoY. In part, the mobile GMV has been driven by ramping conversion rates, the report says. Rising GMV and higher mobile conversions have made the mobile channel more valuable, in turn motivating merchants to spend more money on marketing. This will help the retailing giant monetize the channel effectively.
Mobile monetization rate seems sustainable
The factors behind the rising mobile monetization rate seem sustainable and thus should give the retailing giant longevity as a company, the report says. The e-commerce giant needs to show merchants that mobile is growing in order to continue convincing merchants to spend their money on its mobile platform. This is reliant on the conversion rates.
Conversion rates will continue to improve as customers become more comfortable with mobiles and as purchase options are made simpler and easier. Further, this will make the value of mobile more robust, thus assisting Alibaba in ensuring rising monetization rates, the report says. Eventually, this bodes quite well for Alibaba’s business as its main channel is mobile.