Aug. 13 (Bloomberg) -- Alibaba.com Ltd., operator of China’s biggest trading Web site, reported second-quarter profit that beat analysts’ estimates as an increase in customers helped compensate for higher marketing expenses.

Net income declined 34 percent to 260.7 million yuan ($38 million) from 396.5 million yuan a year earlier, Hangzhou, east China-based Alibaba said today. Profit was projected at 215 million yuan, according to the median of three analysts’ estimates in a Bloomberg News survey.

Alibaba added one million users in each of the past three quarters, Chief Executive Officer David Wei said, after the company stepped up marketing of its portal overseas to bolster demand for the clothes and electronics listed on the Web site by Chinese exporters amid the global recession. The site also attracted more businesses seeking to offer their products to Chinese buyers as a $586 billion government stimulus helps boost domestic consumption in the world’s third-biggest economy.

“Management has responded to the economic slowdown, and has come up with steps to maintain revenue growth,” said Tsz Wang Tam, who rates Alibaba shares “buy” at Kim Eng Securities in Hong Kong. “Higher marketing expenses will put pressure on margins, but will help promote long-term growth.”

Alibaba rose 7.6 percent to close at HK$19.88 in Hong Kong trading today before the earnings announcement. The stock has more than tripled this year, compared with a 45 percent gain in the city’s benchmark Hang Seng Index.

‘Investment Opportunities’

“In the last few months we have been exploring investment opportunities, and we are relatively close to making some announcements in the coming months,” Wei said in a conference call today. The investments aren’t “global targets” and are outside Taiwan, he said, without elaborating.

Alibaba has more than 6 billion yuan following the payout of what Wei described as the largest-ever dividend for a Chinese Internet company. The Web site operator has “reserved enough cash” to complete the planned investments, Wei said.

Almost 50,000 paying members were added in the second quarter, boosting the total to 531,471 at the end of June, Alibaba said. Sales and marketing expenses jumped 57 percent to 378.1 million yuan, according to the statement.

Profit in the second quarter fell 17 percent after excluding the one-time impact of gains from exchange-rate fluctuations and the sale of a stake in its Japan operations in the year earlier period, the company said in a statement.

To contact the reporter on this story: Mark Lee in Hong Kong at wlee37@bloomberg.netTim Culpan in Taipei at tculpan1@bloomberg.net.

Last Updated: August 13, 2009 08:02 EDT