Alibaba Is Stuck With E-Commerce for Now
A tighter regulatory environment has clipped the company’s huge ambitions and forced it to sacrifice margins for growth.
Alibaba’s Beijing office.
Photographer: Gilles Sabrie/BloombergFor more than a decade, Alibaba Group Holding Ltd. invested its growing cash hoard into dozens of businesses in a bid to diversify away from its e-commerce roots. But spreading its wings is increasingly difficult as Chinese regulators grow much more aggressive — with the company serving as a warning for others. Now, Alibaba has had to sacrifice margins to buy growth.
In a conference call after releasing earnings Tuesday, management outlined plans to keep plowing “excess profits” into various aspects of its e-commerce business including merchant support, a second-hand marketplace, and streaming commerce. There was little discussion of its $70 billion portfolio of equity and other holdings, despite the fact that additional income from interest and investments for the June quarter equate to 45% of earnings from operations.