Alibaba Group Holding Limited

Good day, ladies and gentlemen. Thank you for standing by. Welcome to Alibaba Group's September quarter 2022 results conference call. At this time, all participants are on listen-only mode. After management's prepared remarks, there will be a Q&A session. I would now like to turn the call over to Rob Lynn, Head of Investor Relations of Alibaba Group. Please go ahead.

Thank you and good day everyone. Welcome to Alibaba Group's September quarter 2022 results conference call. With us are Daniel Tsang, Chairman and CEO, Joe Tsai, Executive Vice Chairman, Toby Xu, Chief Financial Officer. This call is also being webcasted from the IR section of our corporate website. A replay of the call will be available on our website later today. Now let me quickly cover the safe harbor. Today's discussion may contain forward-looking statements. Forward-looking statements involve inherent risks and uncertainties that may cause actual results to differ materially from our current expectations. For detailed discussion of these risks and uncertainties, please refer to our latest annual report on Form 20F and other documents filed with the U.S. SEC or announced on the website of Hong Kong Stock Exchange. Any further looking statements that we make on this call are based on assumptions as of today, and we do not take any obligation to update these statements, except as required under applicable law. Please note that certain financial measures that we use on this call, such as adjusted EBITDA, adjusted EBITDA margin, non-GAAP net income, non-GAAP diluted earnings per share or ADS, and free cash flow are expressed on a non-GAAP basis. GAAP results and reconciliation of GAAP to non-GAAP measures can be found in our earnings press release. Unless otherwise noted, growth rates of all stated metrics mentioned during this call refer to year-over-year growth versus the same quarter last year. In addition, during today's call, management will give their prepared remark in English, a third party translator will provide simultaneous Chinese translation and another conference line. Please refer to our press release for details. During the Q&A session, we will take questions in both English and Chinese and the third party translator will provide consecutive translation. All translations are for convenience purpose only. In the case of any discrepancy, management statements in the original language will prevail. With that, I will turn the call to Daniel.

Thanks, Rob. Hello, everyone. Thank you for joining our earnings call today. We delivered a solid quarter in a macro environment full of uncertainty. The ongoing resurgence of COVID-19, through political tension, inflation and currency depreciation. The convergence of all these force that created considerable difficulties for business operations. Despite these challenges, Alibaba's non-GAAP EBITDA increased 29% year-over-year as we continue to enhance our operational efficiencies. This is the result of our pursuit of high-quality development, and more importantly, demonstrates the resilience of the Alibaba business ecosystem. In the China domestic consumer market, Taobao Tmall GMV saw a low single-digit young year decline this quarter, but the user traffic remains stable. However, consumption appetite was weak and we saw a drop in purchasing frequency. The resurgence of COVID has affected one area after another, resulting in abnormal or suspended logistics service in different places. This hurt merchant operations and consumer logistics experience. In terms of demand, the decline in categories such as apparel and consumer electronics slowed quarter over quarter. Interest-based categories such as outdoor recreation and pet care and health and wellness-related categories recognized positive growth. In this challenging environment, we have achieved relatively positive results through a committed execution of the following strategies. Number one, we work to ensure our user traffic population remains stable, DAU or MAU by continuing to strengthen our user engagement. After many years of operation, Taobao Tmall is now deeply entrenched in our users' mind as the shopping destination. We are focused on user engagement on our platform by enhancing the customer journey, cross-search, algorithm-driven discovery recommendations, live streaming, and other engagement features. We stimulated consumption interest and drove conversion by highlighting the factors that influence purchase decisions through short-form video, photos, texts, and other means of communication. Number two, we further consolidate the scale and the stickiness of our most valuable consumer group. For the 12 months ended December 30, 2022, the number of consumers who each spent over 10,000 RMB on top 1T more remain around 124 million with a retention rate of 98%. AAVIP membership population held steady at 25 million this quarter with solid membership retention and a growth in GMB contribution. Number three, we improved consumer satisfaction by continually investing in customer service during and after sales, and the logistics service experiences such as doorstep delivery of orders as required. Our latest consumer satisfaction survey showed improvements in NPS scores relating to logistics and poster sales. During our recent 11.11 Global Shopping Festival, Taobao Tmall's total GMV was in line with the performance last year during the same period. Initial fruits of the operation strategies outlined just now were seen during November 11. More than 600 million users engaged with our November 11 related contents. A single digit growth year on year. Although the total number of buyers declined compared to the same period last year, the average GMV per person increased. As for our consumer profile, more than 98 of our AAVIP members bought something during November 11th season. Moreover, the contribution by AAVIP members to the total GMV continued to grow. Regarding product categories, consistent with what we observed during the rest of the quarter, interest-based categories such as outdoor recreations and pets and health and wellness-related categories saw positive growth. Consumer electronics also endured positive growth during November 11 season. However, there are a few factors that negatively impacted our 2011 performance. Number one, average temperature across China was much warmer than usual for that time of year. And the delay in seasonal change weakened the consumption appetite for apparel even more in an environment impacted by COVID. And thus, the apparel category suffered. Number two, starting in October and through the 11-11 campaign period, Nearly 15% of delivery areas across China experienced abnormal or suspended logistics services. This had a significant impact on the merchant's ability to fulfill orders on time and the delivery company's ability to make regular deliveries. But recently, we are seeing improvements. Number three, 11.11 has become an event celebrated and embraced by the entire society. Given the uncertainties relating to the COVID-19, merchants were especially keen to take advantage of this opportunity to capture as much growth as possible across every available channel. Objectively speaking, they offer the consumer more choices, both online and offline. This quarter, the decline in consumer management revenue was higher than the decline in overall GME. I would like to share the reasons. The first is the higher rate of order return because of A, order return due to COVID-related impact on fulfillment and delivery. B, a higher order return rate that accompanied live streaming driven sales. the increasing convenience of making returns and improvements in user experience in returns handling on our platform. These three reasons collectively contribute to the rise in order return rate across the platform. Take rate calculation does not account order returns. If it was accounted for, our take rate actually remained consistent. Second, page views from algorithm-driven discovery recommendations grow, but our monetization of traffic was less efficient, resulting in a lower take rate in the short term. Looking forward, we will adapt to the change in our user traffic composition and introduce better monetization products to ensure the long-term stability of our platform take rate. In our local consumer service segment, Erlema proactively adjusted its business operation strategy to focus on user growth and retention on its mobile app. And it continued to grow its market presence in key cities. At the same time, it continued to enhance operational efficiency and unit economics continued to see improvement. This is primarily due to the rise in average order value, leading to an increase in revenue and a reduction in the logistic costs for order fulfillment. AMAP launched a new version of its maps this quarter, together with a series of new features, including a 3D city map, car lane level map, road navigation, forecasting of traffic light signals, and road navigation for staying in the shade out of the sun, so on and so forth. User population and sickness continue to strengthen in AMAP, and a new historical record of 220 million DAU was registered during the week of the National Day holidays. On top of its map navigation, The services offered by AMAP related to getting to destination, which includes ride hailing, hotel booking, gas station, and the EV recharging station, are all experiencing rapid developments with both service users and all the volume enjoying faster growth. Tanya's various business saw robust growth in this quarter and there are clear improvements in cost efficiency. China Post network grew by 20% year-on-year and now has more than 170,000 locations. It has comprehensive coverage in residential communities, school campuses, and rural villages across China. China Post has become an important touchpoint for serving consumers. For overseas markets, China continues to actively build logistic hubs and nodes for further enhance its global logistic network service capability and efficiencies. In overseas market, the rise in logistic cost due to inflation and the currency depreciation against the U.S. dollar has contributed to all the volume decline of 12% year-on-year in our cross-border export business, Bali Express. In Southeast Asia, Lazada's order volume declined 6% year-on-year as COVID-related restrictions were lifted and offline shopping resumed. TrendView's order volume grew over 65% year-on-year on the strength of its e-commerce business and fast-growing local consumer service. For AliExpress and Lazada, we are taking steps to adjust our business model and investing in creating user value rather than just scaling. We are also continuing to strengthen our capabilities in logistics and supply chain. We believe that developing and investing in these capabilities will be meaningful to ensure the sustainable long-term development of our abilities to serve the overseas consumer market. In our cloud segment, Alibaba Cloud's revenue growth was 4% year-on-year this quarter. Through structural adjustments over the past few quarters, Alibaba Cloud's revenue structure is now healthier and more sustainable. Public cloud revenue grew double-digit year-on-year this quarter, while hybrid cloud declined. In the interest of pursuing high-quality growth We proactively control the development of our business that only resell hosting infrastructure that has been commoditized in the market. Looking at our revenue by industry, non-internet industry revenue grow 28% year over year. Its contribution to total revenue increased from 53% to 58% quarter over quarter. the fastest-growing sectors including financial services, automotive, telecom, and public services. Looking ahead, Alibaba Cloud will leverage its proprietary cloud computing and big data processing capabilities to launch a range of industry solutions with relevant partners for advancing China's industrial digitization. At the APASARA conference in early November, we unveiled many important technological achievements. It included our cloud infrastructure processing unit, i.e. CIPU, and an open source platform under the model as a service named ModelScope. These will serve important purposes in Alibaba's cloud future development. In this environment full of uncertainty, our wide-ranging efforts in cost reduction and efficiency improvement measures are beginning to bear fruit. Businesses such as Taobao Deal, Tao Caicai, Ulema, AMAP, Lazada, and Youku have significantly reduced their losses. We will continue to focus on the steady improvement of business quality and on investing in building capabilities to provide customer core value rather than pursuing short-term business growth or user scale. As China enters an era of high-quality development, we will also enter a stage of high-quality business operations. During the eight years from Alibaba's IPO in September 2014, The quality and the scale of our business has improved significantly. Alibaba's revenue today is 12 times what it was during the same period in 2014. Adjusted EBITDA is 4.5 times what it was during the same period in 2014. Free cash flow is four times that of what it was in 2014. Over the past eight years, China's GDP has almost doubled from 59 trillion RMB in 2013 to 114 trillion RMB in 2021. We are confident about the future and we will continue to execute our SHIPE share buyback program. As of November 16, we have utilized approximately 18 billion US dollars to date towards share repurchase under our existing $25 billion program, with $7 billion more to go. In addition, our board has authorized us to upside our existing share repurchase program by another $15 billion as a tangible action towards enhancing shareholder return. We remain confident about ourselves and even more about the future, no matter the ups and downs. We believe in the prospect of China's economic and social developments. We believe Alibaba's development goals are highly aligned with China's long-term goals. We believe Alibaba can play an important role in the digitalization process in China and around the world. We have taken note of the latest adjustment in China's COVID-related policies and proactive commentary from relevant government regulators about promoting the digital economy and the high-quality development of platform businesses. We believe that COVID will ultimately pass and our society, our economy, and our lives will eventually return to normal. and that the massive potential of China as the world's second largest economy will be further unleashed. Last but not least, we believe that platform economy that Alibaba is part of can make unique and valuable contributions towards serving small and medium businesses, creating employment and the pursuit of better lives. Thank you, everyone. Let me pass the microphone to Toby, who will share the financial result with you.

Thank you, Daniel. Let me start with financial highlights for the quarter. This quarter, our total revenue was RMB 207 billion, an increase of 3% year over year. Income from operations for the quarter was RMB 25.1 billion, an increase of 68%. or RMB 10.1 billion year over year, mainly driven by increase in adjusted EBITDA of RMB 8.1 billion and decrease in share-based compensation expense of RMB 2.3 billion. During September quarter, we have continued to improve operating performance of our loss-making businesses by enhancing operating efficiency and optimizing costs that resulted in 29% year-over-year increase in adjusted EBITDA to RMB 36.2 billion. Overall, adjusted EBITDA margin improved by 3 percentage points to 17%. Now let's look at cost trends as a percentage of revenue excluding SBC. Cost of revenue ratio remains stable at 63% in September quarter. Our direct sales businesses and logistics services contribute to growth, driving up our cost of inventory and logistics, but we were able to keep our cost of revenue ratio stable, primarily through optimizing traffic acquisition and improving subsidy efficiency. Product development expenses ratio remains stable during the quarter. Sales and marketing expenses ratio decreased two percentage point year over year to 11%, reflecting our continued efforts in optimizing user acquisition and user retention spending across our businesses. General administrative expenses ratio remains stable at 4% in September quarter. Non-GAAP net income was RMB $33.8 billion, an increase of RMB $5.3 billion year-over-year, mainly due to increase in adjusted EBITDA, partly offset by decrease in equity pickup of our equity method investee's results. Our GAAP net loss was RMB $22.5 billion, a decline of $25.8 billion year-over-year. primarily due to the increase in net loss arising from changes in fair value of our equity investments, partly offset by increase in the non-GAAP net income. As of September 30th, 2022, we continue to maintain a strong net cash position of 323 billion RMB or 45 billion US dollars. Our strong net cash position is supported by healthy cash flow generation. In September 2022 quarter, cash from operating activities was RMB 47 billion and free cash flow were RMB 36 billion respectively, which were up by RMB 11 billion and RMB 13 billion versus a year ago. Majority of the difference between operating cash flow and free cash flow is operating capex at RMB 11 billion, down by RMB 1.7 billion versus a year ago. Net cash outflow for investments and acquisition activities, net of inflow from disposals, significantly reduced to RMB 2.4 billion compared to RMB 21.5 billion in the same period last year. Importantly, under current market conditions, And given the confidence we have in the long-term sustainability of our business, we have been repurchasing our shares aggressively. For the fiscal first half ended September 30, 2022, we repurchased approximately 62.9 million of our ADSs for approximately US dollar 5.6 billion. which is equivalent to about 70% of our free cash flow during the period. From October 1st to November 16th, we have repurchased another $2.6 billion in ADS's annual share repurchase program. Our strong balance sheet and free cash flow give us the flexibility to execute this share repurchase program with confidence. Let's look at our segment results. Revenue from China Commerce segment in September quarter was RMB 135 billion, a decrease of 1% year-over-year. Customer management revenue decreased by 7% year-over-year to RMB 66.5 billion. Taobao and Timor physical goods pay GNV declined by low single digits. Customer manual revenue is composed of advertising and commission revenue. Within advertising, search advertising revenue continues to observe positive growth as it provides consistent return for merchants, while non-search advertising is negatively impacted by overall market conditions and other factors. Commission revenue also declined more than that of T-more paid D&V due to higher order cancellations. Direct sales and others revenue grew 6% to RMB 65 billion, primarily driven by strong growth of our fresh HIPPO and Alibaba Health's direct sales businesses. China commerce segment adjusted EBITDA increased by RMB 2.6 billion to RMB 44 billion in the quarter. The improvement reflected significant loss reduction from Taobao deal TaoTaiTai, and FreshHitBull, which, on a combined basis, reached RMB 4.9 billion in September quarter. Segment EBITDA margin improved two percentage points year over year to 32% during this quarter. Segment EBITDA margin can be further segregated into three types of businesses. First, our existing marketplace business, including Taobao and Tmall, continues to exhibit stable EBITDA margin year-over-year. Second, combined EBITDA margin of our direct sales businesses continues to improve, which was primarily driven by FreshHippo during the quarter. The vast majority of FreshHippo's existing stores have achieved a cash flow positive. Lastly, new businesses, including Taobao Jio and TaoTaiTai, significantly reduced losses year-over-year, as previously mentioned. Our international commerce segment revenue in September quarter was RMB 15.7 billion, an increase of 4% year-over-year. Revenue from international commerce retail business increased by 3% to RMB 10.7 billion. The increase was primarily driven by Trendio as a result of its strong order growth of over 65%, partly offset by a decrease in artist expressed order as a result of challenges faced in cross-border e-commerce demand in Europe due to depreciating euro and increasing logistic costs. Revenue from our Alibaba.com wholesale business grew 6% to RMB 5 billion. The increase was primarily due to resilient 8% growth in value of transactions completed on Alibaba.com that led to an increase in revenue generated by cross-border related value added services. International commerce segment adjusted EBITDA loss narrowed by RMB 1.5 billion to RMB 960 million in September quarter. The significant loss reduction year over year was primarily contributed by the reduced losses from Lazada and Trendyog. Lazada has continued to improve monetization rate as well as enhancing operating efficiency. During the quarter, loss per order for Lazada narrowed by over 25% compared to the same period last year. While Trendio's improvement is a combination of strong revenue growth despite Forex headwind as well as enhanced operating efficiency. Our local consumer service segment revenue in September quarter grew 21% to RMB 13 billion, primarily driven by strong revenue growth of AMAP as well as higher average order value and more efficient use of subsidies that were counter revenue of ULMA. Local consumer service adjusted EBITDA loss reduced by RMB 3 billion year-over-year to RMB 3.5 billion. Most of the loss reduction was driven by Erlanga business, while rest of the other businesses also recorded reduced losses. Erlanga continued to improve its unit economics per order by increasing average order value, reducing delivery cost per order, and optimizing use acquisition spending. its UEE continued to improve year-over-year and remained positive this quarter. Revenue from time now. After inter-segment elimination grew 36% year-over-year to RMB 13.4 billion, primarily contributed by the increase in revenue from domestic consumer logistics services. As a result of service model upgrade since later 2021, to enhance customer experience, and also the international fulfillment solution services revenue increase. In September quarter, 73% of Tainiao's total revenue was generated from external customers. Tainiao recorded adjusted EBITDA profit of RMB 125 million in September quarter, an increase of RMB 440 million year over year. Revenue from our cloud segment after inter-segment elimination was RMB 20.8 billion in September quarter, an increase of 4%, mainly driven by healthy public cloud growth, partially offset by declining hybrid cloud revenue as we continue to drive high-quality recurring revenue growth. Revenue growth for non-internet industries continue to accelerate growing 28% and contributed 58% of overall crowd revenue. Strong revenue growth of the internet industry was driven by financial services, telecommunication, and public services industries. Revenue from customers in internet industry declined by 18%, that was mainly driven by declining revenue from the top internet customers That has gradually stopped using our overseas cloud service for its international business. Online education customers, as well as softening demand from other customers in China internet industry. Adjusted epitaph of cloud segment, which comprised of Alibaba Cloud and JingTok, was a profit of RMB 434 million in September quarter, increased by RMB 38 million year-over-year. Revenue from our digital media and entertainment segment in September quarter was RMB 8.4 billion, an increase of 4%, primarily due to the increase in revenue from Alibaba Pictures, Youku, which was partly offset by decreasing online games business revenue. Adjusted EBITDA was a loss of RMB 117 million, reduced by RMB 814 million year-over-year, primarily driven by narrowing of losses from Youku and improved profitability of Alibaba Pictures. Youku continues to improve operational efficiency through disciplined investment in content and production capability. Its year-over-year losses have been narrowed for six consecutive quarters. Over the past several months, we have been preparing for our primary listing in Hong Kong. During this process, we are closely monitoring and taking into account various factors, including changing markets and other external conditions. Before our conversion to primary listing in Hong Kong, we also need to formulate and submit a new employee stock ownership program to our shareholders for approval in order to comply with the newly amended rules in Hong Kong. The new ESOP program will continue to align the development of our company with the interests of our long-term shareholders. Accordingly, we will not complete a primary conversion before the end of 2022 as initially planned. we will continue to evaluate the various factors during this process and update our investors in due course. To wrap up, since I've taken up the CFO role early this year, I've met many shareholders and I really appreciate all of your feedback. As I have communicated to many of you, we will proactively execute our capital allocation strategy to create and unlock our company's intrinsic value we consider three important factors. Firstly, we will be focused. We will not only continue to execute our three growth pillar strategy, but we also prioritize growing businesses that include our medium to long-term revenue growth and profitability profile. We remain confident of the growth prospects of our businesses, many of which are leading players in their respective markets. Second, In order to optimize our capital resources, we will continue to be more selective in M&A activities, monetize less strategic investments, and unlock the value of selected subsidiaries. Lastly, we want to better align our business performance to the interests of our long-term shareholders. During each of fiscal year 22 and fiscal first half 23 period, we have deployed around 70% of free cash flow to share buyback. As of November 16, 2022, we had repurchased approximately US dollar 18 billion of our shares under our existing US dollar 25 billion share repurchase program. In addition, our board of directors has approved to increase our existing share repurchase program by another US dollar 15 billion and extended the program through the end of March 2025. Currently, we have an unutilized amount of U.S. dollar 22 billion in our upsized and extended share repurchase program. We hope our ongoing consistent share repurchase program will deliver attractive consistent return to our long-term shareholders, especially during this period of extreme market volatility. Thank you. Now let's turn to Q&A.

Hi, everyone. For today's call, you are welcome to ask questions in Chinese or English. A third-party translator will provide consecutive interpretation for the Q&A session, and our manager will address your question in the language you asked. Please know that this translation is for convenience purpose only. In the case of any discrepancy, our manager's statement in the original language will prevail. If you are unable to hear the Chinese translation, bilingual transcripts of the call will be available on our website within one week after the meeting. Operator, please connect speaker and SI conference right now, and please start a Q&A session when ready. Thank you. Thank you, ladies and gentlemen.

We will now begin the question and answer session. If you wish to ask a question, please press star 1 on your telephone keypad and wait for your name to be announced. If you wish to cancel your request, please press star 2. To give more people the opportunity to ask questions, please keep yourself to no more than one question at a time. Your first question comes from Ronald Kung from Goldman Sachs. Please go ahead.

Thank you, Daniel, Toby, and Rob.

I would like to ask about our customer management revenue, which is customer management revenue, which is the management level of domestic GMB and TKCRE. We saw that GMB's management level in the upper 11 companies was about the same as last year. Compared to September, the number of units in this quarter seems to have improved. But at the same time, we also saw that the value of oil is the same as the value of the package. Thank you, Daniel, Toby.

and Joe and Rob. My question has to do with customer management revenues and GMV. We noted in your prepared remarks, you stated that GMV during double 11 this year was consistent with that of last year. So it seems there's an improvement there from the single digit drop in the September quarter. But looking forward to the next several quarters as we share with us your view of how GMV may grow and also the CMR revenue.

This is our GMB under this epidemic situation, including us in the operation of the entire e-commerce. Under the change of this method, under the change of the sales method, it is particularly like a product like a live broadcast. Under the rapid development of a live broadcast sales method, in fact, this will have an impact on the overall return rate of the entire platform. So I want to discuss this development of this CMR. In fact, we Usually, we look at CMR and take rate together, but in fact, these two factors are still a bit different. The first one, from the take rate point of view, in fact, because in CMR, there is a part that is related to the GMV after the return of the actual merchant, and its sales commission. This part, in fact, I think, is related to the return rate. The second one, from the whole This advertising income, in terms of the entire performance of this CMR, it is more or less related to the investment of the advertising group and the overall financial situation of our business. Let me stop here.

Thank you. Well, in fact, in my prepared remarks earlier, I did offer some detailed analysis of the CMR issue, and I do understand this is an issue in which investors are very interested. Certainly, when it comes to GMV in the context of the ongoing impact of the pandemic, as well as ongoing changes, in the way that goods are marketed and sold to consumers, in particular with the rapid increase in live streaming and growing importance of live streaming, there has been an overall impact on returns of purchases on the platform. So typically when we talk about CMR, we do talk about that in conjunction with the issue of returns. But there are some differences between the two pieces. First of all, when it comes to take rate, we talk about CMR, and that's connected with post-return GMV. So the amount of returns will be highly correlated with that. But the second piece is advertising revenue. And in the current macro environment, certainly there's reduced willingness on the part of merchants to invest as well as the macro environment's impact on the merchant's own business.

Secondly, from our point of view, we are still actively using the entire CMR revenue as a result. The most important thing is to be able to provide the customers with the means to manage their consumers and their users on the platform. Whether it is with our current We are all familiar with paid search, including the recent development of this recommendation and the recent high-speed live broadcast and other sales methods. The management activities can be highly related. In this way, this is for us to achieve this to help the business to better manage its consumers, manage its users. This way, in the end, we will achieve the growth of CMR. On this road, our road and the future is very clear. Thank you.

But secondly, in terms of our own focus on growing CMR revenue, this should really be a result of all of the efforts that we make to help merchants better engage consumers on the platform and drive their sales. So be it in terms of paid search, with which everyone is very familiar, and more recently, smart recommendations and live streaming that has grown very rapidly lately. These are all different ways that we can enable merchants to better engage with their consumers and to drive their sales. And the results of achieving merchants achieve that success should be reflected in our CMR revenues. Very good. Next question.

Thank you. The next question comes from Thomas Chong from Jefferies. Please go ahead.

Good evening. Thank you, Manager Chong, for accepting my question. Just now, Mr. Daniel also mentioned that there are several factors affecting the 31st. The first is the influence of logistics. Because we also see that the epidemic in Guangdong and the whole country is relatively serious. I would like to ask, how should we look at the impact of different factors in the December quarter? The logistics side will affect the order cancellation. And then the live broadcast will also affect the product returns. And then there is the consumer's emotions. If we want to do a ranking, the impact on CMR or GMV, how should we consider the consumer's emotions, and then the impact of the epidemic on logistics, and then there is the ranking of the three impacts of the supply and demand rate of the live broadcast. Then the second question is also about our China Commerce's EBA, which is doing very well, with a 6% growth. I would like to ask, in the short term, what is the impact of CMR on our EBA? Thank you.

Thank you, management.

Daniel spoke earlier about several factors that affected performance this year during Double 11. Certainly, we noted on the logistics side, there were some serious disruptions in various regions in China. So I'm wondering, looking at the December quarter, how would you rank the impact of these different factors if you're going to order them You know, looking at order cancellations as one factor related to live streaming, also just consumer sentiment, and also the ongoing impact of the pandemic. If you were going to order those factors in order of importance, what would that look like? And then secondly, we saw on the China Commerce side that very good results were achieved in terms of EBITDA with a 6% increase there. So in the short term, I'm wondering if you could talk a little more about, you know, if CMR is impacted on an ongoing basis by these macro factors, how big an impact that could be expected to have on EBITDA.

Thank you. Okay, let me say this. First of all, for Ali, for our retail platform, the three situations I just mentioned, including this, What you just asked about the three phenomena of this summary, this really affects us. It's a dynamic change. Then I think the most basic, if you line up, I think the most important thing is that any company, any platform, is still in a large environment of a macroeconomic environment. So I think the most fundamental thing about us is this drive, or the impact it may bring. The most important thing is the confidence of the consumer. ah, ah, ah, ah, ah, ah, ah, ah, Thank you.

You know, as regards to those three situations or three factors that you summarized in your question, they all have an impact, but I think the relative impact of those factors is in a process of flux, dynamic change. But if I absolutely had to rank them, I would say, and this would be true for any enterprise or certainly any platform, that it would be the macro environment that we find ourselves in, which in turn has an impact on consumer confidence, consumer demand, consumer willingness to spend. And I think the macro environment would be the primary determinant, not just for Alibaba, but for all the players in the consumption space, both online and offline. And then on the second piece to this is with the introduction of the 20 measures from the state authorities that can be expected to have a positive impact. We certainly do note still some ongoing disruption to logistics in certain regions of the country, but overall we do expect things to continue to improve in a positive direction.

And then the third factor is live streaming. I think this is a sales method. After the change, there was an impact on the return. For Ali, I think our impact is compared to our peers. Especially compared to e-commerce platforms that focus on live streaming. Or compared to platforms that rely entirely on live streaming. Our impact will be much smaller. Because in our entire sales. The proportion of live streaming stations is relatively small. Relatively small. Second. In this process, in fact, during the double 11, this live broadcast plays such a pre-sale, such a function-based sales and in the daytime, it may be a little bigger than the live broadcast during the big event, but in the ordinary, we are more, for the merchants, this live broadcast is their one way of sales, it is their one way of business, not the whole business. So I think on this, Ali, we are also trying to balance the combination of various sales methods. In the end, the merchant still chooses a way that both consumers are welcome and the merchant can accept the operating costs to run his business. This is also Ali as a comprehensive e-commerce platform. Always use new technology, but at the same time, maintain the experience of consumers. At the same time, it is also a balance of such a cost acceptance that the merchant continues to operate. Thank you.

A third is with live streaming becoming a more important engagement format, as you mentioned, that has resulted in an impact on returns. However, I think Alibaba compared to its peers, especially those who primarily rely on live streaming or basically just rely on live streaming, I think the impact on Alibaba is relatively smaller. During the Double 11 period, live streaming played a more important role on Alibaba than it does during the regular periods of the year, especially as regards pre-sales for Double 11. But in general, for Alibaba, live streaming is one format, one engagement format, and doesn't represent everything that we have to offer. Alibaba is working hard to balance these different formats to ensure that merchants are able to engage with their consumers in the ways that they want to be able to do that. Alibaba is open to embracing new technologies and new approaches. But at the end of the day, we do need that kind of balance to ensure a good consumer experience and also to ensure that costs remain acceptable to merchants. So it is about finding that right balance.

For your second question, I think I will answer it very quickly. Your question is about the overall drop in CMA income. Will it affect the profits of the entire Chinese commercial retail segment? When it comes back, it must be that every drop in income will have a certain impact on profits. But what you usually see is that Our entire EBITDA in the Chinese commercial and retail segment is actually a rise in the past quarter and last year. The most important control in this is for all the business control on investment as well as the improvement of investment efficiency. And the achievement, whether it is in the original profit profit, profit of the business, the improvement of profit, or the decline of loss of business, and finally achieved the entire EBITDA segment.

This is Toby. I'd like to add to that with regards to your second question, which had to do with the impact of the reduction in CMR revenue potentially on China Commerce profit going forward. Look, a reduction in any revenue stream would, of course, have an impact on profit at the end of the day. However, if you look at China commerce EBITDA in this quarter, it was up. There was a positive increase year on year compared to the same quarter last year. And we've achieved that by being very disciplined in our spending and investment and also in driving higher levels of efficiency. So this increase in core commerce EBIT has been driven by an increase in profit in the profitable parts of the business, as well as by achieving narrowing of losses in the parts that we're making losses. So that's why you do see that increase of around 6%. Next question.

Thank you. The next question is from Eddie Leong from Bank of America Merrill Lynch. Please go ahead.

Good evening. There is a problem of assumption. If we assume that the direction of the epidemic control has a larger adjustment, I would like to ask the management team, what do you think about the impact of a bad or good product type on us? Thank you. Good evening, management. I'd like to ask you a hypothetical question.

I'm wondering if going forward, there is a relatively large adjustment in pandemic control measures in China. How would that kind of adjustment impact on different businesses or different product types? And would the impact be positive or negative? And then related to that, I'm wondering if there are any preparations that Alibaba might be making or could be making as a company to better position itself for that future prospect of a major change in pandemic control restrictions. Thank you.

Thank you, Eddie. Let me say something. I think it's a very good question. In fact, we all look forward to the end of the epidemic as soon as possible. Then the social and economic life are back to normal. I think if the epidemic can ease the social and economic activities, including the improvement of life, that is, if the pace of life can be normal, then I think it will definitely be good news not only to Ali but to everyone. Of course, for Ali, we are a group made up of multiple businesses, so the situation of the epidemic is not the same in each business.

Well, thanks very much for what really is a very good question. Certainly, I'm sure that we all hope to see an end to the pandemic and a complete return to normalcy for society, for the economy, for our own daily lives. There's nothing that people would want more than to get back to normal, and that would be good news for Alibaba. It would be good news for everyone. Now, certainly, Alibaba's businesses are diverse and would be impacted in different ways.

Then I think for our consumer sector, the most important thing I think is that after the epidemic, this is when life is back to normal, especially when work is back to normal. After this more job opportunities, in fact, the increase in consumer confidence, I think it is this whole this for the Chinese economy or for this, including companies like Ali, I think it is a positive effect. In the end, consumption is still very important to promote economic development. China China China China China

Talking about the consumption part of our business first, I think most importantly, were there to be an end to the pandemic and a complete return to normal life and normal work in particular, that would result in a big boost to consumer confidence. And that would certainly be very positive for the Chinese economy as a whole and also for companies like Alibaba. Consumption is an important engine of economic growth. have stable expectations including stable expectations regarding their own future income so where the pandemic to end the controls to end that would i believe result in a big boost to that kind of confidence resulting in higher consumer spending and also further stimulating the economy so good news all around uh

uh, uh, uh, uh, uh, uh, But if this epidemic is resolved, I believe that this aspect of concern will be released. But on the other hand, I think it will also bring more to non-must-haves. As life returns to normal, this is still the consumer's yearning for a good life. Pursuing should be a big historical trend. So on this, non-life must-haves serve fashion as a representative of these categories. I think there will be some better help.

Secondly, I would say that you could expect to see an impact on the consumption mix in the context of the pandemic. And with all the uncertainty, there's been an increased focus on non-discretionary consumption on daily essentials, food, groceries. things of this nature. And you've, of course, seen a lot of demand for stocking up with people worried about potential supply disruptions, lack of access to necessities and essentials. So a lot of demand for people to stock up. Now, of course, were the situation to change, were the pandemic to ease, then I think you could certainly expect to see a corresponding increase in discretionary type of spending. So that would be a change we could expect to see.

For Ali's 2B business such as cloud computing, I think a very important point is that only this enterprise, because now all enterprises have seen the digitalization of this prospect, they also want to participate in this prospect. But it is also based on the expectations of enterprises for the future and whether the business of this enterprise is normal, whether it can grow. It will also greatly determine their investment in digitalization to such an extent. Secondly, if we look at our 2B businesses, for example, cloud computing,

I think certainly all enterprises across the board understand that digitalization is the future, but at the same time, how much they will invest in any period does come down to their own current business performance and their expectations of the future. So companies have to decide how much they're willing to invest and they have to be sure they're living within their means. So I think after the pandemic is over, in their future growth prospects and being willing to devote more resources to digitalization. I think that would be good news for our cloud business.

For Alibaba, I think we will always face the future. I think facing this pandemic after the end of the pandemic, we need to be actively prepared. For example, in terms of consumer goods, we are very complete in terms of consumer goods. So in this, naturally, in the consumption of post-pandemic products and consumption methods, we are actively preparing, not only for products, but also for services, including tourism, and such industries. In terms of cloud computing, I think we still need to actively surround the process of industrial digitalization in this process, and form products and solutions for different industries, so that customers can Thank you.

So for Alibaba, I do think it's important that we always be looking to the future and, of course, hold out hope for the future. In terms of our consumer-oriented categories and offerings, we're already very complete, and we will continue to look forward to rolling out and developing new categories going forward at the end of the pandemic, and not just goods, but also services, including travel and tourism services. At the same time, we need to continue to maintain a proactive approach to developing new digital offerings and solutions and to rolling out cloud-based solutions that help and empower customers to generate data, to leverage their data, and to extract value from their data. And I think this will all be very positive going forward. Thank you. Next question.

Thank you. The next question is from Alex Yao from JP Morgan. Please go ahead.

Thank you. Daniel, I would like to ask you about the long-term development of Alibaba and the long-term goal of the country. We will actively participate in the digitalization process of the country. What do you think is the direction of China's digitalization in the next five years? What kind of rhythm? And in this big process, what can Alibaba do? And what do you think of the financial return? Thank you.

Thank you.

Daniel, in your prepared remarks, you spoke about how Alibaba's long-term development is highly aligned with China's overall long-term development strategy and direction, including around digitalization. I'm wondering in the context of the current global regulatory environment, how you see digitalization playing out in the future, say in the next five years in China, in terms of its direction, in terms of its pace, what can Alibaba do as part of that process, and what kind of financial returns can Alibaba reap? Thank you.

Okay, for the future of Hong Kong, I think we still have a very clear view, because our own strategy around Alibaba cloud computing, consumerization, and globalization. We are seriously learning the development of this big strategy of the country, especially like the 20 major ones. The goal of moving towards this network strong country, digital China, such a development goal is actually highly consistent. Today, I think for us, for Ali, I also talked about this at the Wuzheng Internet Conference not long ago. For Adi, the first thing we did in the past 23 years was digitalization of the circulation field. We promoted the digitalization of the circulation field. In fact, it is the actual economy that can better establish the circulation market, the circulation channel, and the entire digitalized circulation market, the circulation channel, to serve consumers, to serve the final customer. In order to do this well, we also did our digitalized logistics system. Let the entire logistics flow, the supply chain flow more efficiently. Let the world of goods promote the realization of the world of goods. Today, China has become the most developed country in the world of express delivery. Whether it is in terms of the number of our packages or in terms of our operating quality, it is the most developed in the world. The third is that in the last five to ten years, we have actively invested in cloud computing because we firmly believe that the future of digitalization of the physical economy. This is the consensus of all industries. Today, whether it is from digitalization of China's epidemic prevention or to the digitalization of all industries, in fact, I think it reflects the digitalization of all industries, whether it is from the public service sector to urban management, to the digitalization of all enterprises and industries. This is our high consensus. So on this, we are committed to the future of the development of Paris, to serve the physical economy of China to digitalize, to use digitalized technology to be able to make long-term development. I think this is where our firm confidence lies. At the same time, we also continue to improve our own continuous technical capabilities, to further improve the capabilities of technology, to use cloud computing as a substitute, to better do this technology, This serves the physical economy, serves the process of industrial digitization, such a job. So from this point of view, we are in the middle of the country's major development goals. Ali is in the middle. We can participate in it. We can make contributions and play a role. We are fully confident. We have also seen that the country has released a series of policies in recent days, including some of these policies and some of these policies, including the development of high-quality platform economy, Thank you.

Well, when it comes to Alibaba's view of the future, the big picture of the future, we are, of course, strongly committed to our three key strategies of cloud computing, consumption, and globalization. And, of course, we do note the important emphasis given at the 20th Party Congress with the intention of helping China develop into a strong player in internet industries with a strong digital economy. And I think that Alibaba is very well positioned to contribute to the realization of those goals. If you look back at Alibaba's history as a company around the internet, the first thing we did was in the field of retail commerce and enabling digital flows of goods to consumers in the real economy, serving consumers with digitalization in that way. The second thing we did was bring digitalization to logistics, making it possible with high efficiency and high effectiveness to ship goods all over the country. And in fact, China today is now probably the number one country in the world when it comes to express delivery services, not only in terms of the number of parcels, but also the quality of services as well. And then thirdly, over the last five to 10 years, we've been very focused on investing in cloud computing and helping companies go digital, not just companies though, but public services as well, enterprise management, as well as the digitalization of industry All of this is served by our cloud computing offerings. So going forward, we do indeed feel that as a company, we're highly aligned with that overall direction in China to continue to empower this process of digitalization and to harness the benefits of digitalization as part of this long-term development process. And Alibaba as a company has tremendous confidence in our ability to do precisely that, to provide the technologies that will empower the real economy to create further value through digitalization. So we do feel very encouraged about that overall policy direction, and we also are positively encouraged by other comments that we've seen from state authorities, including talking about the Alibaba looks forward to playing an important role in all of these developments going forward and have confidence that we will. Okay. Next question.

Thank you. The next question is from Jerry Lu from UBS. Please go ahead.

Thank you, Mr. Guan. Good evening. I want to go back to the question we discussed at the beginning of the call. Daniel mentioned that on the one hand, it is the delivery rate, and on the other hand, it is the efficiency of the user traffic flow. It may not be the most ideal, and then there may be some thoughts and actions about the flow transformation in the future. So I want to understand what we may do in the next few years. Thank you, management, and good evening.

I'd like to come back if we could to a topic we addressed earlier in the discussion, which was about the take rate and the company's ability to monetize traffic. I'm wondering if you could tell us please what your view is over the next few quarters or say over the next year, in the company's ability to monetize this traffic.

Thank you. Hailu, in fact, for the entire flow transformation and commercialization process, it has always been an investment-related process. Everyone has been asking this question for many years. But for Ali, we still don't see it as a single transformation, but as all commercialized products, we still need to be able to to run their consumers, to run their businesses, to provide value. Only when they can create value and have a good ROI, can we get a very good share. So this is our basic goal. Secondly, throughout this process, we also saw that in the end, with the consumers, in our consumption policy, which represents our mobile Taobao, The diversification of behavior, including what I just talked about, is now a cross between a variety of consumer trends, including the original search behavior under the demand of the target consumer, including our recommended trend that has been highly developed in recent years, which recommends the discovery of such behavior, including the content of today's live broadcast and short video, which forms such a way of consumption. On this, we will still adapt this consumer scene With the increase in the concentration of consumers in this scene, the increase in frequency, or the increase in traffic, there are plans and steps to carry out a part of commercialization. Of course, the process of commercialization also hopes to provide the business in this field to manage the ability of its consumers. Whether in the original search, or in the recommendation, or in the content of this video, I think it is such a process. So as I mentioned before, we also saw that as we continue to work on the whole discovery, we also see that in the discovery field, the consumer's habit and page view are also experiencing some structural growth. We will also better grasp such changes and look at the entire commercialization process. In the end, it is also for the consumer and at the same time for the merchant to provide him with reliable services for the consumer. Thank you.

Thank you. Well, the topic of monetizing traffic is one of perennial interests, of course, to investors, and we've taken many questions on this topic over the years. But it's not a question that we look at alone in isolation. It's all really more about how we help merchants and how we create value for merchants, enabling merchants to achieve ROI. And then we can share part of that ROI. That's our basic take and our basic objective on this. Secondly, when you look at our, for example, the Taobao mobile app today, there's, you know, more diversity in terms of the way consumers are interacting through that app. with different routes to purchase, as I mentioned in my earlier remarks. You have, of course, search, and now you have recommendation feeds that are becoming smarter and smarter, as well as other kinds of discovery functions, including live streaming and short-form videos, and all of that. So these represent new formats or new scenarios for consumption, and of course we are monitoring structural changes that are underway in terms of the frequency and concentration and traffic around those different kinds of interactions on the consumer commerce side. But at the end of the day, it's still about us helping to create value for merchants, helping them to connect with those consumers via a search, via recommendation, via videos, or in other formats. But we are tracking behavior around those discovery-related formats, looking at consumer behavior, PVs, and can and will, going forward, consider ways to change the monetization model in line with this kind of evolution. But at the end of the day, it's really about providing a reliable and effective service to merchants to help them serve the consumers. Next question.

Thank you. The next question is from Alicia Yap from Citigroup. Please go ahead.

Hi, thank you. I would like to follow up on this. For the entire big brand and the business owners of the Standing Committee, regarding the distribution of our advertising budget on our platform, in the recent months, versus some changes before the pandemic, or any changes. For example, how much of the marketing budget they want to allocate to the search or recommendation, and the difference between a large family and a small one. What are the changes in the current situation before the epidemic? And then to follow up, Daniel talked about this live broadcast as one of the marketing models. Thank you. Good evening, management.

I'm wondering, first of all, if you could talk to us a little bit about advertising marketing budget allocation and changes that you may have seen there in the past few months in particular compared against the period before the pandemic in terms of big brands, large brands, and then the long tail merchants. For example, what proportion of their marketing budget are big brands versus smaller merchants allocating to different formats, for example, to paid search versus recommendations. And then by way of follow up, I was wondering if Daniel could tell us a bit about the take rate for live streaming versus search and recommendations, if the take rate for live streaming would happen assuming as one marketing format that can bring more convenience to merchants and be one more format. But I'd like to know about the take rate. Thank you.

Okay, I have two questions to share with you. The first one, I think, is actually about the behavior of the advertising of this brand during the epidemic, the behavior of this marketing budget. I think that no matter how big or small the business is, in such an uncertain epidemic environment, in an uncertain business environment, in general, we see Or is his marketing investment more cautious? More cautious. This actually doesn't matter. I don't think it matters. Because in general, it will be more cautious. Because all the business from the financial point of view, the budget for marketing expenses must be a percentage of his expected income. No matter according to the record or the year, it is like this. So from this perspective, when the expected income is uncertain, the marketing budget will be more cautious. No matter how big or small, it will be like this. Secondly, I think the biggest change in this is still the demand for the effect of the business. The demand for the marketing effect may have higher requirements in the past. The investment in the brand, the investment in the exposure display, we see that the business will be more cautious. Compared to the effect, it will be more cautious. The demand for the entire ROI of the effect advertising will be higher. This is also in line with the business. From the business perspective, demand better certainty in the context of the epidemic, the uncertainty in the context of the economic uncertainty. I think this is my answer to your first question. And on this issue, for Ali, we are because it is a consumer media and it is a consumer business location of this store. These two are united in such a way, so it has already formed This is a business that is fully sustainable, not a sales center. It is a sustainable method and profit model. So for the business, I want to combine this Taobao and Tianmao. I think this is an important place for them to operate. Such a position, I think today we see it is more important in the case of the epidemic. More important. This business may explore some new platforms or new channels. They will explore because everyone wants to pursue growth. In the end, they find out whether the ROI in the middle of the growth can be stable for the long term. Can it be sustainable? I think this is what all business owners will do under a special epidemic environment. A more careful judgment. So this is the first question. The second question, let's turn it over first.

Thank you. Let me divide this into a few pieces. When it comes to marketing budgets, and I think this is true of all kinds of merchants, large, medium, or small, in the context of the pandemic and considerable uncertainty, I think that all categories of merchants have become more prudent with regard to their spending on marketing. Because any company, regardless of its size, small, medium, large, is certainly going to be allocating a marketing budget as a percentage of its expected future revenues, be it in a quarter or be it in a year. So in the context of the pandemic with heightened uncertainty around expected future revenue, of course, there's going to be an impact on our marketing budgets for all kinds of companies alike. I think secondly, a change that you have seen following the pandemic is higher demands around ROI, also a function of merchants being more prudent. They want to ensure that the advertising they're paying for is being effective and paying off in terms of ROI. So certainly a more cautious approach, especially to things like display advertising. Merchants, advertisers are looking for more certainty amidst all of the uncertainty brought about by the pandemic. Alibaba is, of course, very well positioned as both a consumer media and also a platform, the major platform for merchant operations in China. It's a place that merchants can come and achieve sustainable, ongoing business operations and success and be empowered with a whole variety of different tools to do that. And that's why Taobao and Tmall continue to be the primary place for merchants to come and do business. Now, of course, merchants are always going to explore new formats, new models, new platforms, for that matter, that crop up because they're always looking to achieve incremental growth in their business. But at the end of the day, they will be looking at the ROI they're achieving and the sustainability of their investment in gaining that incremental new business.

Okay, the second question is about the way of live streaming. Actually, for Ali, we have two types of live streaming. One is as a shopkeeper. He used to run such a online shop here. His employee or the third party he hired will live stream in this shop as a shop. This is our exclusive way. The second type is Uh, this way is this, uh, some of this, we call the leader, uh, we call the answer, uh, this, this, as a pure promoter. He came to help different stores, uh, to do this live, uh, live in their own live broadcasts, uh, live in their own live broadcasts. So in these two ways, we all have different, uh, this, this commercial, uh, this agreement, uh, in fact, this, this, this. Okay, thank you. We'll take the last question.

Sorry, Rob, just to complete. Go ahead. Yeah, so the second part of your question, Alicia, had to do with the take rate on live streaming. So Alibaba has two different kinds of live streaming. The first kind is merchant live streaming. So this is where you have a merchant store online with an employee or a third-party person engaged by the merchant doing live streaming. Secondly, we have live streaming by opinion leaders. In Chinese we call them . So they're running their own live stream on which they can give visibility to and promote other merchants. And we have agreements in place to ensure that we're sharing an incremental revenue growth via a take rate. So that is our model.

Okay, last question please.

Thank you. The final question comes from Jiang Xiao from Barclays. Please go ahead.

Thank you, Mr. Guan, for answering my question. Good evening. My question is about wild birds. Wild birds are doing very well this season, right? The yield is more than 30%. You briefly talked about one or two reasons in the PR. I hope I can talk a little bit more about it. Thank you.

Thank you very much. Good evening, management. My questions have to do with chai miao, which we see has had very good performance with growth of over 30% in revenue, so very robust performance this quarter. I'm wondering if you could expand on that a bit and talk to us about some of the reasons that are driving that growth. And also, given now that over 70% of Tainiao's total revenue is external, being generated by external customers, if you could talk to us about the prospects for a potential spin-off of Tainiao. Thank you.

Thank you for your question. I will answer the first question first. Daniel will answer the second question. The first question is about the growth of the entire revenue of Tainiao. In this quarter, the overall revenue has increased by 36%. As I mentioned in my script, there are two major growths. The first one is a major growth in consumer logistics services. At the same time, it also includes the growth of cross-border logistics revenue. Then the main growth in this area is actually a relatively large growth, which comes from a local consumer logistics service growth. I just mentioned that the most important part of this service growth is an improvement in the entire service model. The previous model, more than you can understand, is a 3PL model, and now it has upgraded to a 4PL model. On the one hand, I think it's through more of what we used to be, not just a link between a service provider and a final customer. We are now more in the process of buying the service of the service provider and ultimately directly serving the final customer. In this way, we will bear more responsibilities. Thank you. So this is Toby. I'll take the first question.

to Daniel on the second question. So yes, indeed, in this quarter, China's revenue increased by some 36% year over year. In my script, I did go into the reason logistics side, the consumer logistics services, and secondly, on the cross-border side as well. But I think the biggest contributor was the local consumer logistics side where we achieved a very good growth and improvement. largely thanks to an enhanced service model. So going from more of a 3PL model to a 4PL model, where now we're not just passing on services to customers, but rather we are booking and purchasing services from different providers and then providing those services on to consumers, meaning that we're taking on more responsibility for the service, enabling us to provide overall better service, and that in turn is reflected in more revenue that can be recognized for Alibaba and an improvement in revenue for China.

Yes, so on the one hand, we have improved the customer service, and on the other hand, we have also met some of the relevant regulatory requirements, some of the regulatory requirements of this service industry.

With this upgrade in our model, we are better able to provide services to our customers and at the same time also able to satisfy regulatory requirements that have been introduced into this space.

Okay, let me talk about the second question. In fact, for Alibaba, since Alibaba was established in 2013, Alibaba Group is an independent operating subsidiary of Alibaba. Very clear So he Not only because he has external customers He is independent More importantly, he also has external shareholders Now Alibaba is in this We have a list in the annual report We are in almost 67% of the shares 66-67 shares So our team This one Surrounding this one for so many years Is around this one Whether it's at the end of the consumer contact point This includes cities, villages This community station We are actively exploring, actively progressing. So we also hope to participate in a better independent growth. We believe that participating in a better growth will definitely be able to counteract the other digital business activities of Alibaba Group, whether it is domestic or international business, whether it is retail business or B2B business. I think we Thank you. This is Daniel regarding the second question.

Ever since Tainiao was established back in 2013, it has been independently operated within the Alibaba family, providing external services, and more importantly, with external shareholders as well. So today the Alibaba group owns some 67% of Tainiao, and there are other investors as well. Over the years, Tainiao has been invested in robustly building up its last mile capabilities, turning out post delivery stations on campuses, in villages all around the country, and also in developing very robust supply chain capabilities with domestic logistics and cross border as well. So as far as Alibaba is concerned, of course, we look forward to seeing China continue to achieve very robust development, building those capabilities, and for those capabilities in turn to feed back into and better drive Alibaba's growth as well in terms of our our international commerce business, be it 2C, be it 2B as well. And this is a really important kind of synergy that we see across the businesses, but certainly Tynel will continue to be independently operating in the market and achieving success more broadly in the market.

Thank you, everyone, for participating in today's earnings call. Today's call will have a transcript available later on our corporate website. Please feel free to reach out to me and the IR team for any follow-ups. We'll see you next quarter. Thank you.

Thank you. That does conclude our conference for today. Thank you for participating. You may now disconnect.