By Melanie Lee
SHANGHAI (Reuters) - Alibaba Group, China's largest e-commerce company, posted a 64 percent rise in revenue in the January-March quarter and a six-fold rise in net profit, cementing its position as a key beneficiary of China's e-commerce explosion.
Alibaba's net profit for the first quarter jumped to $220.5 million from $29.6 million a year ago. Its sales climbed to $805.9 million, according to a filing by Yahoo Inc to the U.S. Securities and Exchange Commission. (http://www.sec.gov/Archives/edgar/data/1011006/000119312512347578/d354721d10q.htm)
Based on the first-quarter results, Alibaba Group, which is 40 percent owned by Yahoo, is the second-largest Chinese Internet company by revenue, behind Tencent Holdings and ahead of Baidu Inc. It is the last China Internet behemoth that is still private and not required to publicly disclose financial statements.
Alibaba, which runs the Taobao Marketplace, China's largest business-to-consumer e-commerce website, and Alibaba.com, China's largest business-to-business platform, has a business model that revolves around online advertising and subscription fees.
"In China people are transitioning from traditional shopping methods to e-commerce, so it is a very very fast growing industry," said Alex Lee, an analyst with Hong Kong-based Haitong International Research.
"There are other players like Tencent that are rising in the industry. But in the near term, Alibaba will stay the dominant force in China's e-commerce industry," Lee added.
According to data from Analysys International, in the second quarter this year, Alibaba Group was the second-largest platform for Internet advertising by market share, after Baidu.
"The results speak for themselves," said Alibaba Group spokesman John Spelich, who declined to elaborate on the numbers. Sources told Reuters that Taobao accounted for almost two-thirds of $2.8 billion group revenue in 2011.
PROVIDING INTERNET REAL ESTATE
A key to Alibaba's rapid growth is that it is a platform not an online retailer. The difference being Alibaba's crown jewels, Taobao Marketplace and Taobao Mall, don't carry inventory or manage warehouses, but provide Internet real estate by allowing buyers and sellers to trade, and charging them advertising or subscription fees.
For the six months that ended March 31, Alibaba's revenue rose 76.7 percent to $1.83 billion, while net profit rose 638.9 percent to $457.4 million. The filing shows Alibaba's income from operations rising to $490 million in the same period from $73.2 million a year ago, a jump of about 569 percent.
Yahoo agreed in May to sell back part of its stake to Alibaba. Under the agreement, Yahoo was to sell one-half of its stake in Alibaba for at least $6.3 billion in cash and up to $800 million in new Alibaba preferred stock.
Alibaba delisted its Alibaba.com unit earlier this year in preparation for an eventual initial public offering. Banking sources told Reuters that Alibaba Group could rival Facebook with a valuation of $100 billion when it lists its shares, possibly by 2015.
China's rapidly growing e-commerce industry is estimated by Boston Consulting Group to become the world's largest by 2015, worth more than 2 trillion yuan ($314.5 billion).
($1 = 6.3590 Chinese yuan)
(Editing by Matt Driskill and Muralikumar Anantharaman)