E-commerce platforms report mixed results amid tougher regulation

China’s internet titans have reported mixed business results for the July-September quarter, with Alibaba falling short of market expectations in revenue growth and Baidu doing better than expected, as the government launches measures from anti-monopoly supervision to investigation into unfair competition to rein in the online industry.

Experts said that the tougher management might limit the potential for profits at some online companies, especially the first-tier ones, in the short term, but in the long run, their businesses will benefit from the establishment of a more standardized industry ecosystem.

Both Alibaba’s revenue growth and earnings per share for the third quarter fell below market expectations. Revenue was up 29 percent on a yearly basis to reach 200.69 billion yuan ($31.4 billion), below market estimate. Earnings per share stood at 11.2 yuan, also below market expectations.

However, the company managed robust growth in its active consumers, as its global users reached approximately 1.24 billion for the 12 months ended on September 30, 2021, an increase of approximately 62 million from the 12 months ended on June 30, 2021. The user base grew both in China and overseas for the e-commerce giant, the company’s latest financial report showed.

China slapped a record 18 billion yuan fine on Alibaba Group in April, after an anti-monopoly probe found the e-commerce giant had abused its dominant market position for years. The company was also requested to rectify its business comprehensively in accordance with laws and regulations.

Alibaba’s major rival in China – e-commerce website JD.com – saw net income grow 25.5 percent on a yearly basis to 218.7 billion yuan in the third quarter, according to the company’s financial results, which were released on Thursday. The report also showed JD.com’s active users surged by 24.9 percent in numbers in the year ended on September 30.

Online giant Baidu Inc’s revenues rose to an above-expected 31.9 billion yuan in the third quarter, largely buoyed by its artificial intelligence cloud sector that saw a 73 percent leap in revenue, according to financial data revealed by Baidu.

The online titans’ businesses continued to expand, some showing a better-than-expected performance, after they were put under stricter management by the authorities in the past months.

Since the beginning of this year, policies have been adopted to improve China’s business environment and open up more space for private enterprises to develop, including strengthened anti-monopoly supervision over some platform companies, investigation of antitrust activities and unfair competition, and prevention of disorderly expansion of capital.

Analysts said that such moves are pragmatic steps to regulate the industry and safeguard fair competition.

It can be said that the era of strong anti-monopoly supervision of the internet industry has come, Zhang Xiaorong, director of the Beijing-based Cutting-Edge Technology Research Institute, told the Global Times on Thursday.

“The increasing concentration of internet giants is an objective trend and an inevitable result of industry development. By strengthening anti-monopoly supervision, the obstacles affecting the healthy development of platforms and the digital economy can be eliminated, and usher in a better development environment,” Zhang said.

Internet companies and platform companies have adjusted their businesses according to regulatory requirements, with initial efforts emerging, said analysts.

Fu Liang, an independent tech analyst, said that fines and toughening regulation might hurt some internet firms’ profitability, particularly the first-tier platforms like Alibaba and Meituan, in the short term, but in the long run, their businesses would benefit from the formation of a transparent, fair-competition ecosystem.

“In general, the bonus period for internet companies still exists in China, particularly with the government’s push for internet infrastructure building. Most platforms, whether the first-tier or smaller ones, will benefit from such a trend and will continue to attract new users,” he told the Global Times.

Authors: Xie Jun, Chi Jingyi, Global Times