Over the past few years$BABA (BABA.US) $Has evolved from a pure e-commerce platform to a huge business empire:

At present, BABA's business consists of four parts: core business, cloud computing, digital entertainment and innovation business. Core businesses include retail-related businesses such as domestic and foreign retail platforms, new retail and logistics; cloud computing is Aliyun; digital entertainment includes entertainment industries such as BABA Film and Youku; innovation and other projects that mainly include nails are hatching, but with less income for the time being.

Among the many plates, e-commerce is still the core of BABA, contributing most of its profits.

However, with the end of the sinking traffic dividend and the limited improvement of the realization rate brought about by intensified competition, it has been difficult for e-commerce business to support BABA's rapid growth in the future.

In the fourth quarter of 2019, BABA's operating income increased by 37.67% compared with the same period last year. But advertising and commissions based on e-commerce grew by only 23 per cent and 16 per cent respectively, both setting new lows in recent years.

From the current point of view, BABA's other business is also difficult to play a leading role in the short term. The new retail business does not increase profits, whether it is takeout, or box horse, the performance is hardly optimistic. It is true that cloud computing has performed well, but limited by the small base, it is difficult to pull the big ship BABA.

From this perspective, when the era of high growth in e-commerce business is coming to an end, BABA needs to find a new growth baton. BABA's next performance will directly determine whether he can start a new round of growth cycle in the next decade.

From user growth to user value Mining

GMV is often the core indicator to measure the scale of e-commerce. For e-commerce, there are two factors that affect GMV: annual active users and per capita GMV.

Over the past three years, the growth of the number of users has been the core logic of BABA's e-commerce GMV growth.

Between 2017 and 2019, BABA's annual active users (those who had placed orders on Tmall and Taobao in the past December) increased by 60 per cent from 443 million to 711 million. The vast majority of these users come from the sinking market. According to data previously released by Jiang Fan, president of Taobao Tmall, more than 70 per cent of Taobao's new users in the past two years have come from the sinking market.

But there are times when the dividends of the sinking market are exhausted.

In the fourth quarter of 2019, BABA e-commerce had 824 million monthly active users (mobile users with apps open).

You know, there are only 1.151 billion Wechat users at present. According to the Guosheng Securities Research report, the current population of 15 murmurs aged 60 is about 890 million. In other words, excluding repeated users and the elderly who do not know how to shop online, BABA's potential user increment will not be much. In other words, at least from a traffic point of view, BABA has reached the ceiling.

From the point of view of user growth, this judgment can also be confirmed. As shown in the following figure, BABA's user growth rate has been steadily declining in recent years. In the fourth quarter of 2019, the number of monthly active users of BABA increased by only 17.88% compared with the same period last year. In contrast to JD.com, the number of monthly active users of JD.com 's mobile phone increased by 41% in December 2019 compared with the same period in 2018.

Of course, there are reasons for the user base, but it is undeniable that because the basic disk is too large, BABA flow dividend ends at a point in time earlier than other homes.

When the flow dividend ends, the logic of e-commerce GMV growth changes from user growth to user value mining.

Due to the considerable growth of users in the past, BABA did not invest too much energy in user value mining. From the 2018-2019 fiscal year, the per capita GMV growth rate of BABA e-commerce was only 5.25% and 0.26% respectively.

The per capita GMV growth rate of 0.26% is the lowest since BABA announced his prospectus, which also means that user consumption on BABA's platform is almost no longer growing.

So it is not difficult for you to understand why BABA got through the two scenes of Taobao and Tmall in March last year, with Jiang Fan as the president, and began to introduce the mode of live broadcast with goods. These actions are designed to increase user activity.

BABA needs to do better outside the Fifth Ring Road.

In the past, many investors have always held the view that the e-commerce users outside the Fifth Ring Road nurtured by Pinduoduo (NASDAQ:PDD) will eventually be harvested by BABA.

But in fact, this does not seem to be the case.

We can refer to two pieces of data. First of all, from the point of view of the length of use of users, Pinduoduo has surpassed Taobao to become the longest-used e-commerce APP.

Secondly, from the past few quarters, the ratio of BABA's annual active users to monthly active users has been declining.

How to understand this data? Compared with the number of monthly active users, BABA's definition of annual active users is more rigorous. BABA's "monthly active users", just open APP. The annual active users are those who have placed orders in Tmall and Taobao in the past 12 months.

In other words, when the ratio of BABA's annual active users to monthly active users is declining, it means that for every 100people who visit Taobao or Tmall, the number of people who place orders at last is decreasing.

This figure continued to decline throughout 2019. It fell from 0.91 in the first quarter of 2019 to 0.86 in the fourth quarter.

Considering that most of BABA's new users in recent years come from outside the Fifth Ring Road, there are two possibilities for BABA to reduce the ratio of annual active users to monthly active users:First, it is brought by the consumption habits of users outside the Fifth Ring Road. Second, BABA's competitiveness in the market outside the Fifth Ring Road needs to be improved.

Taking into account the past Jiang Fan repeatedly stressed that sinking users have considerable spending power. Either way, it means that BABA still needs to do better outside the Fifth Ring Road.

Competition in e-commerce intensifies and monetization is limited.

The income formula of platform e-commerce can be summarized as follows: operating income = GMV* monetization rate.

From this point of view, the increase in monetization is the biggest "contributor" to the rapid growth of BABA's e-commerce income in the past few years. But as e-commerce competition turns white-hot, this driver is likely to be less brave than it was then.

For the past three yearsAlthough the growth rate of e-commerce revenue has always been higher than that of GMV.But the difference between the two has gradually narrowed.

• In fiscal year 2017, BABA's e-commerce GMV grew by 22%, and e-commerce revenue grew by 43%, a difference of 21%.

• In fiscal year 2018, BABA's e-commerce GMV increased by 28%, and e-commerce revenue increased by 44%, a difference of 16%.

• In fiscal year 2019, BABA's e-commerce GMV grew by 19%, and e-commerce revenue grew by 29%, a 10% difference between the two.

This means that after several years of "capacity climbing", the improvement of BABA's monetization rate may have encountered bottlenecks.

And this is largely because the sinking market is becoming more and more competitive. In the fourth quarter of 2019, BABA's commission income was 16%, most of which came from Tmall. Tmall's GMV growth rate was 24% in the fourth quarter.

In the words of BABA, the growth rate of commission is lower than that of GMV.This is because BABA has adopted a preferential commission policy for some strategic categories, and Tmall's super business with high commission will no longer be counted as commission.Such offers will continue and may even be extended to new categories.

However, this slowdown also shows that intensified competition in the industry is gradually beginning to affect BABA's commission income. BABA previously pushed 10 billion yuan in subsidies, cheap and good goods and other channels, and gave commission preferential activities to Tmall merchants who participated in the activities.

Affected by the competition is not only the commission, but also BABA's advertising revenue.

In a conference call in the fourth quarter of 2019, Wu Wei, chief financial officer of BABA, said that in order to sink the user experience of market users and expand market share, BABA does not plan to fully monetize the flow of information this year.

Considering that the rise of Pinduoduo and the recovery of JD.com have brought greater competitive pressure to BABA, its monetization rate is difficult to restore the past high growth trend in the short term.

Who is BABA's growth baton?

With the growing volume of e-commerce, a slowdown in growth is inevitable. BABA needs a new growth baton.

In the fourth quarter of 2019, the brightest performance of BABA's core business was "other business", with revenue of 25.8 billion yuan, an increase of 128% over the same period last year. The rapid growth is largely due to the acquisition of koalas. Looking at the performance of its assets, it is hard to be optimistic.

As one of the representatives of BABA's new retail sector, Box Horse not only slows its expansion in 2019, but also faces re-examination of its internal position in BABA. In BABA's latest organizational restructuring, Dai Shan, president of BABA's B2B business group, was in charge of the box horse business group on behalf of the group, and Hou Yi's reporting object also changed from Zhang Yong to Dishan.

And the local life services (mainly ele.me and word-of-mouth) of the new retail business are not much better.

According to the Trustdata report, Meituan's market share in the takeout industry continued to grow in the first half of 2019, rising to 65.1%, up 1.7% from the previous month, while the transaction volume of ele.me accounted for 27.4%, down 0.1% from the previous month, and the gap between ele.me and Meituan takeout continued to widen.

This is also an important reason why local life services changed again in January this year, with Hu Xiaoming, president of Ant Financial Services Group Group and chairman of Internet Merchants Bank, also chairman of BABA Local Life Service Company.

Speaking of which, Aliyun may be one of BABA's few bright spots except for his e-commerce business. In the fourth quarter of 2019, Aliyun's business revenue grew 61% compared with the same period last year, exceeding 10 billion yuan for the first time.

From the perspective of the industry pattern, Aliyun accounts for nearly half of China's IAAS cloud service market, and is also far ahead of other cloud companies. But for now, cloud computing is still in its infancy and its base is still small, so it is difficult to pull the big ship BABA.

Taking into account the difference in market size and competition pattern, whether Aliyun will eventually have the same volume as Amazon.Com Inc AWS needs to be followed up.

There is no doubt that the lack of performance growth points will make BABA slightly embarrassed in the coming period of time. And BABA's performance in the next will directly determine its trend in the next decade.