Taobao Live’s Growth Story Continues (NYSE:BABA)

Taobao Live saw its popularity surge during the initial months of the pandemic, and the growth of the platform still remains strong, contributing to Alibaba’s (BABA) overall growth. Alibaba’s China commerce retail segment saw 21% combined YoY growth from its two sub-segments, commission and customer management, of which Taobao and therefore Taobao Live fall under. As the China commerce retail segment growth looks poised to continue among tailwinds to e-commerce, Taobao Live remains in focus as a longer-term driver of GMV as it builds upon earlier successes.

Although Alibaba is a conglomerate with many rapidly growing segments, like cloud, other retail services like Freshippo for food, media & entertainment, Taobao and Tmall compose the core commerce, and within that lies Taobao Live and a growing live-streaming e-commerce service industry in general. For more information about Taobao Live, its position within revenue streams, previous growth metrics and steps, and risks, read Taobao Live Could Be A Key Growth Driver For Alibaba,” as this article will focus more on the changes and progress since then.

Alibaba had a strong Q2 for MAU and AAC (annual active customers) with both metrics gaining more sequentially – MAU hit 874 million, up 28 million QoQ (while Q1 rose 22 million QoQ), and AAC hit 742 million, up 16 million QoQ compared to Q1’s 15 million. So the platform as a whole is still showing strong growth, even as it inches closer to a landmark 1 billion MAU.

But why Taobao Live is important lies within the generation of EBITA from Alibaba’s segments – core-commerce adjusted EBITA has grown 25% YoY to US$7.25billion, and while other segments have grown, adjusted EBITA for the rest is still negative. As e-commerce continues to shift in regards to how customers interact with merchants, Taobao Live’s growth could help fuel long-term growth for core commerce.

Some highlights from the quarter ending March 31 for Taobao Live:

  • Daily active merchants using Taobao Live grew 88% YoY
  • Merchants using the platform surged 719% in February compared to January
  • GMV growth has measured over 150% YoY
  • Had plans to add 200,000 offline stores with 300,000 merchants per day in live-streams
  • 50,000 farmers are streaming on the platform, and sold 380,000 kg of produce to over 4 million viewers on Valentine’s Day

For Q2, Taobao Live is still showing similar growth metrics. Alibaba is witnessing that the Taobao Live “ecosystem continues to strengthen with broader adoption by brands, retailers and merchants across all product categories,” even with its higher concentration in jewelry and fashion accessories as a driver of GMV. 2019’s top categories by growth rate included vehicles, home appliances, books/audio/video tapes, home decor, and electric appliances – aside from vehicles, the rest likely saw huge tailwinds during the pandemic.

Taobao Live’s influencers (KOLs – key opinion leaders) “continue to generate robust GMV growth on the platform,” but merchants and brands themselves are increasingly interacting directly to consumers as well. Merchants and brands who live-streamed direct to consumers “accounted for approximately 60% of Taobao Live GMV” as GMV “continued to grow over 100% year-over-year.”

GMV still has that triple-digit growth rate, although 100% growth and 150% growth are quite dramatic differences when numbering in the hundreds of billions of renminbi. But growth still doesn’t look to be slowing dramatically, and triple-digit growth rates could well remain, as the live-streaming e-commerce sector continues to heat up.

Everbright Securities estimated the 2019 GMV of live-streaming at 440 billion renminbi, over three times that of 2018; 2020’s GMV is expected to double 2019’s figure – that’s quite a tremendous growth rate, and leaves a huge margin for Taobao Live to capitalize upon, as it had done on the 6.18 Mid-Year Shopping Festival and on the upcoming 11.11 Single’s Day events.

Alibaba noted that it reached another record for the 6.18 event, and combined with (JD) saw a “total of $136.5 billion [renminbi] in sales during almost three weeks of promotions — largely driven by livestreaming.” Single’s Day is also lining up to be stellar for Taobao Live, after it more than doubled its DAU in 2019. More users equals more viewers, which will translate into a higher GMV, given that the number of merchants has grown significantly.

However, there are some competitors to Taobao Live, and could dampen the overall GMV that it could post in the upcoming quarter as well as on Single’s Day. Kuaishou is one of the larger competitors, and with over 100 million DAU in June, it poses likely the largest threat to Taobao Live, even as Taobao controls most of the live-streaming market. Other live-streaming apps involved in e-commerce include Douyin, JD Live, Pinduoduo (PDD), and gaming-focused Huya (HUYA), DouYu (DOYU) (who has partnered with Taobao in the past), and Bilibili (BILI) (who also has partnered with Taobao).

Even so, the tide is growing stronger for livestreaming. While there is competition, Taobao Live can bank on the industry-high MAU that Alibaba has established. The growth to merchants in Q1 from the pandemic and plans that Taobao had made to increase stores and merchants on the platform will correlate with overall GMV growth as the live-streaming e-commerce market continues to grow at astonishing rates.

GMV is projected to double for 2020 to over 800 billion renminbi, and capitalizing on holidays like Single’s Day in a similar fashion to the 6.18 holiday events can drive Taobao Live’s GMV significantly higher, and allow it to continue posting triple-digit YoY growth rates. As core commerce is Alibaba’s largest segment, Taobao Live can help revitalize a slowing GMV growth rate in Taobao (which is offset by a more rapidly growing Tmall), and provide a meaningful long-term benefit to both overall core commerce GMV and revenues. Again, for a more in-depth analysis of growth, outlook, and other risks, please read the aforementioned and linked article about Taobao Live.

Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

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