Youku Tudou Losses to Weigh More Heavily on Alibaba

Alibaba, China’s e-commerce giant, enjoyed an annual growth of 33% in revenue (to $15.7 billion or RMB101 billion) and 22% in net profits in the year to March 2016. But losses from over-the-top video operation Youku Tudou will weigh more heavily on the group in the current year.

Gross merchandize revenue on Alibaba’s platforms – the topline measure of consumer and business activity –exceeded RMB3 trillion ($485 billion) for the first time, following a 27% increase. That is far in excess of the roughly 6% growth in China’s total economic activity and shows Alibaba is still growing its position in China’s economy.

The company’s final quarter showed revenue growth of 39% and net profits up by 85%.

Financial analysts said that the quarter missed estimates of profits, but exceeded in revenue terms. Shares were up by more than 4% at $78.9 per ARD in initial trading Thursday in New York.

The company’s disclosure about its entertainment business is minimal and was affected by the deconsolidation of Alibaba Pictures Group , which has a separate share listing in Hong Kong and Singapore. It will be further changed by the acquisition of online video business Youku Tudou, which was completed after the financial year end in April.

The accounts show Alibaba’s approximate 20% share of Youku Tudou’s losses in the year prior to acquisition amounted to $61 million (RMB391 million), more than triple the losses in the previous year.

“We now offer a multi-channel content distribution platform to delight and entertain users on their PCs, mobile devices and in their living rooms,” Alibaba said of the Youku Tudou deal. “Our strong platform of media assets, including Youku Tudou, UCWeb properties (browser, news feeds and mobile search), over-the-top TV and our partner Weibo, is ideal for brands that are looking for multimedia and broad exposure to users through integrated marketing campaigns. We offer merchants and brands not just unrivaled “reach and frequency” but also deep consumer insights driven by big data from user behavior on our e-commerce marketplaces as well as our media properties.”

Alibaba also said that the Youku Tudou takeover will increase goodwill write-offs of intangible assets in the future.

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