Robust ad returns boost Alibaba revenue in Q2

A pedestrian walks past an advertisement for Chinese e-commerce giant Alibaba Group Oct 23, 2015. [Photo/IC]

Alibaba Group Holding Ltd's second-quarter revenue beat analysts' estimates as China's biggest online shopping company boosted advertising to fend off a slowing economy.

Sales rose 32 percent to 22.2 billion yuan ($3.5 billion) in the three months ended September, the company said on Tuesday. That compares with the 21.3 billion yuan average of estimates compiled by Bloomberg. Net income surged to 22.7 billion yuan after recognizing an accounting gain on an affiliate.

New cloud-based services for merchants and partnerships with retailers including electronics chain Suning Commerce Group Co are helping boost ads and limit the impact of a slowing Chinese economy. Increased promotions on Alibaba's Tmall and Taobao marketplaces are driving sales ahead of next month's Singles' Day, the country's biggest shopping event.

"Alibaba is tweaking its payments for search terms, which helped generate more money from advertisers," said Li Muzhi, a Hong Kong-based analyst at Arete Research Services LLP. "Investors are expecting things to improve at Alibaba as the economy in China improves with more stimulus policies."

Shares of Alibaba closed on Monday at $76.35 in New York. The stock has surged 29 percent so far in October and is on pace for its best month since last year's initial public offering.

The company this month offered $4.6 billion for the rest of Youku Tudou Inc to stream more video content to Chinese Internet users through control of the YouTube-like site.

Alibaba is investing more in online-to-offline services in competition with rivals Tencent Holdings Ltd and Baidu Inc. That includes investing in Didi Kuaidi, China's biggest taxi-hailing application, and backing the merger of group-buying platforms Meituan and Dianping.

Billionaire Chairman Jack Ma is pushing ahead with acquisitions. The company has participated in almost $15 billion of deals announced this year, about triple the number for all of 2014, according to data compiled by Bloomberg.

Gross merchandise volume in China, Alibaba's largest business, rose 28 percent to 713 billion yuan in the quarter, while mobile GMV almost tripled to 10.5 billion yuan.

While mobile platforms help capture the millions of consumers shopping on smartphones and tablet computers, the smaller screens typically generate less advertising revenue.

Singles' Day on Nov 11 seeks to lure bargain shoppers, and the promotion last year had five times the sales of Cyber Monday in the United States.