World Economy

Alibaba Slow Growth Costs Investors $70b

Alibaba Slow Growth Costs Investors $70bAlibaba Slow Growth Costs Investors $70b

After Alibaba Group Holding Ltd. raised a record $25 billion last year, founder Jack Ma said the Chinese e-commerce company faced the danger of high expectations. He might be right.

About $70 billion of market value has evaporated since Ma made that statement in November as investors worry about slowing growth. Alibaba’s dominance at home as a marketplace for buyers and sellers of goods is being undermined by a Chinese economy projected to grow at the slowest pace since 1990 and a consumer shift to mobile shopping that crimps advertising revenue, Bloomberg reported.

Ma’s push outside China also has yet to gain traction -- its presence in the U.S. and much of Europe remains negligible. Results due Thursday are expected to show that the pace of Alibaba’s revenue expansion fell below the average of the previous seven quarters. Shares of Alibaba closed Tuesday at $79.54 in New York, 33 percent below their November peak and the lowest since the Hangzhou-based company sold stock at $68 apiece in its initial public offering in September.

“With the overall Chinese economy slowing down and the market saturating in large cities, overseas expansion seems even more important,” said Cao Lei, director of the China E-Commerce Research Center in Hangzhou

Alibaba’s success in China made it the nation’s biggest e-commerce operator, with everything from clothes and food to jets and cars being sold across its platforms.

Ma wants to replicate that around the world, setting a goal of generating half of sales and servicing more than 10 million small businesses outside China. But while the company has made inroads into Russia and Brazil, Alibaba currently gets less than 5 percent of its revenue from outside China, Ma said in March on a company Twitter account.

Alibaba’s sales probably rose 41 percent in the fourth quarter to 16.9 billion yuan ($2.7 billion), according to the average of 23 estimates compiled by Bloomberg. That compares with an average of about 50 percent during the past seven quarters.

The company’s strategy of expanding in under-served regions of China and overseas is driving up marketing costs as more consumers shop on mobile devices, where ads typically generate less revenue than those on desktop computers. Operating income will probably shrink 18 percent to 4.5 billion yuan, according to the estimates.