Alibaba's proposition of "user-first, AI-driven" is a redefinition of its approach.

By creating value for users, enhancing user experience, and addressing their pain points first, Alibaba can relaunch itself.

Coupled with the booming AI technology, Alibaba can leverage its scale advantages of big data, numerous users, merchants, and comprehensive product categories.

Such an Alibaba is worth paying attention to for its long-term investment value.

In September 2024, marking the 25th anniversary of Alibaba Group's establishment, Alibaba (09988.HK) was officially included in the Stock Connect program.

Prior to this, on August 28, Alibaba announced that it had officially completed a dual primary listing in Hong Kong, becoming a company with dual primary listings on both the Hong Kong Stock Exchange and the New York Stock Exchange.

Inclusion in the Stock Connect program in September facilitates investment in Alibaba by mainland capital.

Currently, the largest incremental capital in the Hong Kong stock market comes from the Stock Connect program.

Referring to the current holdings of Tencent and Meituan in the Stock Connect program, it is expected to bring a considerable amount of incremental capital to Alibaba's Hong Kong stock.

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On August 30, the State Administration for Market Regulation announced that Alibaba Group had completed a three-year rectification with good results.

News on September 4 indicated that the Taobao app is about to fully support WeChat Pay, marking the interconnectivity between Alibaba's and Tencent's platforms.

It also signifies that China's two most powerful platform companies are transcending the past under new circumstances to jointly bring convenience to users.

As a former Alibaba employee, I have been observing Alibaba from the perspective of a professional investor over the years.

Analyzing these events, I believe Alibaba has stabilized its position.

In this September, as Alibaba concludes its rectification and sets off again, I attempt to analyze Alibaba's future development and investment value and identify key investment insights.

Establishing a Leading Position in E-commerce As a globally renowned e-commerce and internet company, Alibaba has experienced three stages in its development.

The first stage was led by Jack Ma, under whose leadership Alibaba evolved from a small B2B e-commerce platform into an internet giant encompassing e-commerce, finance, cloud computing, and more.

Jack Ma founded Alibaba in 1999 and served as the chairman of Alibaba Group until 2019, which coincided with the rapid development of China's internet, mobile internet, and e-commerce industries.

Alibaba became a leading global platform company.

During this stage, although there were a few competitors in China's e-commerce industry, such as the early C2C e-commerce website EachNet, none posed a strong challenge to Alibaba.

Throughout Alibaba's development in the e-commerce sector, it won the trust and support of numerous consumers by understanding Chinese users, leveraging its strong platform advantages, offering a wide range of products, and providing a comprehensive payment and logistics system, as well as continuously innovating its service models.

This allowed it to gain a leading position in market competition.

The core was to meet user needs, consolidate advantages, and deepen its moat in a nearly blank e-commerce market.

Emergence of Strong Competitors As Alibaba's business continued to expand and its scale grew, the company required more professional talent to drive the development of various businesses.

Thus, the second stage saw leaders such as Jonathan Lu and Daniel Zhang.

During this phase, although significant progress was made in the three major strategies of globalization, rural development, and cloud computing and big data, it was not as smooth as the first phase of capturing the domestic e-commerce market.

Looking at globalization, Alibaba did not have a first-mover advantage in many markets and encountered stronger competitors.

For instance, Alibaba announced in April 2016 an investment of $1 billion to take a controlling stake in Lazada, and has since continued to increase its investment to support its expansion and development in the Southeast Asian market.

With such support, Lazada's competitiveness in the Southeast Asian market has been continuously improving.

However, it faces strong competitive pressure from other e-commerce platforms such as Shopee, TikTok Shop, and Amazon, as well as different policies and e-commerce environments in each country, and even the influence of geopolitics.

Alibaba's global development is far from the leading position it once held in the Chinese market.

As early as 2019, Shopee had already surpassed Lazada and has since remained the top e-commerce platform in Southeast Asia.

Regarding the rural strategy, Alibaba spent over five years vigorously promoting and operating Rural Taobao across the country.

At that time, the vision of "making rural areas better" and the slogan of "mass entrepreneurship and innovation" inspired many local youths to return to their hometowns to start businesses.

Local governments fully supported the extension of logistics and express delivery to rural areas to promote online shopping among farmers.

However, for various reasons, it was not smooth.

For example, competitors were more in touch with the local market; platforms like Pinduoduo quickly won the recognition of farmers with their more affordable price advantages.

The cloud computing and big data business faced the issue that, in the early days, Alibaba Cloud had a significant advantage in China, but later competitors improved, making Alibaba Cloud a replaceable option.

It can be said that in this stage, Alibaba encountered strong competitors in many fields.

Coupled with the rectification order, time was no longer on Alibaba's side, and its domestic e-commerce GMV market share continued to decline, being significantly eroded by Pinduoduo and platforms like Douyin and Kuaishou, until 2024 when it finally regained its footing.

Adjustment and Correct Direction In the past few years, Alibaba's revenue growth was not fast, but development is the hard truth; without development, a multitude of problems emerge.

Therefore, Alibaba adjusted its organizational structure for many years but found no significant effect.

Against this backdrop, Joe Tsai and Maggie Wu stepped forward, and the company's development entered the third stage.

After taking on the role of CEO, Maggie Wu proposed "user-first, AI-driven," which grasped the key to the problem and found the right path to implementation.

Maggie Wu's September 2023 letter to all Alibaba employees, "User-First, AI-Driven: Creating Greater Value with an Entrepreneurial Mindset," is worth savoring.

It set the tone for Alibaba Group's adjustment and marked the beginning of a new departure.

Why am I optimistic about Alibaba's third stage?

Because the company's proposition of "user-first" is a necessary and long-overdue major directional adjustment.

The market has always perceived Baidu as technology-driven, Tencent as product-driven, and Alibaba as sales and operation-driven.

Times have changed, and Alibaba's sales and operation-driven model is no longer suitable.

Previously, the company set high goals and established KPIs (Key Performance Indicators) from top to bottom, then attacked around these KPIs.

As a result, with the Chinese internet and e-commerce dividends almost exhausted, and disregarding user experience and demands, various problems arose.

The solution is to follow Tencent's approach, focusing on user value, meeting user demands, addressing user pain points, and improving user experience.

Alibaba tried countless methods in the past few years but was hard-pressed to counter the "affordable" move of competitors.

Currently, Alibaba's Taobao Group has returned to its advantage of "more" in "more, faster, better, cheaper"—more users, merchants, categories, and global countries, even more advertising spots and slogans.

And it has started to drive with AI, algorithmically matching the "more" from various angles, finding its advantage and the way to improve.

As user experience improves, Alibaba's GMV market share in the first and second quarters of 2024 no longer declined.

Taobao Group is promoting several important transformations, the first of which is "full-site promotion," which hands over the countless advertising spots, keywords, and ad banners that the platform and merchants have spent a lot of manual fine-tuning to AI.

Based on the advertising budget and return on investment set by merchants, the algorithm automatically optimizes the best results across the entire site, immediately increasing conversion rates and significantly reducing manual input.

The second-quarter earnings call mentioned that the more traffic involved, the more data there is, and the better the results, allowing Alibaba to leverage its "more" advantage.

AI-driven like mining, the Taobao app will understand users and merchants better and can also use algorithms to select high-quality merchants to gain more traffic.

The penetration of "full-site push" in traffic will take several quarters.

This will undoubtedly increase the conversion rate and, combined with the identification and matching of merchants and users, can also improve user satisfaction.

The second transformation is to start charging a technical service fee from September, collecting 0.6% based on the confirmed GMV of completed transactions.

If the annual GMV of some small and medium-sized merchants is below a certain threshold, a refund will be given.

What are the benefits?

In fact, it is combined with "full-site push," more comprehensive merchant scoring, etc., to make AI-driven smoother and more thorough.

Alibaba also has other related measures to improve user experience and increase commercialization rates.

The key is that the starting point of "user-first" is correct, and the path of "AI-driven" is correct.

The rest is just to experience the product and pay attention to the progress of financial reports.

At present, Alibaba is setting off in the right direction and, like the e-commerce king in the era of the internet and mobile internet, Alibaba is also expected to shine again in the AI era, becoming a first-class and intelligent platform company that serves global users better.

Its long-term investment value deserves attention.