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Dear Fellow Shareholder,

It has been a year full of excitement — and a few challenges — for the Alibaba Group. It is a privilege to serve as this company’s CEO, and on behalf of the entire Alibaba family, I want to thank you for your support as we move along our journey as a public company. I am writing today to share some thoughts on our progress over the past year and what we have in store in the years ahead.

Our ecosystem is thriving

Last September, we made history with the world’s largest IPO, an accomplishment made possible by the countless small and medium enterprises and consumers who are the backbone of the Alibaba ecosystem.

More importantly, over the past year the Alibaba ecosystem has grown stronger each day. We have 3501 million annual active buyers on our China retail marketplaces, tens of millions of small- and medium-sized businesses operating on our marketplaces and have achieved total effective GMV of RMB2.44 trillion for fiscal 2015. We have made great progress on mobile with more than 289 million mobile monthly active users.2 Our annual mobile GMV was approximately RMB1 trillion, and we have become the world’s first truly great mobile Internet company. Moreover, Alimama is playing an increasingly important role in user acquisition and monetization on our marketplace.

Six years ago, we began investing in a cloud-computing platform, which began to bear fruit last year. Over one million enterprises are currently using our services, and we are working with several Chinese municipalities to create cloud-based smart cities.

Cainiao Logistics, in which we invested, not only has proven successful in fulfilling the logistics needs of our transactional marketplaces, but also has clearly laid out a long-term strategy that is under execution. It is building up both the physical infrastructure and the data network necessary to solve for the immediate as well as future challenges in logistics.

We also added new capabilities to our ecosystem, including UCWeb (the number-one third-party mobile browser in China, and the most popular mobile browser in India and Indonesia) and AutoNavi (one of China’s largest providers of mobile mapping services), along with a series of important investments to serve and strengthen our ecosystem. We believe health and entertainment will be increasingly bigger opportunities in the future, so we expanded and invested in AliHealth and AliPictures.

The global markets have seen a lot of turmoil recently, and some of the volatility has impacted Alibaba Group’s stock price. I would like to take this opportunity to share our views: Alibaba’s values are reflected in the pursuit of our dreams and creating value for our customers. This value proposition is not affected by the stock price. We remain committed as ever in our focus to provide the best service to our customers. Only by better serving our customers and continually creating new value for them can we reciprocate the trust and support that they and wider society bestowed upon us, while successfully creating value for our shareholders and ourselves.

We are proud to share that Alibaba today is healthier, stronger and more confident than ever before. We have strong faith in the Chinese economy and the future growth of our business.

Persistence in the face of challenges ahead

There is no denying that we have encountered many challenges during the course of our development. It was also inevitable that the market wouldn’t always fully understand us. However, we view all these challenges as invaluable opportunities.

1. Market leadership expansion

Alibaba will continue to focus on value creation for our customers to further expand our market leadership. How are we going to do that?

First, our unique market position and business model ensures our continued development and ability to add value. We are operating an ecosystem that is the catalyst for a transformation of the business landscape, and our hope is to provide the basic infrastructure for the future of commerce. We are dedicated to enabling others, ensuring opportunity for all ecosystem participants to flourish together. We can only achieve sustainable growth if all active ecosystem participants are growing and share collective interests.

Second, we plan for the future and long-term development. We will further invest in third- and fourth-tier cities and rural districts in the coming years in addition to fortifying our market leadership in major cities. We believe that building a truly viable network connecting people and products all across China is essential to realizing its full economic potential.

Third, we are committed to a profit model that is scalable with high efficiency. Any company that is not profitable or cannot scale profitably will find it difficult to sustain growth and provide long-term value to customers no matter the size of its business.

2. Trust and safety of our marketplace

We continue to improve our marketplace mechanisms and are committed to addressing some of the realities of operating a global e-commerce marketplace, which affect all companies in our space. This includes taking on the tough challenge of counterfeit products and brushing. We have confidence that Alibaba Group is the most qualified company to come up with effective solutions, leveraging the valuable experience and data accumulated over the years along with the hundreds of millions of dollars invested in the fight against counterfeiting and to enhance consumer protections. We have also announced several new partnerships with global anti-counterfeit organizations and continue to see significant progress. In this environment of intense competition, we will continue to upgrade our products; adapt to market changes; meet the needs of consumers and businesses; and further upgrade the governance and health of our marketplace platforms.

3. Investments

Our investments are integral to the strategic development of Alibaba Group. All our investments are implemented in strict adherence to our strategic vision. While acquisitions contributing to annual and quarterly results are easily understood, we cannot make acquisitions and investments for short-term growth. We have strict procedures and controls throughout our entire investment process, from pre-investment analysis to post-investment oversight. We will also publicly report on the progress of our various investments in due time.

Our future and our core strategy

Alibaba holds fast to our mission to “make it easy to do business anywhere.” This is our core principle, which has served us well over the past 16 years without losing steam. It will continue to be our guide. Alibaba Group is not just about being a profitable company. We want to work hard to bring about incremental change, to improve efficiency and solve the problems of society, and to catalyze social change.

But we will seek to bring new meaning to our mission. We are also well aware that in today’s era of rapid change, no industry is isolated from challenges and transformations. The integration of the physical economy and the digital economy is already a reality. We must ensure our efforts to make it easy to do business anywhere remain relevant in this new era in order to continue to create value for customers, help businesses grow, bring new users into the economy, transform supply chains, reconceive the production of goods and services, and ultimately enhance the efficiency of society and solve social problems.

We have set ambitious goals for ourselves. Over the next five years, Alibaba Group aims to become the world’s first platform to surpass US$1 trillion in GMV. Over the next 10 years, Alibaba Group will establish an ecosystem that serves two billion consumers, supports 10 million businesses and creates 100 million job opportunities. This ecosystem will allow SMEs around the world to fully participate in fair, free, open and equitable commercial trade.

We will get there by concentrating on three key priorities: globalization; rural expansion; and big data and cloud computing.

In the future, Alibaba wants to help consumers and businesses buy and sell globally. In past years we undertook a great deal of planning and exploration, and 2015 is the inaugural year of Alibaba’s globalization. We are aggressively developing cross-border e-commerce, bringing high-quality Chinese goods to overseas consumers while helping international companies introduce their products to the Chinese market. Our success depends in large part on our people. We are recruiting the best talent from around the world to support our globalization strategy.

Serving rural China will continue to be a priority. Almost half of China’s population lives in rural areas,3 and consumer activity is currently constrained by geographic limitations. Meanwhile, there is good farmland in rural areas that remains underutilized due to geography and lack of proper infrastructure. Through the power of the Internet, we believe rural consumers can enjoy the same selection of goods, services and prices available to their urban counterparts. At the same time, there is tremendous demand for high-quality, fresh agricultural products all over China that can be fulfilled by rural communities through e-commerce. We believe online marketplaces will gradually change the rural economy and foster positive rural economic development.

During the agrarian era, power came from wind and water. In the industrial age, the energy source was oil. The energy source of the new economy will be big data and cloud computing will be the engine. Data is the fuel for our future. Our cloud-computing capabilities will serve customers in China and around the world, moving them from today’s IT age, where information is harnessed for personal benefit, to the DT (data technology) era, where data is a shared resource for the benefit of society.

Innovation and continuous upgrading of our ecosystem

We will continue to innovate and upgrade Alibaba's ecosystem. This includes the development of our five key platforms: e-commerce, logistics, cloud computing, digital marketing and mobile Internet services.

We will continue to upgrade Alibaba’s core business of e-commerce. No matter if it is in wholesale or retail, cross-border or rural expansion, products or services, we want to make the ecosystem more vibrant, influential and prosperous. We will take into consideration a variety of factors in addition to scale of business in determining platform upgrades, including marketplace mechanisms, health of the ecosystem and level of vibrancy. We plan to expand the category of services offered, building on the existing rich and diverse range of physical product categories and services to meet the multidimensional needs of consumer lifestyles.

On logistics, we continue to believe that an open and collaborative approach with partners is crucial to our goal of shipping goods anywhere in the world. Cainiao Logistics is exploring ways to help logistics partners all over China improve efficiency by integrating information from each parcel and every warehouse through social collaboration methods, big data and cloud computing.

Cloud computing has started to take off after six years of steady investment. We have comprehensive plans for a rich product selection and diversity in customer base. Today our cloud computing business is enjoying accelerated and robust growth in a market with tremendous potential, quickly becoming an important basic infrastructure in China’s future business landscape.

We are also in the process of transforming Alimama. Currently, Alimama works as a tool to help merchants on Taobao and Tmall better reach their consumers. Alimama will leverage our big data to become a standalone digital marketing platform for businesses to run marketing campaigns both inside and outside our owned and operated properties. Our hope is that Alimama will serve customers across all industries and sectors in a few years’ time, spanning physical products to entertainment and offering everything from marketing to local services.

We are also expanding our products and services into mobile service technologies. In addition to mobile Taobao and mobile Tmall, we own non-e-commerce-related web services built on UCWeb and Auto Navi. Web browsing, searching and geo-mapping capabilities are fundamental to the mobile era, and help to integrate our businesses more seamlessly and create endless possibilities for our development of mobile technologies.

Fostering talent of the next generations

We believe in the power of youth to keep Alibaba vibrant and ensure our future continuity. Therefore, at the beginning of May this year, in addition to my taking on the role of CEO, we appointed several younger executives to front-line decision-making roles. Over the years we have made significant investments in talent development succession planning so that at every stage of our development, we will have a strong team of young leaders to rise to the occasion. Today, our executive team is composed of people born in the ’70s, and more than half of Alibaba’s managers were born in the ’80s.

In our rapidly changing operating environment, we know the innovation and creativity of our people is our greatest asset. We will continue to challenge, reward and develop our talent to ensure our sustained growth and success.

Alibaba is a company driven by its vision, and our development is guided by strong company culture and values. We have always been idealistic yet realistic. As the leader of a new generation of management, I assure you we will continue to strengthen the Alibaba ecosystem, enabling the success of more people and creating more value for our customers and partners, the community and our shareholders. Thank you again for your investment in Alibaba.

Daniel Zhang

Chief Executive Officer, Alibaba Group

Footnotes
Mission, Leadership and Governance