Alibaba’s deep pockets

The first round of financials from e-commerce company Alibaba after its 2007 IPO were released last week revealing some pretty interesting details.

Net income at Hangzhou-based company soared 340% to 967.8 million yuan (HK$1.06 billion) last year, up from 219.94 million yuan in 2006, partially benefiting from 350.5 million yuan in interest income from oversubscriptions of its public offering in November last year.

Buried deep down in its financial statement was how much money the company spent on sales and marketing. If you were anywhere around Hong Kong in the final months of 2007 it would have been hard to miss the Alibaba logo, which was stuck on buses, taxi's, all over the MTR and pretty much anywhere else you can buy advertising space. In short, the company was (and still is) everywhere!

Alibaba’s own records state that its sales & marketing expenses increased 20.7% from RMB610 million in 2006 to RMB737 million in 2007. The company said its sales and marketing expenses increased mainly as a result of increased staff costs, advertising and promotional expenses and sales commission. It added that sales and marketing expenses increased in the second half of 2007 – leading up to its IPO.

“We invested more on promotional activities in new regions that we expanded our business into as well as promotion of new products that we started to offer during the year."