Alibaba most of the time compares to Amazon. Yet the future of Alibaba business is something Amazon has turned into big business. According to a report from CNBC, Alibaba future is cloud computing business.
Besides, Alibaba’s CEO who has been a chairman of the board after Jack Ma stepped down, Daniel Zhang, says that cloud will be Alibaba’s main business in the future.
Alibaba Future
Alibaba started off in 1999, as an e-commerce company. Years later, it branched into payments, brick-and-mortar stores, streaming services, and food delivery.
However, its cloud computing holds the most promise. Alibaba launched its cloud computing business in September 2009. Its cloud computing is now the biggest player in China.
In the June quarter, cloud computing brought in revenue of 7.79 billion yuan or $1.13 billion to Alibaba, according to the exchange rate during that time. That was a 66% year-on-year growth.
Up to now, cloud computing accounted for 7% of Alibaba’s revenue in the June quarter. And while the business unit was still loss-making, those losses narrowed and the margins improved.
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In comparison, Amazon Web Services, the U.S. giant’s cloud division, brought in net sales of $8.38 billion in the June quarter. It has now accounted for over 60% of Amazon’s total operating profit.
With the similarities Alibaba and Amazon have, many believe that Alibaba will also experience huge profit from cloud computing like Amazon.
The Company Cloud Dominance
Alibaba is currently dominating the Chinese cloud computing market. It has two advantages in China. One is that there is less competition and the second is that Chinese companies can more easily move to the cloud as they don’t have decades of old IT infrastructure.
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Alibaba is the dominant player in China’s cloud market. Its competitors, Baidu and Tencent, do not seem to come anywhere near Alibaba. However, they are putting more focus on their cloud businesses.
Yet, those competitors, alongside worries over a Chinese economic slowdown, could be a challenge for Alibaba.
