Revision: we're correcting a grammatical error to clarify one of the Key Points. We apologize for the confusion.
- WHY TMALL GMV MIX IS IMPORTANT: BABA only collects commissions on its Tmall platform, and growing Tmall GMV Mix has been propelling commission revenue growth well in excess of BABA's GMV growth throughout its reported history. This has been masking the weakness in BABA's core Marketing segment (both reported in China Retail). However, if this metric stalls, then all the weakness in its marketing segment bubbles to the top (similar to last quarter).
- OUR NEW TRACKER IS POINTING SOUTH: We have worked iResearch traffic metrics for BABA into an index, which has produced a .78 correlation with the y/y change in BABA's Tmall GMV Mix dating back to CY 1Q13. Our index is pointing to a continued deceleration in Tmall GMV mix shift through February. As it stands now, we're expecting Tmall GMV Mix will grow 1.5 percentage points y/y in F4Q15 (vs. 2.6 and 5.2 in F3Q15 and F2Q15, respectively). In short, we expect the gap between the y/y growth in Commission Revenue and GMV will narrow further.
Let us know if you have any questions, or would like to discuss in more detail.
Hesham Shaaban, CFA