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Alibaba patient in its efforts to topple Android in China

Michael Kan | Nov. 5, 2014
Alibaba expects its mobile OS to provide a 'long-term winning strategy'.

E-commerce giant Alibaba Group is happy to play the long game in trying to unseat Android's dominance in China, despite slow progress with the company's own mobile OS.

"The dominant player today may not be the dominant player tomorrow," Alibaba Executive Vice Chairman Joseph Tsai said Tuesday during an earnings call.

His comments came as Alibaba reported growing sales, partly from more Chinese consumers buying goods over their mobile devices. In the company's third quarter earnings, revenue was up 53.7 percent year-over-year to 16.8 billion yuan (US$2.7 billion), slightly ahead of estimates from analysts polled by Thomson Reuters.

The company's net profit, however, was down 38.6 percent to 3 billion yuan. This was largely due to an increase in a share-based compensation expense and an amortization of intangible assets, it said.

Alibaba has already made a name for itself through its hugely popular e-commerce sites in China and its massive initial public offering that raised US$21.8 billion in September. But less known is its mobile operating system, called YunOS, which the company has high hopes will one day rival Google's Android.

So far, Alibaba hasn't made much of a dent in Android's presence in China's smartphone market. In this year's second quarter, the Google OS had a 93 percent share, according to research firm Canalys. It hasn't helped that Alibaba has struggled to attract big-name vendors to adopt its OS, with most of its hardware partners made up of lesser-known handset makers in China.

Despite those challenges, Alibaba plans to continue investing in YunOS, which it launched in 2011. "The operating system is a very long-term strategic project for Alibaba," Tsai said. "Especially for the China market."

At the end of the third quarter, Alibaba had 217 million monthly active users who were connecting to its services through mobile phones. This figure was up by 29 million from the previous quarter and helped contribute to the company's growing revenue.

By developing a mobile OS, Alibaba wants to promote its Internet services through phones on which the software is installed. This may give Alibaba a leg up over Google, which partially pulled out of the country's market in 2010 after repeated disputes with Chinese authorities.

Since then, Google has come out with few mobile products designed for the Chinese market and many domestic handset vendors have instead loaded their Android phones with apps developed by local companies. In addition, the Chinese government started cutting access to all of Google services in late May.

"Although a lot of phones in China are operating on the Android system, there's not a lot of Google services that operate with these phones," Tsai said.

 

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