Alibaba Dominating Cloud Marketshare in China with 38%
Alibaba becoming a B2B Titan
While insider reports show ByteDance is disrupting Alibaba in E-commerce sales, Alibaba is securing its lead in the lucrative Cloud sector. China’s cloud infrastructure services market saw third-quarter revenue grow 43 per cent year on year to US$7.2 billion, according to data provider Canalys.
Cloud adoption is slowing in the pandemic era though. The growth rate was the slowest since Q2 of 2019 and well below the rapid pace of 2020 as the pandemic fueled cloud spending migrated to online amid lockdowns.
There’s no doubt the diversification of E-commerce in China is good for its innovation sector. Just as Douyin, Pinduoduo, JD.com, Vipshop and now Bilibili. Alibaba is such a Titan though, its investment in the Cloud is really going to pay off as a cash-cow for the company’s other efforts.
In the U.S., Azure and Google are slowly eating away at AWS’s lead now down to 33% of the U.S. market. In China, Alibaba is even more dominant. Alibaba Cloud's market share expanded 450 bps to 38.3%.
The cloud units of Alibaba, Huawei, Tencent, and Baidu Inc held a combined 80% of the China market in Q3. That’s not unlike in the U.S. how just a few companies dominate the entire sector. Huawei and Tencent are big losers in recent months and years in the Cloud.
Baidu is also going for the Metaverse and its Cloud sector is very solid. Baidu grew 64.7% in Q3, thanks to its more significant customer base across different sectors and industrial internet projects. Alibaba is under regulatory threat and disruption by ByteDance in a shocking growth of Douyin’s E-commerce scalability. ByteDance’s E-commerce growth is so sudden and tremendous it could threaten Amazon globally in just five years, by 2027. Instagram, Pinterest and Snap by then won’t exist as we know them today.
New winners are emerging in China with the regulatory shakeup and it’s a massive opportunity for consolidation too. Alibaba grew 33.3%, driven by the internet, financial services, and retail sectors. Both Huawei and Tencent grew ~50%. The Cloud sector in China is something I really watch closely.
While Jack Ma’s mistakes were horrible for the future of Ant Group, Alibaba still has a tremendous moat. The demand for cloud computing accelerated after the pandemic forced activities like work, shopping, and entertainment to migrate online. The Chinese government also introduced its "Digital China" initiative to drive economic growth. I found this story first on SCMP, owned by Alibaba. I also like to follow TechNode among other publications of Chinese Tech news.
If China is the new center of global consumerism with 4 times the population of the U.S., I think it’s important to stay informed about what’s going on with its technology and retail sectors.
"The uptick in interest from the US-based hyper scalers mostly comes from the fact that mainland China is the world's second-largest market," said Canalys analyst Blake Murray. "This coupled with its status as one of the fastest-growing markets in the world due to its rapidly digitalizing economy," he said.
Speaking of Canalys, we know that Cloud infrastructure services spending increased 36% to US$47.0 billion in Q2 2021, as workload migration and cloud native application development accelerated. Google Cloud has accelerated its growth in its attempt to start catching up with AWS and Azure who have a huge lead.
In China, I see Alibaba, Huawei, Tencent and Baidu as a more diversified ecosystem but clearly Alibaba could become a monopoly winner of the sector. As you know, Cloud computing is extremely profitable and the winner would enable it to invest those funds into new innovations. Alibaba is among the most diversified companies in the world outside of Microsoft, which is the best managed company in the world.
Google Cloud only has an 8% marketshare in the U.S. similar to what Baidu has in China. We have to remember though that Alibaba had 43% marketshare in 2019, just two years ago. However that Chinese tech giants Huawei Technologies Co and Tencent Holdings lost cloud services market share in the third quarter amid tough competition from market leader Alibaba Group Holding and foreign players, is very interesting.
For all the scrutiny and regulatory hell Alibaba has raining down on it with a stock that has been like a fallen dagger though the butter that is inflation, that Alibaba is winning a cash cow sector in the biggest country in the world should not go unnoticed completely by the American media and on American platforms like LinkedIn. Microsoft has killed LinkedIn in China and its major news is barely mentioned any longer on the website (that appears more like an Indo-American hub).