Alibaba patient in its efforts to topple Android in China

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 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 ($US2.7 billion), slightly ahead of estimates from analysts polled by Thomson Reuters.

The company's net profit, however, was down 38.6 per cent 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 $US21.8 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 per cent 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.

Earlier this month, Alibaba unveiled the newest version of YunOS and also landed its biggest partner yet. Meizu, a domestic smartphone maker popular in the country, decided it would use the operating system on its latest flagship phone and touted the Alibaba services that would be tied in.

"We feel that we are a very strong Internet service company in China," Tsai said, adding that he expects YunOS to be a "long-term winning strategy."

A Chinese government report last year said that Google had too much control over Android and signaled support for a homegrown mobile OS.

Google feuded with Alibaba in 2012 over YunOS, claiming that the software was a variant of Android. Alibaba rejected the claim, slamming Google for preventing hardware vendors from using YunOS.

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Tags business issuesAndroid OSe-commerceGoogleAlibaba GroupMobile OSesfinancial resultsmobileinternet

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Michael Kan

IDG News Service
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