Research of a mobile segment of the market. Comparison of reports of US and Chinese companies

14 minutes read

Why do large American companies take the mobile segment less seriously than their Chinese counterparts? This question was attempted by Andy Favell , a foreign mobile marketing specialist, and a speaker at ClickZ .

If you want to know how seriously this or that company takes the mobile segment of the market, review its annual and quarterly reports. While the largest Chinese retailers are eager to share with their investors the success in the mobile sales and services segment, their American counterparts often hesitate to disclose such figures. This is especially true of the largest American retailers.

During an in-depth study of the commercial reports for Click Z, Andy needed to establish which of the world’s largest powers had real success in the field of mobile sales and services. The conclusions are worth sharing.

The methodology was simple

1) Based on Forbes Global 2000 .

2) Examine data from US and Chinese companies (as they dominate the Forbes list).

3) Concentrate on consumer-oriented companies, for which the mobile segment of the market is not a core business, but should be an important sales channel. Thus, the objects of study were retailers, a chain of restaurants, banks and Internet companies, and not cellular companies, oil corporations and manufacturers.

4) Check the latest annual (2015) and quarterly (І – ІІ quarter of 2016) reports in order to determine with exact figures where the performance of the mobile market segment and other aspects of public relations were ignored.

The results were astounding.

  • Leading Chinese banks, retailers and Internet companies described in detail the performance of the mobile market segment.
  • Three of the four largest US banks declared the performance of the mobile segment of the market, but they did not do it in such detail as the four leading Chinese banks.
  • Of the two American Internet giants, only Facebook (Facebook) has declared in detail the performance of the mobile version of its site. Surprisingly, Alphabet (Google) did not.
  • None of the top 10 US retailers from Walmart (Walmart) to Amazon.com provided statistics on their mobile customers in the latest annual and quarterly reports.

US retailers are shocking, especially Amazon.com . In 2016, you should ask the question: “Why is the performance of the mobile segment not shown in the financial statements of the largest US retailers ?” And more importantly, why aren’t investors and analysts looking for an answer to this question?

The more financial reports you view, the more you are convinced that Chinese companies and their investors take the mobile segment of the market more seriously. They saw the prospects for mobile sales of goods and services earlier, made this aspect key in reorganizing their companies, and now they want investors to appreciate its impressive performance.

Alibaba – a benchmark in the reporting and performance of the mobile segment

In August 2016, the Chinese e-commerce site Alibaba (Alibaba) demonstrated what it means to be first in the mobile segment, announcing that 427 of its 434 million users are monthly active mobile users.

In the second quarter of 2016, 75% of the value of all goods bought and sold on the platform, as well as 75% of its profits were provided by mobile users.

A few facts to get a general idea of ​​427 million Alibaba mobile users:

– The US population is 324 million people; 
– Walmart’s global customer base is 260 million people (note: Walmart counts users a week, Alibaba a month).

Alibaba mobile segment report

Double alarm bell for all companies

  1. The strategy of leadership in the mobile segment provides tangible benefits.
  2. How well the markets perceive the news …

Financial investors and analysts were impressed by the results of Alibaba . After the announcement of the results of the second quarter, the value of the company’s shares increased to a record figure for 18 months.

In the role of “carrot” performs impressive performance in the mobile segment, which is becoming one of the main factors encouraging investors to buy shares. The question is when investors and analysts in the United States will begin to use the “stick”, punishing American companies that hide performance indicators in the mobile market segment.

American investors are learning and appreciating Chinese retailers such as Alibaba, JD.com , Baidu and Tencent. All of these companies in their financial reports show impressive performance in the mobile segment, and their shares rose in price after the publication of fresh financial reports.

Shares of three of the four companies mentioned above are listed on US markets: Alibaba shares are on the New York Stock Exchange, JD.com and Baidu are on the Nasdaq Stock Exchange. Tencent is listed on the Hong Kong Stock Exchange. Thus, in the near future, these companies will remain on hearing.

For an illustration of stock prices, look at BABA , JD , BIDU and 0700.HK (Tencent).

Whip and Gingerbread: Facebook’s Mobile Success Story

Any American company that does not believe that investors in the United States take seriously the success of mobile users should study the recent financial history of Facebook.

One of the main reasons why the price of Facebook shares plummeted in 2012 was the disappointment of investors with its achievements in attracting mobile users. And among the main reasons for the high value of the company’s shares today is that investors are impressed with the indicators of its success in the mobile segment.

As Fortune magazine wrote in 2015:

“Facebook used its weakness in mobile as a motivating factor. When the company gained fame, it did not have significant profits from the mobile segment. For 18 months, Facebook developed a great mobile app and reassured critics. By the end of 2013, more than half of the company’s profits came from advertising in mobile applications. Facebook seemed to say: “Do you want to profit from mobile users? We will show it to you! ” Wall Street responded to the company by increasing the value of its shares. ”

Today, Facebook wants its record in attracting mobile users to be appreciated. In its report on the results of the second quarter of 2016, the company could not declare its successes louder:

Key operational indicators for the II quarter of 2016

– Daily active users on average in June 2016 – 1.13 billion. An increase of 17% over the same period last year.

– Mobile daily active users on average in June 2016 – 1.03 billion. An increase of 22% over the same period last year.

Other financial indicators for the II quarter of 2016

– Revenues from mobile advertising in the second quarter of 2016 accounted for approximately 84% of all advertising revenues. In the second quarter of 2015, the same indicator was approximately 76%.

The phenomenal growth of Facebook stock quotes (see FB ) is all you need to know about investor attitude towards mobile business development.

How transparent is the information about revenues in the mobile segment of the largest companies?

In this study, Andy checked the latest annual and quarterly reports of the world’s largest companies represented on the Forbes list, led by Chinese and American enterprises, to find out to what extent the performance of the mobile segment of their activities is displayed (and is it displayed at all).

Forbes rating is based on the criteria of income, profits, assets and market value of enterprises.

Chinese banks

Three Chinese banks are headed by three leading Forbes rankings, and the fourth is the sixth ranking. Apparently, all four institutions have made mobile banking their priority. Their performance is simply amazing. At the end of 2015, they had 590 million mobile banking customers. This figure is 1.8 times the population of the United States .

  • Industrial and Commercial Bank of China – 190 million mobile customers with an annual transaction volume of more than 800 billion yuan (121 billion dollars), which represents approximately 38% of its customer base (source: 2015 annual report ).
  • China Construction Bank – 182.84 million mobile banking users (up from 25% over the previous year) with a total transaction volume of 15.4 trillion yuan (2.3 trillion dollars), which is approximately 54% of its customer base ( source: annual report for 2015 ).
  • Agricultural Bank of China – 140 million mobile customers with an annual transaction volume of more than 9.6 trillion yuan (1.5 trillion dollars), which is approximately 29.5% of its customer base (source: annual report for 2015 ).
  • Bank of China – 79 million mobile customers with an annual transaction volume of more than 5.2 billion yuan ($ 0.7 billion); the share of these users in the client base remains unclear (source: annual report for 2015 ).

American banks

Three of the four largest US banks publish data on their mobile banking. Although the number of mobile customers seems insignificant compared with similar indicators of Chinese banks, it is a significant part of their customer base.

  • JP Morgan Chase (5th place in the world ranking) – 24.8 million mobile customers. Since JPMC counts its client base in households (53 million), rather than individuals, it remains unclear how much of its users are mobile. The total amount of mobile transactions is also unavailable (source: the results of the second quarter of 2016 ).
  • Wells Fargo (7th place in the world ranking) – 18 million active mobile users, which is approximately 25.7% of its customer base. Data on the amount of mobile transactions is not available (source: the results of the second quarter of 2016 ).
  • Bank of America (11th place in the world ranking) in Q2 2016 – 20.2 million active users of mobile banking. Their proportion in the total customer base remains unknown. But in its presentation for clients, the bank stated that the income from mobile transactions equals 17% of its total deposit and in weekly terms represents the most active channel of interaction with customers. See the charts below (source: results of the second quarter of 2016 ).
  • Citigroup (13th place in the world ranking). We were unable to find data on the number of Citigroup mobile customers, but in its report for 2015, the company stated that it is implementing a market strategy for mobile device users through the newly created Citi FinTech division.

Brian Moynihan – Chairman and CEO of Bank of America – explained the importance of mobile banking to shareholders:

“Why do we triple our investments in 2016? Because that’s how our customers want to interact with us. Our customers write out 250,000 checks a day through their mobile devices. This represents 15% of all customer deposits. We would need 650 additional financial centers to cope with deposit activity passing through these mobile devices. ”

Statistics from Bank of America reports

Chinese retailers

The most highly rated Forbes rated Chinese retailers are Alibaba (174th place) and JD.com (800th place). Despite their modest, compared to American companies like Walmart (15th place), ranking positions, they are by no means small bipods.

  • Alibaba is an online trading platform where in the second quarter of 2016, independent retailers sold goods worth 837 billion yuan ($ 126 billion). This is six times the value of goods sold on eBay in the same quarter. As mentioned above, the company received 75% of the total value of the goods sold and 75% of the profits from mobile sales. Total profit was 32.2 billion yuan (4.8 billion dollars). This means that the lion’s share of Alibaba’s profits comes from mobile sales.

The most interesting news is that today Alibaba earns more out of 427 million of its mobile users on each than on customers who do not use mobile applications (source: results of the second quarter of 2016 ).

  • JD.com is a platform for direct e-commerce. Its profit is greater than Alibaba’s profit. In the second quarter of 2016, it amounted to 65.2 billion yuan (9.8 billion dollars). Therefore, it claims to become the largest Chinese e-commerce site in terms of revenue. But the total value of all goods sold is lower than that of Alibaba, and amounts to 160.4 billion yuan ($ 24.1 billion), which, nonetheless, slightly exceeds eBay.

Unlike its competitor, JD.com does not report how much of the profit, or the total value of the goods sold, was obtained by attracting mobile users (as well as their numbers). However, the company claims that an impressive 79% of its orders were placed from mobile devices (source: results of the second quarter of 2016 ).

The achievements of Alibaba and JD.com were enthusiastically received by investors.

Report of the Chinese company JD

American retailers

Compared to information on the mobile market segment and the performance of mobile versions of sites published by Chinese retailers, similar data provided by US retailers is disappointing.

In the annual financial statements for 2015 and quarterly reports until August 18, 2016, we were unable to find accurate information about the performance of the mobile market segment and any of its descriptions of the following US retailers and restaurants:

  • Wal-Mart Stores (15th place in the Forbes ranking);
  • CVS Health (62nd place) – no published data on work in the mobile market segment in the annual report for 2015, reports for the 1st and 2nd quarters of 2016;
  • Walgreens Boots Alliance (107th place);
  • Home Depot (112th place);
  • Target (164th place);
  • McDonald’s (189th place);
  • Costco Wholesale (192nd place);
  • Lowe’s (205th place);
  • Kroger (223rd place);
  • com (237th place);
  • The Priceline Group (445th place);
  • Macy’s (515th place).

There were only two non-top ten retailers / restaurants that reported some details on the performance of their mobile sales sector:

  • Starbucks (389th place in the Forbes ranking) has published data on accepting orders and payments from customers via mobile devices. In the third quarter of 2016, the volume of mobile orders and settlement of the coffeehouse network reached 5% of all its transactions in the USA and grew by 1% compared to the second quarter of 2016 (source: results of the third quarter of 2016 ).
  • eBay (466th place in the ranking) did not include performance data in the mobile segment of the market in its reports, but in the attached Quick Facts website, the auction site reports that in the second quarter of 2016 it was carried out using mobile devices sales of $ 9.5 billion. This means that mobile sales account for 45.5% of total sales for the quarter ($ 20.9 billion). eBay also claims that 57% of sales relate in one way or another to the mobile market segment.

Chinese Internet companies

In China, there are two well-known Internet companies: Tencent (201st in the Forbes ranking) and Baidu (349th place).

  • Tencent’s business projects include Mobile QQ, a platform for gaming and instant messaging, a Qzone social network, and a chat app for Weixin / WeChat smartphones. As of June 2016, Mobile QQ has 667 million active mobile users monthly, Qzone – 596 million, Weixin / WeChat – 806 million. Data on the contribution of the mobile sector to the company’s profit is not available, except for the fact that games for smartphones brought it 9.6 billion yuan (1.4 billion dollars) of profit (source: the results of the second quarter of 2016 ).
  • Baidu is a mobile web search engine with a variety of related products. In a report for the second quarter of 2016, the company reports that 667 million active mobile users used its mobile search services and 343 million mobile topographic services monthly. The fact that this was the total number of active mobile users or those who were online was not reported. Profit from the mobile sector of the company in the second quarter of 2016 amounted to 62% of its total income. In the same period of 2015, this figure was 50%. These figures hide revenues of 11.3 billion yuan (1.7 billion dollars) (source: results of the second quarter of 2016 ).

American Internet companies

Alphabet, better known as Google (27th place in Forbes), and Facebook (188th place) are the two most famous American Internet companies. The contrast between them is remarkable.

  • Today, Facebook has 1.03 billion mobile users daily, which is 91% of all its users per day. Mobile advertising revenue represents 84% ​​of the company’s total advertising revenue ($ 24 billion). That means Facebook is earning $ 5.24 billion in mobile advertising.
  • Alphabet does not report the amount of revenues from the mobile sector of its activities in the annual report for 2015, as well as reports for the first and second quarters of 2016. From the incomes of investors it follows that the mobile sector is extremely important for Google, and the company keeps them aware of its performance (source: results and revenues of the second quarter of 2016 ).

Google CEO Sundar Pichay, from his speech at the briefing of investors for the second quarter of 2016:

“We’re talking about revenues for the second quarter of 2016: our investments in the mobile sector run through the red line through everything we do today – from search engine and YouTube to Android and advertising. The mobile sector is the engine of our present. ”

Space for improvement

We look forward to the moment when US companies will be so confident in their revenue indicators from the mobile segment that they will include them in financial statements, or when their investors will insist on it.

Note: This analysis was not an in-depth research project. It is based only on observations based on financial statements of companies. If any of the above retailers published this data anywhere else or wants to share it, leave comments.

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