- Alibaba began slashing prices for cloud services in order to win back customers amid fierce competition, while its stock fell instead of rising.
- Alibaba is now focusing on growing the public cloud, addressing the sanctions curtailing the supply of advanced chips from the US.
- The rival competitor company in e-commerce and cloud services of Alibaba, JD.com, declared the cloud price war on Alibaba.
OUR TAKE:
Alibaba’s aggressive price cuts for its cloud services reflect a strategic shift to compete in the market. Forgoing short-term profits to drive revenue growth and expand its user base, Alibaba is focusing on public cloud services and addressing geopolitical risks. JD.com’s swift response with its own price cuts sets the stage for a fierce competition that could reshape the cloud services landscape in China. This underscores the increasing importance of cloud services and highlights the evolving strategies of key players in the market.
— Iris Deng, BTW reporter
Alibaba slashed its price for cloud services aiming to win back its customers, which was a more aggressive bid to defend against competition from other tech industrial companies.
Alibaba cuts the price of services deeply
Previously, Alibaba halted its plan to spin off its cloud business into an independent, publicly traded unit, which stunned investors. In order to win back customers, Alibaba began slashing prices by as much as 55% on more than 100 services on Thursday. It has been the biggest price cut in the company’s history. As a result of this initiative, Alibaba’s stock fell as much as 1.9%.
The price of its storage products will be slashed by up to 50 percent, as part of its broader push to expand user base and improve its proportion in the cloud computing market.
Alibaba is pinpointing the direction of its future development
Facing the fierce and turbulent Internet competition, Alibaba has taken public cloud services, which are the domestic services arm aimed at enterprise customers as its new key development direction. Alibaba Cloud led the cloud infrastructure services market, taking up 36 percent of total spending, followed by Huawei Cloud, Tencent Cloud, and Baidu AI Cloud. Due to geopolitical risk factors, Alibaba has made great efforts to cope with the shortage of advanced chips caused by U.S. sanctions against China.
Also read: Alibaba’s Surprise Reversal Slashes $20 Billion from Market Value
JD.com declared its intent to compete
The biggest rival of Alibaba, JD.com has started its own price cuts as a response to Alibaba, and its shares were virtually unaffected while Alibaba’s was declined.
“Cut all you like, let’s fight to the end!” the company proclaimed in a big banner-like declaration.
According to Bloomberg Intelligence, JD.com will price its cloud services 10% below an undisclosed rival’s from March 1., raising the likelihood that Alibaba will need to forgo more profits than budgeted to boost the business’ revenue growth.
