Annual Report 2009 - Alibaba

The following table presents a breakdown of the components of operating expenses, alone and as a percentage of revenue for the
years indicated:
2009 2008 Change % of total revenue
RMB’000 RMB’000
(Restated)
RMB’000
Sales and marketing expenses 1,623,845 1,108,129 515,716
Product development expenses 384,333 214,038 170,295
General and administrative expenses 409,708 322,246 87,462
Total 2,417,886 1,644,413 773,473
Sales and marketing expenses
Our sales and marketing expenses were RMB1,623.8 million in
2009, representing a 46.5% increase from RMB1,108.1 million
in 2008. Included in the sales and marketing expenses was
share-based compensation expense of RMB55.7 million and
RMB58.3 million in 2009 and 2008, respectively. Our sales and
marketing expenses increased mainly as a result of increased
sales commission expense, staff costs and advertising and
promotional expenses. The increase in sales commission
expense was mainly due to the increase in our reported revenue
and our strategy to expand our market leadership by growing
paying member base. As a result, we increased performancebased
incentive compensation to drive this initiative. Staff
costs increased mainly as a result of the expansion of our sales
force to better serve our increasing number of customers.
Advertising and promotional expenses increased, particularly in
the latter half of 2009, mainly due to our planned investments
in enhancing our brand awareness. As a result of the foregoing,
sales and marketing expenses as a percentage of revenue
increased to 41.9% in 2009, as compared to 36.9% in 2008.
Product development expenses
Our product development expenses were RMB384.3 million in
2009, representing a 79.6% increase from RMB214.0 million
in 2008. Included in product development expenses was
share-based compensation expense of RMB32.8 million
and RMB20.0 million in 2009 and 2008, respectively. Our
product development expenses increased mainly because
of the increase in staff costs as we hired more engineers and
enhanced our IT infrastructures to develop new initiatives
9.9%
7.1%
2009
2008
10.6%
10.7%
41.9%
36.9%
54.7%
62.4%
and products, such as Ali-ADvance, and to upgrade our
Gold Supplier services. Consequently, product development
expenses, as a percentage of revenue, increased to 9.9% in
2009, as compared to 7.1% in 2008.
General and administrative expenses
Our general and administrative expenses were RMB409.7 million
in 2009, representing a 27.1% increase from RMB322.2 million
in 2008. Included in general and administrative expenses was
share-based compensation expense of RMB96.0 million and
RMB93.7 million in 2009 and 2008, respectively. General and
administrative expenses, as a percentage of revenue, remained
in line with last year at 10.6%, as compared to 10.7% in 2008.
Other operating income, net
Other operating income, net was RMB150.6 million in 2009,
representing a 17.6% decrease from RMB182.6 million in
2008, mainly due to a higher deemed disposal gain recorded
in 2008. Excluding the effect of the gain in both years, other
operating income increased 1.6% mainly due to the increase
in government grants received. During 2009, we received
grants of RMB113.5 million from government authorities in
the PRC, a 10.4% increase compared to 2008. In May 2009,
Hikari Tsushin, Inc., a leading selling agent of offi ce automation
equipment and mobile phones, made a cash investment into
Alibaba Japan in exchange for a 10.0% interest in Alibaba
Japan. As a result of this transaction, a deemed disposal gain
of RMB7.0 million was recognized for the year ended
December 31, 2009, as compared to RMB41.3 million in 2008.
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