If you want to know how seriously any public company takes mobile, then take a look at the annual/quarterly reports.
While top Chinese retailers, banks and internet companies are keen to share their mobile success with their investors, their US equivalents are often shy to reveal their numbers… especially the biggest US retailers.
While researching a series of in-depth m-commerce reports for ClickZ Intelligence, I needed to establish which of the world’s biggest countries are really making headway with mobile. The results are worth sharing.
The methodology was simple
1) Use Forbes’ Global 2000 as a guide.
2) Stick to US and Chinese companies (as they dominate the Forbes list).
3) Concentrate on consumer facing businesses where mobile isn’t the core business, but should be a very significant sales channel, so retailers, restaurant chains, banks and internet companies are in; but mobile companies and oil companies and manufacturers are out.
4) Then check the latest annual (2015) and quarterly statements (Q1 and Q2 2016) to see which detailed mobile performance – only hard numbers; PR fluff was ignored.
The results were striking:
- The top Chinese banks, retailers and internet companies all (of those considered) detail mobile performance, often in considerable depth.
- Three out of four top US banks declare mobile numbers. But not in as much detail as the top four Chinese banks.
- Of the two US internet giants, only one details mobile performance: Facebook. Alphabet (Google), surprisingly, doesn’t.
- Not one of the Top 10 US retailers from Wal-Mart to Amazon.com, shared mobile stats in their recent annual or quarterly report.
The US retailers were a big shock – especially Amazon. In 2016, you have to ask: why we couldn’t find any indication of mobile performance in financial reports of the US top retailers?
And, more importantly, you have to ask: why aren’t investors and analysts asking the same thing?
The more financial reports you look at the more you come to the conclusion: Chinese companies – and their investors – take mobile more seriously.
They saw the mobile opportunity earlier; they made it a priority to re-engineer their companies to take full advantage; and now they want investors to benchmark them on their impressive mobile performance.
Alibaba: the benchmark in mobile performance and reporting
This month the Chinese ecommerce retail market place Alibaba redefined what it means to be “mobile first” announcing that it has 427 million mobile monthly active users (MAU) – out of a total of Alibaba’s 434 million total users.
In the latest quarter (Q2, 2016), mobile accounted for a stunning 75% of value of all goods bought and sold on the platform and 75% of its revenues.
Just to put Alibaba’s 427 million mobile users into perspective:
- The entire population of the US is 324 million.
- Walmart’s global customer base 260 million (Note: Walmart measures weekly shoppers; Alibaba’s are monthly).
The wake-up call for all companies is twofold
- A mobile-first strategy delivers tangible rewards.
- How well the markets received the news…
Financial investors and analysts loved Alibaba’s results. On announcement of the Q2 results, the stock leaped to its highest level for 18 months.
This is the carrot: impressive mobile performance is increasingly a factor (one of several) that encourages investors to purchase stock.
The question is: when will US investors / analyst start to use the stick to punish (US) companies that keep their mobile numbers a secret?
US investors are becoming well acquainted with, and increasingly attracted to the Chinese retail and internet companies such as Alibaba, JD.com, Baidu and Tencent (all of which detail impressive mobile performance in their financial reports; all of which saw their share price improve on the latest results.
Three out of four are quoted on US markets: Alibaba is listed on the NYSE; JD.com and Baidu on Nasdaq (Tencent is listed on HKSE), which means they’ll remain front of mind.
Stick and carrot – Facebook’s mobile story
Any US company that doesn’t believe how seriously US investors take mobile needs to look at Facebook’s recent financial history.
One of the main reasons Facebook’s share price went into freefall post its 2012 IPO was that investors were very unimpressed with its mobile story. One of the main reasons they love it now is because they are impressed with its mobile numbers.
As recounted by Fortune in 2015:
Facebook used its weakness on mobile as a motivator. When the company went public it had no meaningful revenue from mobile. Within 18 months, Facebook delivered a magnificent about-face on mobile, quieting the haters in the process. By the end of 2013, more than half of Facebook’s revenue came from mobile ads. “You want mobile revenue? We’ll show you mobile revenue!” the company seemed to say. Wall Street rewarded the company by trading up its stock.
Today Facebook wants to be measured on its mobile record. In its Q2 2016 results statement it couldn’t shout louder about its mobile success:
Second Quarter 2016 Operational Highlights
- Daily active users (DAUs) – DAUs were 1.13 billion on average for June 2016, an increase of 17% year-over-year.
- Mobile DAUs – Mobile DAUs were 1.03 billion on average for June 2016, an increase of 22% year-over-year.
Second Quarter 2016 Other Financial Highlights
- Mobile advertising revenue – Mobile advertising revenue represented approximately 84% of advertising revenue for the second quarter of 2016, up from approximately 76% of advertising revenue in the second quarter of 2015.
The phenomenal rise of Facebook’s stock price, see FB, from mid-2013 tells you everything you need to know about investor attitude to mobile.
How the largest companies rack up on mobile transparency
By way of research we looked at the recent annual and/or quarterly reports and earning statements of relevant companies from the world’s biggest public companies according to Forbes, which is dominated by Chinese and US companies, to see to what extent (if at all) mobile performance is displayed.
The Forbes rankings are based on a mix of revenue, profits, assets and market value.
Three Chinese banks occupy the top three Forbes rankings, with a fourth in sixth ranking. All four appear to have made mobile banking a priority over recent years and the numbers are staggering. At the end of 2015, they have 590 million mobile banking customers between them. That’s 1.8 times larger than the population of the United States.
- Industrial & Commercial Bank of China has 190 million mobile customers, with annual transaction volume of over RMB800 billion (US$121 billion), which is approximately 38% of its customer base. (Source 2015 Annual Report)
- China Construction Bank has 182.84 million (up by 25% year on year) mobile banking users, with a transaction volume was RMB15.4 trillion (US$2.3 trillion), which is approximately 54% of its customer base. (Source 2015 Annual Report)
- Agricultural Bank of China has 140 million mobile customers, with annual transaction volume of over RMB9.6 trillion (US$1.5 trillion), this is approximately 29.5% of customer base. (Source 2015 Annual Report)
- Bank of China has 79 million mobile customers, with annual transaction volume of over RMB5.2 billion (US$0.7 billion), the proportion of the customer base that is mobile is unclear. (Source 2015 Annual Report)
Three of the top four US banks share mobile banking numbers. Although mobile customers are dwarfed by the vast numbers of their Chinese counterparts are a significant proportion of their total user base.
- JP Morgan Chase (Global Rank 5) has 24.8 million active mobile customers. As JPMC only counts its customer base by households (59.2 million), rather than individuals, it is unclear what proportion of customer are mobile. Mobile transaction value is unavailable. (Source Q2 2016 results).
- Wells Fargo (Global Rank 7) has 18 million mobile active users. This is approximately 25.7% of customer base. Mobile transaction value is unavailable. (Source Q2 2016 results)
- Bank of America (Global Rank 11) has 20.2 million active mobile banking customers in Q2 2016. It is unclear what proportion this is of the total customer base. But it does reveal in its investor presentation that mobile equates to 17% of total deposit, and on a weekly basis it is the most active channel. See charts below. (Source Q2 2016 results)
- Citigroup (Global Rank 13). We were unable to find mobile numbers for Citigroup, but the company did state in its 2015 Annual Report that it is implementing a “mobile first” approach via a newly established Citi FinTech unit.
Brian Moynihan Chairman and CEO, Bank of America explains to shareholders why mobile banking is so important:
Why are we tripling our investment in 2016? It is simply because this is how customers want to do business with us. Our customers deposit 250,000 checks a day through their mobile devices, reflecting 15 percent of consumer deposit transactions. We would need an additional 650 financial centers to handle the deposit activity that is currently being done on those mobile devices.
China’s highest ranking retailers on Forbes list are Alibaba (rank 174) and JD.com (rank 800). Despite their lowly ranks, compare to US companies such as Walmart (rank 15), these are no small fry.
- Alibaba is an internet marketplace where third-party retailers sold RMB 837 billion (US$ 126 billion) of goods in Q2, 2016. (That’s six times the value of goods sold on eBay in the same quarter). As noted above, 75% of this GMV and 75% of the revenue it makes from these sales. Total revenue is RMB 32.2 billion (US$ 4.8 billion), which means Alibaba’s revenue from mobile is
Most interesting is the news that Alibaba now makes more money from each of its 427 million mobile user than from non-mobile customers. (Source Q2, 2016 results)
- JD.com is a direct ecommerce retailer and internet marketplace, it makes more in revenue than Alibaba, at RMB 65.2 billion (US$9.8 billion), in Q2, 2016, hence its claim to be “China’s largest ecommerce site by revenue”. But GMV (value of total goods sold) is lower than Alibaba at RMB160.4 billion (US$ 24.1 billion), though still slightly above eBay.
Unlike its rival, JD does not reveal what proportion of revenue or GMV is mobile or the number of mobile users. But it does declare that an impressive 79% of its orders placed on mobile. (Source: Q2, 2016 results)
Like its rival Alibaba, JD’s earnings were well received by investors.
Compared with the mobile details (and outstanding mobile performance) shared by the Chinese retailers, the details shared by US retailers is disappointing.
Searching through the 2015 annual report and quarterly earnings statements (up to August 18 2016), we were unable to find mobile performance numbers of any descriptions for the following US retailers and restaurants.
- Wal-Mart Stores (Forbes rank 15)
- CVS Health (rank 62) – no mobile numbers apparent in 2015 annual report, Q1 or Q2 2016 reports.
- Walgreens Boots Alliance (rank 107)
- Home Depot (rank 112)
- Target (rank 164)
- McDonald’s (rank 189)
- Costco Wholesale (rank 192)
- Lowe’s (rank 205)
- Kroger (rank 223)
- com (rank 237)
- The Priceline Group (rank 445)
- Macy’s (rank 515)
There were two US retailers/restaurants sitting outside the top 10 that revealed some details of mobile performance:
- Starbucks (Forbes rank 389) reveals the adoption of mobile ordering and payment by customers. In Q3 2016 Mobile Order and Pay usage reached 5% of the coffee chain’s U.S. transactions, up from 4% in Q2 FY16. (Source Q3, 2016 results)
- eBay (rank 466) does not include details of mobile performance in its actual earnings releases, but in an accompanying “Fast facts” document it declares that $9.5 billion of sales on the auction site were completed on mobile devices in Q2 2016. This means mobile sales volume is now 45.5% of the GMV for the quarter ($20.9 billion). eBay also states that 57% of sales are touched by mobile at some point. (Source eBay Fast Facts – PDF).
Chinese internet companies
There are two prominent internet companies in China, Tencent Holdings (Forbes rank 201) and the Baidu (rank 349):
- Tencent businesses include the QQ web/mobile portal, instant messaging and gaming platform, the Qzone social media site and the Weixin/WeChat social/chat smartphone application. As of June 2016, Mobile QQ has 667 million monthly active users (MAU) users, Qzone has 596 million MAU and Weixin/WeChat has 806 million MAU. Mobile’s contribution to revenue is not available, except reporting that smartphone games delivered RMB 9.6 billion (US$ 1.4 billion) in revenue (Source Q2, 2016 results)
- Baidu is a mobile/web search engine, with portfolio of associated products. In its Q2 2016 results it reported it had 667 million mobile search MAU and 343 million mobile maps MAU. Total or online MAUs were not reported. Mobile revenue represented 62% of total revenues for the second quarter of 2016, compared to 50% for the corresponding period in 2015. This works out at RMB 11.3 billion (US$ 1.7 billion). (Source Q2, 2016 results)
US internet companies
The two prominent Internet companies in USA are Alphabet, the company formally known as Google, (rank 27) and Facebook (rank 188). The contrast is remarkable.
- Facebook now has over 1 billion (1.03 billion) mobile daily users (DAU), which is 91% of total DAU. Mobile advertising revenue accounts for 84% of total ad revenue (US$ 24 billion) which means Facebook earns US$ 5.24 billion in mobile ad revenues.
- Alphabet does not report mobile numbers in its 2015 annual report or 1Q or 2Q 2016 reports. It appears from the investor earnings calls that mobile is very important to Google, which makes it inexplicable that the company does keep investors informed of mobile performance. (Source Q2, 2016 results and earnings call)
Sundar Pichai, CEO Google, investor briefing Q2 2016:
“Q2 2016 earnings call: Our investment in mobile now underlines everything that we do today from search and YouTube to Android and advertising. Mobile is the engine that drives our present.”
Room for improvement
We look forward to the time when US companies feel confident enough about their mobile numbers to share them in their financial reports; or the time when investors start to insist on it.
N.B. This study was not an in-depth research project, it was based on observations from the companies’ financial reports. If any of these retailers share numbers elsewhere / or would like to share their mobile numbers, please contact the author Andy Favell who will be very happy to update the ClickZ readers.
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