By Don Gasper

China’s e-commerce giant Alibaba.com plans to increase its investments this year, fortified by a substantial war chest, a fast-expanding base of paying subscribers and a new pay-for-performance advertising product.

As revenue increased by 19 percent year-on-year in the first quarter of 2009, the company said in May that it felt it was actually benefiting from the current economic crisis, since more buyers were postponing business travel and switching to the Web for procurement instead.

Registered Alibaba users topped 40 million, up 36 percent on year, as more buyers moved their sourcing online to achieve higher efficiency and greater selection of suppliers and products

In the first quarter of 2009, the combined net addition of paying members across three key products – Gold Supplier, International TrustPass and China TrustPass – was a record high of 49,544.

“We are always looking for acquisition opportunities, so we’ve conserved cash for potential investment if a suitable candidate comes along,” said chairman Jack Ma, speaking in Hong Kong at the company’s annual general meeting on May 8. 

The cash-rich company is mulling acquiring foreign firms whose business does not overlap with that of Alibaba. Chief executive David Wei said that out of its reserves of RMB 6.9 billion ($1.01 billion U.S.) the company had RMB1 billion cash earmarked for possible acquisitions. However, if no suitable targets were identified, it would consider raising dividends instead.

Ma also said that if Yahoo Inc. wanted to divest part of its 39 percent stake in the Alibaba Group, which holds around 70 percent of Alibaba.com, his company would be ready to buy it back.

He said there were no plans at this stage to spin off Taobao.com, the online consumer-to-consumer trading site, or Alipay, the group’s online payment unit.

Revenue from the international marketplace was RMB506 million ($74 million) for the first quarter, an increase of 9 percent year-over-year and 3 percent quarter-on-quarter. The growth was primarily due to the increase in the number of members of the company’s Gold Supplier Starter Pack scheme, launched in November 2008.  The momentum in Gold Supplier membership acquisition continued from the fourth quarter of 2008 into the first quarter of 2009.

During the first quarter, the company added 12,782 Gold Supplier customers, for a total of 55,810. Even though China’s export sector declined by nearly 20 percent during the quarter, we achieved a historical high in Gold Supplier net adds,” a company statement said.

Members of the Alibaba International TrustPass scheme increased in the first quarter by 1,444 to 17,580, which was in-line with gains in previous quarters. “Steady progress has been made in building awareness and interest in Alibaba.com through our overseas expansion initiatives in key regions where we see promising potential for growth.”

Registered users on the international marketplace grew by more than 700,000 in the first quarter to a total of 8.6 million at the end of the quarter, representing an increase of 76 percent year-on-year and 9 percent sequentially. Simultaneously, storefronts on the international marketplace grew by more than 77,000 to a total of 1 million at the end of the quarter, representing an increase of 39 percent year on year and 8 percent quarter on quarter.

The company said on May 5 that it would raise fivefold the annual fee it charged its international members to $2,999, starting from June 15. In return it would upgrade the package of services it offered them.

Meanwhile, revenue from the company’s domestic marketplace was RMB301 million ($44 million), representing a year-on-year increase of 39 percent and a 5 percent quarter-on-quarter decrease of 5 percent. The year-on-year growth was mainly due to the increase in members of the China TrustPass scheme, while the sequential decline was mainly attributable to reduced revenue from the sale of keywords based on the old fixed-placement keyword bidding service.

“During the quarter we transitioned our customers to Ali-ADvanceTM, a new pay-for-performance keyword bidding service, which replaced the old fixed-placement service,” a company statement explained. “We also recognized less display advertising revenue in the first quarter compared to the prior quarter due to seasonality.”

Under the Ali-ADvanceTM program, officially launched in March, paying members can bid for keyword placement on a cost-per-click basis while product listings in search results will be determined by factors such as relevance of the customer’s product to the search and the keyword bid price. The company believes this will help improve the efficiency of suppliers’ marketing efforts while allowing for better monetization of the ever-increasing user traffic on Alibaba’s China marketplace.