BABA-SWR's "Crown Prince" steps down.

Byline | Liu Baodan

Editor | Zhou Zhiyu

With just 3 months to go, Yu Yongfu's 3-year management career at Alibaba's Local Services Group is coming to an abrupt end.

On March 1st, Alibaba Group CEO Eddie Wu announced through an internal memo that Yu Yongfu, Chairman of the Local Services Group and CEO of Ele.me, will officially step down in a month and move to the eWTP Fund. He will then support Alibaba's international exploration as a partner.

Yu Yongfu's unexpected retreat from the frontline to behind the scenes is surprising. In January this year, he denied rumors of Douyin acquiring Ele.me on behalf of Alibaba's Local Services Group. Years ago, Yu Yongfu was considered by Jack Ma as a successor, one of Alibaba's "princes," also known as a key figure who led the integration of Alibaba Mama and Alibaba Pictures.

Now, this "Alibaba prince" leaving the center of power paves the way for Alibaba's post-80s partners like Wu Zeming to take the lead. This reshuffle also signals Alibaba's desire for the younger generation to shoulder more responsibilities and revive growth in Alibaba's local services business.

In recent years, the local services sector has been on the defensive, but this situation is expected to be completely overturned.

After Alibaba's largest-ever organizational split last year, with its various businesses operating independently, Alibaba's series of actions not only lightened its load but also provided greater room for each business to operate, especially allowing local services to compete more freely in the market.

Next, we may witness a more aggressive Alibaba, with the long-dormant Alibaba Local Services entering a new phase of development.

Turning Point

As the person who steered local services on the right track, Yu Yongfu's departure signifies a potential change in the pace of local services development.

Over a month ago, there were multiple rumors about Douyin acquiring Ele.me, but Yu Yongfu personally clarified within the company's intranet that "false news will always be false."

It appears that Alibaba still hopes for new breakthroughs in local services and is entrusting it to a younger team for management.

Specifically, Wu Zeming, the CTO of the Local Services Group, will become Chairman of Ele.me, while Han Liu, head of Fengniao Delivery, will become CEO; Liu Zhenfei, Chairman of Gaode, will be succeeded by President Guo Ning as CEO of Gaode.

Both Wu Zeming and Han Liu are post-80s, while Liu Zhenfei and Guo Ning are post-70s, forming the core management team of Alibaba's Local Services.

This move is in line with Eddie Wu's approach in December last year when he took over as CEO of Taotian Group, appointing a young team. He emphasized at the beginning of his tenure in September last year that he would vigorously implement team rejuvenation, aiming to have post-85s and post-90s as the main management force within 4 years.

Another factor that emboldened the Local Services Group to change its management team is that under Yu Yongfu's leadership, both organizationally and strategically, local services have entered a phase of healthy development.

When Yu Yongfu took over, Gaode Maps had less than 10 million daily active users (DAU). Today, Gaode's daily active users have exceeded 100 million, making it the industry leader. According to QuestMobile data, during the spring of 2024, Gaode Maps' user engagement growth rate exceeded 30%.

Alibaba's local life sector has been steadily reducing losses in recent years, showing signs of development.

According to the comprehensive financial report, in the 2023 fiscal year, the adjusted EBITA of Alibaba's local life service division showed a loss of 14.021 billion yuan, compared to a loss of 22.092 billion yuan in the previous year, marking a nearly 40% reduction in losses.

Ten years ago, when Yu Yongfu entered Alibaba through the acquisition of UC, he always took on heavy responsibilities when a certain business at Alibaba faced bottlenecks. He strategically adjusted the relevant sectors, leading them out of difficulties step by step. From Ali Mama to Alibaba Entertainment, his capabilities have been repeatedly validated. This earned him the nickname "Alibaba's Crown Prince" in the media.

At a time when Alibaba's local life business was experiencing continuous slowdown, in 2021, Yu Yongfu, who had gradually faded from the public eye, was once again entrusted with significant responsibilities by Daniel Zhang. Internally at Alibaba, the importance of local life had become as crucial as e-commerce and Alibaba Cloud.

Under Yu Yongfu's leadership, businesses such as Ele.me, Koubei, Amap, and Fliggy were able to develop in a coordinated manner. The business logic of local life became clearer, and services like Ele.me began to thrive. A former Alibaba employee commented, "Internal staff generally recognize him. Ele.me used to struggle, but he did a great job after taking over."

With Yu Yongfu's departure, the local life group will usher in a new development phase.

Intense Battle

Next, Alibaba will engage in an intense battle in the trillion-dollar local life market alongside Douyin, Meituan, and Kuaishou.

Wang Xing once said, "If local life is done well, it will be another Taobao," but Alibaba seems to have "risen early but arrived late" in the local life sector.

Alibaba's foray into local life began with the acquisition of Ele.me, which was established five years before Meituan Waimai. However, this early advantage dissipated during the food delivery war, leading to a decline in Ele.me's position within Alibaba and local life being marginalized as a non-core business.

Yet, Alibaba is unwilling to give up on the trillion-dollar local life market. According to Haitong International's research report, in 2023, Douyin's local life GMV (Gross Merchandise Volume) has approached 200 billion yuan, accounting for about one-third of Meituan's.

With increasingly fierce competition in the market, the rapid growth of Douyin's local life sector indicates that there is still significant room for development in this field. Following Alibaba's largest organizational split last year, Alibaba's local life sector is poised to unlock more value.

The new leadership with a background in technology holds the key to Alibaba's turnaround. According to Eddie Wu's strategic roadmap from November last year, local life will continue to invest in location-based technology services in the future. At the same time, they will seize opportunities for application innovation and capability enhancement brought by AI.

Eddie Wu believes that in the next three years, location-based technology services will continue to evolve and grow rapidly across various industries. Not only will there be rapid growth in location-based technology services in various toC industries, but there will also be a significant increase in demand for location-based technology services in toB industries.

For local life, turning losses into profits is likely only a matter of time. The greater challenge lies in whether they have the ability to compete head-to-head with their rivals and rise again.

Compared to the past decade, competitors in the local life market are not only increasing but also becoming stronger. In the field of offline business, Ele.me still faces tough competition from Meituan, with both focusing heavily on food delivery and instant retail. As for reaching the destination, Amap also competes with content platforms such as Douyin, Xiaohongshu, and Kuaishou, especially Douyin, which has risen strongly in the past few years with its massive traffic. It won't be easy for Amap to grab a share from this competition.

Fortunately, with the foundation laid by Yu Yongfu in integrating business over the past few years, the new management team can enter the battlefield lightly and show their skills.

From independence to acquisition, and back to independence again, after more than a decade of development, Alibaba's local life has returned to the starting point. Fortunately, Alibaba is still in the game and has a chance to compete.

As Alibaba embarks on the path of transformation, the local life battlefield is set to witness a series of exciting developments.