Question

In your view, can Alibaba successfully monetize Taobao ?

Explain

Answer 1

Taobao makes Sellers on all the Alibaba marketplaces can purchase advertising on Taobao in a variety of forms including CPC keywords, CPM display, and as a commission on closed sale (Taobaoke – like an “internal” affiliate fee). There are no commissions on closed sales (other than Taobaoke) or placement fees on Taobao. Some Taobao sellers also pay a monthly subscription for software (Wangpu) which helps them create better looking and easier to manage storefronts.

To be clear, Alibaba’s sites are obviously marketplaces. They drive huge volumes of transactions and Alibaba doesn’t hold inventory like an Amazon. But it’s not clear if the monetization of the group as a whole looks more like Google or more like eBay. Taobao is essentially monetized through advertising, albeit ad buying done by sellers across the Alibaba marketplaces. Taobao drives significant traffic across all Alibaba’s marketplaces and there seems to be a real ecosystem/network effect at work here. This is pretty different from eBay, which generates some revenue from ads & marketing services, but the vast majority (80%) from transaction fees. Tmall generates a lot from transaction fees and probably some from ads though again I don’t know the precise split. If and when I know more about the split between Taobao and Tmall revenue, I’ll have a greater understanding of what the best financial analog is for Alibaba. I actually don’t know the precise breakdown of revenue between the two, but I do know that for every $1 of GMV Alibaba generates more revenue from Tmall than Taobao. The makeup of the revenue is different too