Business model of Digital Platform – Taking Taobao as a case study

(Figure 1.0 ‘Taobao-app-features-that-drive-sales-Sampi’ From Fiona Martin, Licensed CC BY 2.0

Alibaba Group Holding: “To make it easy to do business anywhere”


Taobao, directly translated as ‘search for pleasure’ in Chinese, is a large-scale e-commerce retailer and trading platform in the Asian-Pacific region that Alibaba Group Holding initially developed in May 2003.The advanced empowerment of online algorithms and data analysis technology equips with a highly interactive personalized tool for users across urban and rural domestic areas of China to purchase, sell, and receive products and services worldwide. Referring to individual browsing trails, highly relevant products and services are recommended to users. Whereas embedded interactive communication tool enables product supplier updates information towards the product that makes customers gain background information of products and a sense of current fashion trend. This essay will briefly introduce the background of Taobao in terms of its primary field of operation and the proportion of preferred usage by customers. In addition, it would introduce how Taobao generates profit and the establishment of its successful business model. Last but not least, the essay would focus on Taobao’s social responsibility in a critical perspective to analyze the social consequences of the developed platform economy such as Taobao, a giant in the e-commerce industry with such scale and capacity platform.


To redefine Taobao and its role in shaping platform industry

Alibaba Group Holding reconstructed Taobao as three distinct subsidiary companies in 2011: Taobao marketplace (a C2C platform), eTao (a shopping search engine), and TMall ( a B2C platform) (Ya-jun, Ying jia, Juzhi, 2020) are responsible for providing a more sophisticated and complete online shopping by equipping each with more freedom to expand strategic initiatives (Krokou, 2019). To begin with, Taobao marketplace practices the original field of operation of Taobao; it maintains the hegemonic role in digital sales by motivating customers to practice online shopping via “customized” homepage regarding listing acceptable product’s price and expected quality. The lunch of eTao and Tmall represents an advancement in the diversification of the platform. In contrast, the former permit vertical comparison of one specific product or service and the later replicate the shopping experience of an offline physical store. More importantly, Taobao has updated to become a “one-stop super APP” (Alibaba group, 2020) in online shopping, watching live streams, food ordering, and arranging flights and hotels for travel that emphasizes shared community ideology (Alibaba group, 2020).


A guide on how to buy on Taobao

The embedded subprogram in Taobao:

A comprehensive marketing investigation prepares Taobao to further fit in the Chinese market, whereas the establish of Ali Wang Wang and Alipay contributes to an excellent satisfaction rate of customers fulfill the ambition of Taobao and makes its fame spread abroad (Dahui, Jun, Zhangxi, 2008). More importantly, planted electronic segments of Taobao has formed a self-sufficient online-shopping loop (Figure 1.1); the following section provides an introduction in significant procedures of Taobao’s electronic program.

(Figure 1.1 “Five steps for buyers to shop in Taobao”, Ya-jun, Ying jia, Juzhi, 2020)

Ali Wang Wang:

Ali Wang Wang, for example, was initially developed by Alibaba group as an instant message tool that facilitates 24/7 communication in messages, audio, video, and image forms amongst product suppliers and customers (Lixia, Xun, 2009). The introduction of Ali Wang Wang specifies the uniqueness of Taobao from similar e-commerce platforms. Ali Wang Wang laid a solid foundation for the success of Taobao by accurately targeting customers’ requirements of buying and building a bridge of communication between sellers and buyers.


(Figure 1.2 Ant Group logo From Xvh5158, Licensed CC BY 2.0

Although the motivates to invent the online payment platform – Alipay is to encircle an online-purchase loop, the role of Alipay is reshaping the overlook of the e-commerce industry. Expect the outstanding performance of Alipay on Taobao; in response to Taobao’s future development strategy, Alipay gradually and steadily intergrades into society as a credit intermediatory and shift the nature as a social infrastructure. Today, over 50% of Alipay sales are not from Taobao (SinoCast Daily Business Beat, 2012); in other words, Alipay is the voice of a secure and confidential online payment due to close cooperation with bank and financial institutions (Lixia, Xun, 2009).

The business model of Taobao

Taobao generates profit via a range of approaches; however, as a typical “sharing economy” it contains the essence of “participatory society” gain profit by collecting, processing and circulating users’ data to commercialize personal connections (de Kloet, Poell, T., Guohua, and Yiu Fai, 2019). Noteworthily, a superficial analysis of the formation of income would fail to portray the complete picture of Taobao as a platform business since the government restrictions impact the construction of basic framework in each approach of generating profit. Hence this section of essay would combine the regulation policies of Taobao where is needed to exam business model of Taobao.

The Advertisement mode of Taobao

The data-driven culture and the exploitation of influence is a new tale. Platform businesses thrive on adjusting information sources to reflect customers’ demands (Pesce, 2019). Taobao is practicing the same principle via monetizing traffic for installed shops to increase exposure rate and target consumers in promotion; as a result, it leads to more social welfare since it enables shops enjoy more free rights and interests (Chen, Fan and Li, 2016)


(Figure 1.3:Girls daily Ad:Stay home baking party, Taobao makes buy Items More Easily From Rachel, Licensed CC BY 2.0

The Taobao Village

“Institutions and culture cannot be separated” (de Kloet, Poell, T., Guohua, and Yiu Fai, 2019) exemplifies the political practice on Taobao, namely, known as the Taobao village,answer the call of the establishment of ‘Made-in-China 2025’ government plan. Primarily, Taobao village is located in rural or semi-rural areas of China with at least 50 installed online shops and makes products based on algorithmic orders. Taobao village plays a vital role in Taobao’s business ecosystem in terms of the tract, analyzing, and optimizing data relevant to customers, traffic, and product. Taobao village demonstrates how Taobao, as a leading enterprise, obeys the Chinese manufacturing industry development tenancy operate effectively and make a win-win situation for both Taobao and its customers (sellers) to gain a higher proportion market share.

Criticism of Taobao Operations: Social and economic consequences

Reputation inflation:

The regulation of digital platforms would be recognized as an ever-lasting debate in the regular exercise of platform business by digital media scholars. The initiatives to modify and operate the platform’s order contribute by economic segments (Jean, Alice, Thomas, 2018). Reputation inflation that occurred in 2013 on Taobao has overwhelming economic and social consequences on users’ experience, platform equality, and public image of Taobao. The inflation is not entirely evitable since it follows the same “data-driven” assumption of Taobao; as such, it required a continued and strict monitor for subsequence usages.

The modification of content:

The ideal digital platform resonates with a profound and anti-utopia ideology to guarantee absolute “openness” and “liberty,” but the cruel reality appeal to the significance of internal management (Gillespie, 2019). Nevertheless, to define “acceptable content” is a subjective and flexible mechanism. In contrast, Chinese digital platforms are regarded as an onerous political regulation product (de Kloet, Poell, T., Guohua, and Yiu Fai, 2019). The consequential social impacts and results should be evaluated and reconsidered.

Final message

To take Taobao as a case study in platform establishment and regulation determine dynamics of complex and enormous e-commerce industry in terms of its role in the society it inhabits and the social and economic consequences. The field of operation of Taobao contains an intense political character; thus, a critical analysis in judging the success and popularity of Taobao also provides future study insight into Chinese online regulation policy.


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