For ecommerce companies which received mint of money from VCs, the last thing they want to see will be skyrocketing marketing expenses and ever-rising SEM costs. While capital scrambles to invest in Chinese B2C sites, few of which will go public and most of them will end up shutting down, and the navigations sites(hao123, 265), portals(sina, sohu) and search engines(Baidu, Google China, Sogou) who serve ads for B2C sites are actually the real beneficiaries.
Many B2C players came to realized this, starting to reduce or even totally cut SEM expenses and build up their own affiliate program. Chinese giant B2C site Dangdang have stopped Baidu SEM initiative as of this April, prior to 360buy founder Liu Qiangdong announcing the same attempt for 360buy. B2B site DHGate is also reducing such costs.
Baidu accounts for 80% of Chinese search market. Turning back to such huge traffic sources will definitely result in decrease in new customer acquisition and in sales volume, which is a major pitfall for Chinese ecommerce sites. Hence they have to build their own affiliate program to attract new customers. Letao recently announced raising commission rates to 18% of each transaction.