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Chinese Pinterests Have to Change Courses, Thanks to Taobao
Jack Ma’s comments on social shopping sites at an internal meeting earlier this year is no secret: Taobao wouldn’t like to see a small number of them to grow big enough to have a decisive impact on retailers’ sales. He’d like to see a short-grass prairie, rather than a forest with large trees.
Social shopping sites account for 21% of the total revenue cuts Taobao Union shared with third-party partners in 2012; mobile shopping apps earned half the total revenue shares, about 50 million yuan ($8mn), from Taobao Union’s mobile program.
U Zhan, a platform for social shopping sites launched in October, is one of Taobao’s responses. Working in the same way with Taobao, it allows for setting up shopping sharing sub-sites for. In short, it’s a grassland Taobao built by itself, within its realm. Not only would it be under control, but also they’d become competitors to outsiders.
Dependence on Taobao
Previously Meilishuo and Mogujie, the two well-known big trees, contributed over one billion yuan worth of monthly transactions to Taobao retailers. At the same time, they pretty much depend on Taobao in terms of usage and revenue. CPS-based commission through Taobao Union program is their major revenue source, 60%-70% of Meilishuo’s and 80%-90% of Mogujie’s.
Spending big on branding campaigns, even the leading sites haven’t made big money from the newly emerging business. To make it worse, Taobao came up with technical fee, 10% of commissions, to kind of tax social shopping sites last year. Meilishuo only made about 6mn Yuan ($968,000) and Mogujie made about 4mn Yuan ($645,000) in the past September.
Even worse, since the past July, Taobao has been adjusting APIs policies. Now third-party sites cannot get the updated commodity information and user comments.
In order to reduce dependence on Taobao, those sites started partnering with independent e-commerce players like Vancl or other platforms like Tencent’s. However, Taobao turns out to be irreplaceable that new sources of shopping items doesn’t perform that well, according to CMO of Mogujie, Li Yanzhu (source in Chinese).
Mogujie also tries to become more of media thus to make display advertising one of the major revenue sources — previously it was a minor one. Mogujie is not alone that a handful of shopping sites changed the pinterest-style layout of their sites into content-centric media for shopping information, including Hers.
Meilishuo shifts in another direction, from taking CPS-based commissions to CPC-based advertising fees which has become 50% of its total revenues (report in Chinese). CPC also means it can avoid CPS-based Taobao Union and directly charge merchants.
Both Mogujie and Meilishuo are trying out other services, such as offering beauty product giveaways for brands. It’s now for free but expected to charge brands sooner or later.
Should Meilishuo or Mogujie set up a site on Taobao’s U Zhan? Just like those independent group-buying services set up a shop on Taobao’s Juhuasuan, a platform for aggregating group-buying sector? Whatsoever, commission-based online business sounds such a hard business, especially in a country when e-commerce is largely in Taobao’s hands.
You may also Read:
- How Many Pinterests Does Taobao Need?
- Rumor: Social eCommerce & Pinterest-like Service Mogujie Acquired by Taobao
- Are social shopping sites really doing well? Doubt so.
- Taobao Union to Open Advertising Services to All Online Advertisers
- Duitang: Chinese Social Shopping Initiative Focusing on Items Sharing and Discovering