taobaoreadRumors have circulated for some time that Taobao Read (our translation), the digital publishing business of Alibaba Group, was dissolved last month. An anonymous Taobao Read employee and other people close to the matter have confirmed the closure at Zhihu.com, a Quora-like Q&A and content sharing platform. The Taobao Read app and published e-books currently are still available.

It’s unknown what the next steps will be, but what is certain is that Alibaba’s digital publishing service, unlike its Taobao and Tmall marketplaces, has not turned out to be the go-to place for digital content for Chinese consumers.

In 2010 Alibaba launched Taohua, a marketplace for digital videos, books and magazines. Taobao Read, formerly Taohua Book Mall (our translation) was the part of it available on the web and on Android and iOS at the time. As the Taobao marketplace for physical goods had been in place for several years, Taohua was considered a natural step.

There are now several established video streaming sites, making purchasing digital video irrelevant. And when it comes to digital publishing, Alibaba has failed to channel its huge consumer base to the reading service.

Most Chinese online publishers have a similar business model: acquiring digital rights from traditional publishing houses, copyright holders, or writers, and selling content through a website or mobile app. Taobao failed to partner with the three Chinese telecom operators and the digital publishers backed by the internet giants. To this day, the three telecom operators are believed the only digital publishers in China turning a profit. China Mobile, the largest of the three and boasting the most subscribers, is the market leader.

The operators charge a monthly fee to access books or articles from third-party content providers via mobile. This was in fact the only channel from which digital book sellers could make money, as the web was full of pirated books. Little wonder, then, that the telecoms operators took the majority of the revenue leaving a minor percentage to content providers.

In theory, these days, when smartphones are ubiquitous, users would prefer to consume digital books through mobile apps. But so far content providers or copyright holders still see more revenue from the telcos than from reading apps. The main reasons, according to industry insiders, are many users are accustomed to buying content from telcos and that carrier billing is more convenient than other mobile payment methods.

Other players in China’s digital publishing market are Tencent, Baidu, Xiaomi, Dangdang, JD.com, Suning, and Douban. Analysts estimate that few of these digital publishers are profitable.

Online retailers such as Dangdang, JD.com and Suning consider digital publishing necessary, having been proven a valid business by Amazon.

For Baidu and Tencent, digital publishing is more about ensuring users stay on their platform than a profit generator. Of the Chinese internet giants, Tencent is so far the winner. It has successfully channelled its QQ IM users and has acquired both content creators and online literature sites.

 

Editing by Mike Cormack (@bucketoftongues)