Sept. 11 (Bloomberg) -- Alibaba Group Holding Ltd.’s Taobao unit, China’s biggest online commerce site for consumers, may more than double revenue this year from about 400 million yuan ($58.6 million) in 2008, said its President Jonathan Lu.

“Our advertising sales are increasing and the company is also getting more income from commissions,” Lu said in an interview in the eastern Chinese city of Hangzhou, where Alibaba is based. Taobao may double its number of employees in two to three years from about 2,800 workers now, he said. Parent Alibaba Group is 39 percent owned by Yahoo! Inc.

Taobao, which doesn’t charge individual users fees on transactions, posted its first profit before interest, tax, depreciation and amortization last year as sales of advertising on its Web site surged. Alibaba Group Chief Financial Officer Joseph Tsai predicted earlier this year that Taobao would challenge Baidu Inc. as China’s biggest seller of Web ads.

Alibaba last year said it would invest 5 billion yuan ($732 million) in Taobao over five years to add functions and services. Taobao was established in 2003 and in less than three years overtook EBay Inc.’s China unit to become the market-leader by keeping services free.

Ads currently account for about 70 percent of revenue, with commissions on transactions at its retail site that offers products from Dell Inc. and Fast Retailing Co. and other value- added services making up the remainder, Lu said.

Taobao had 86.8 percent of China’s so-called consumer-to- consumer online commerce market in the second quarter, compared with 7.9 percent for second-ranked Paipai, a division of Tencent Holdings Ltd., according to researcher Analysys International.

The Web site had almost 145 million registered users at the end of June, who purchased 80.9 billion yuan of goods during the first half, according to Alibaba.

To contact the reporter on this story: Mark Lee in Hong Kong at wlee37@bloomberg.net

Last Updated: September 11, 2009 04:39 EDT