Alibaba's E-Commerce App Has a Social Network Facebook Would Love

China's largest online shopping company is building a social network that keeps users buying more. Vice Chairman Joseph Tsai explains how.

Alibaba Blends E-Commerce and Social Media

Alibaba Group Holding Ltd. has tried to shake the perception that it's just the EBay Inc. or Amazon.com Inc. of China, by pushing into social media and entertainment and actively investing in startups like Snapchat Inc.

Case in point: Alibaba’s Taobao mobile app, which allows users to join chat groups dedicated to fishing and more, book travel tickets, read the news, order takeout—and, yes, buy stuff. To the Western eye, Taobao may seem chaotic and overwhelming, but the app has resonated with China's young users, who are spending longer on the site than visitors to Amazon or Twitter Inc.'s mobile sites. Taobao has helped Alibaba more than double mobile revenue in the most recent quarter, evidence that Chairman Jack Ma's push beyond e-commerce is finally starting to pay off.

"To capture the attention and imagination of young people you have to provide more social features," Alibaba's co-founder and Vice Chairman Joseph Tsai said in an interview. "We want to continue the sense of community so that they'll come back and engage with the platform."

Alibaba started Taobao in 2003 as an eBay-like site for small businesses and entrepreneurs to sell directly to consumers. In the last few years, it's added social and entertainment features to keep people on the app longer, increasing the chance they’ll buy products. The strategy worked. Monthly mobile active users increased 39 percent to 427 million and mobile revenue jumped to $2.6 billion in the June quarter. People visit the app more than 7 times a day for more than a total of 25 minutes. That compares with about 9 minutes on Amazon’s mobile app and 16 minutes on Twitter's app on days when users visit. 

Taobao
Source: Alibaba


"Amazon doesn’t get people on the website 7 times a day,'' said Gil Luria, an analyst at Wedbush Securities Inc. ``The level of engagement Alibaba's able to create is more than what we’d consider with search companies and social companies. They’re investing a lot into making their tools have social engagement like Facebook."

Taobao users can join one of its 1,000 special interest groups to chat about topics from wedding planning, to sports to baby showers. Last year, the site started a program to get bloggers and experts to post content by offering them a commission for making product recommendations. Alibaba also recently rolled out the Taobao news feed that’s grown to more than 1,300 media outlets that provide content to its 80 million-plus monthly active users. A few months ago, Taobao added video live-streaming for bloggers and merchants to interact with consumers.

 Tsai says that more social features will be added to Taobao, but only ones that will lead to more sales. Users may not make a purchase every time they open Taobao, but the activities pique their interest in potential merchants, whether that's watching a live broadcast with a Chinese celebrity testing out new makeup or participating in a special interest group discussing fishing products. 

 "We're already at the holy grail point where our users have very high desire to buy things and they're very commercially minded," Tsai said. "On Facebook you're friend-ing all of your friends because you already know each other. In our case, we start with strangers but then use data to find a commonality of interest and create a community around that interest." 

In recent years Facebook has also been searching for ways to convince its users to shop on the social network, trying digital storefronts, birthday gifts and a "buy" button. It too is testing a shop section for businesses to sell directly from their Facebook page. Pinterest and Twitter have introduced ways to buy products from their sites as well.

Amazon hasn’t made any major inroads in adding lifestyle features to its e-commerce site, though the company invests in routine social media promotions. Seattle-based Amazon's biggest social media push was in 2014 with its $970 million acquisition of Twitch Interactive Inc., an online forum that lets users discuss gaming and watch others while they play. Twitch continues to operate as an independent company under CEO Emmett Shear with limited integration with Amazon’s online marketplace.

Mixing social media with e-commerce hasn't really taken off in the U.S., where consumers are used to separate apps for specific purposes, according to Luria. On the other hand, China has a rapidly growing base of smartphone users that are accustomed to messy interfaces with as many features as possible. Tencent Holdings Ltd. has a grip on China’s social messaging space with WeChat, a do-it-all app for booking taxis or buying movie tickets. Alibaba also has added services to Taobao’s main app that include food delivery, travel booking, and on-demand home cleaning. Chinese search giant Baidu Inc. allows users to also book hotels and look at real-estate.

 "For a lot of Chinese companies, distribution is so prized and valuable that if they can add-on other elements to the same user-base, they will consider it," said Connie Chan, a partner at Andreessen Horowitz. "Most of the Chinese players recognize that having more touch points in a user’s life is probably the main goal."

Ma has placed his stakes in social media and entertainment by spending billions of dollars buying video website Youku Tudou, web browser UCWeb, and investing in China's Twitter-like social media platform Weibo. Yet social networking has been a soft-spot for Alibaba: it tried to compete with Wechat a few years ago with a messaging service called Laiwang, which hasn't gained nearly as much traction. Last year, Alibaba was said to have invested $200 million in Snapchat. 

"We want to learn and understand how Snapchat is engaging with young users,'' he said. "We're just intrigued by the product and impressed with Evan Spiegel, the founder, and we want to be partners with him." 

--With reporting assistance from Spencer Soper in Seattle.

 

 

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