The WSJ reports,"perhaps the best way to understand Alibaba is as a mix of Amazon, eBay and PayPal, with a dash of Google thrown in, all with some uniquely Chinese characteristics.
"Unlike Amazon.com Inc., which buys goods from suppliers and sells them to customers, Alibaba has always acted as a middleman, connecting buyers and sellers and facilitating transactions between them. While it isn't an auction company, its middleman role is similar to the one played by eBay Inc.
Taobao, Alibaba's biggest website, is like a gigantic Chinese bazaar, with about 760 million product listings from seven million sellers. Merchants don't pay to sell products on Taobao. Instead, they pay Alibaba for advertising and other services to allow them to stand out from the crowd.
hat no-fee model is part of Taobao's appeal in China. Much as with Google Inc., the ads from merchants appear with Taobao's product-search results.
While Taobao is mostly for small merchants, Tmall, another shopping site run by Alibaba, is designed for bigger merchants, including well-known brands such as Nike Inc. and GapInc. Apple Inc this year opened a store on Tmall. Unlike Taobao, Tmall, which has about 70,000 merchants, charges each seller a deposit and an annual fee, as well as a commission on each transaction.
"What sets Alibaba apart is size. The company has said that Taobao and Tmall account for more than half of all parcel deliveries in China. In 2012, the combined transaction volume of Taobao and Tmall topped one trillion yuan ($163 billion), more than Amazon and eBay combined".
"Alibaba's revenue is about one-tenth of Amazon's because the Chinese company doesn't sell products on its site. But Alibaba is far more profitable. Alibaba's third-quarter revenue rose 51% from a year earlier to $1.78 billion. Net profit was $792 million, giving the company a profit margin of 44.6%, according to shareholder Yahoo Inc., which owns a 24% stake in Alibaba. Amazon posted revenue of $17.09 billion and a loss of $41 million in the same quarter".
