Let's talk about the monetization rate of Alibaba's e-commerce.

Alibaba's e-commerce monetization rate was once the highest in China, and at that time, it could really be said that it couldn't even see its competitors with a telescope.

But in the past two years, this figure has clearly lagged behind Douyin and Pinduoduo. To some extent, it might even fall short of Kuaishou—if you include Kuaishou's e-commerce and influencer live-streaming ad revenue in its e-commerce monetization.

For the full year of 2023, Alibaba's e-commerce monetization rate was about 3.9%, Kuaishou around 4%, Pinduoduo approximately 4.5%, and Douyin about 10%. For Kuaishou and Douyin, 55% of their online marketing revenue is counted as e-commerce revenue because this portion is inherently driven by internal e-commerce loops. For Alibaba and Pinduoduo, the ratio can be roughly estimated based on the proportion of ad revenue + commissions to GMV.

Looking solely at Q1 2024, Alibaba's e-commerce monetization rate was around 4%, Pinduoduo about 4.8%, Kuaishou approximately 4.6%, and Douyin likely above 10%.

E-commerce monetization rate isn't necessarily better if higher—too high means excessive operational burdens for merchants. But it's also not better if lower—too low indicates weak monetization capability or even being taken advantage of by some merchants.

Douyin and Kuaishou are special cases. As short-video platforms, some brands advertising there might not care as much about ROI but prioritize brand visibility.

Lagging behind Pinduoduo is actually worth discussing.

Alibaba's e-commerce monetization rate once exceeded 4%. The decline is partly due to proactive reductions in merchant costs, such as making Business Advisor free and nearly eliminating Taobao store deposits.

But more reasons lie elsewhere. The main factor is the absence of transaction service fees and unified promotion.

All e-commerce platforms outside Alibaba's ecosystem have gradually introduced transaction service fees of 0.6-1% since 2020, mostly charged per order amount—regardless of final completion, returns, or refunds. Alibaba's ecosystem lacks this fee.

Additionally, after Pinduoduo adopted unified promotion, most traffic became paid and centrally allocated by the platform. This is somewhat reasonable since the platform charges no fixed store-opening fees—your business and traffic come from the platform, so paying for traffic makes sense.

Alibaba's ecosystem hasn't rolled out unified promotion yet (still in testing), meaning much traffic remains free. Some Taobao stores pay zero fees—no transaction service fees, no store-opening costs, no deposits, no transaction commissions—if they don't run ads.

On July 26, Alibaba announced it would start charging a 0.6% transaction service fee from August 9, alongside fully opening unified promotion. These measures should raise Alibaba's e-commerce monetization rate to a reasonable level—at least around 4.5% eventually.

However, Alibaba's transaction service fee has differences: (1) It's charged at 0.6% of completed transactions, with refunds reimbursed; (2) Small merchants with annual sales under RMB 120,000 are exempt; (3) From September to December 2024, large orders (e.g., phones, jewelry) are capped at RMB 60 per transaction.

These are smart choices—optimizing the business model while balancing merchant burdens and giving some operators flexibility.

Alibaba has made many recent adjustments. Another major one is refining the refund policy, granting more autonomy to stores with ratings above 4.8. This is also worth discussing—maybe in a separate post later.$Alibaba(BABA.US) $BABA-W(09988.HK)