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China's Alibaba Adds Social Networking to E-commerce

China's Alibaba Group has started mixing social-networking functions into its leading e-commerce platforms, a move it hopes will convince users to spend more time and money on Alibaba Web sites.

Alibaba is crafting social-networking platforms specifically to complement two of its core operations. The beta version of a Web site with Facebook-style applications and a Twitter-style feed is being grafted onto Taobao.com, Alibaba's auction and retail Web site, a spokeswoman said. A more professional platform that the spokeswoman likened to LinkedIn is being added to Alibaba.com, the group's business-to-business e-commerce operation.

The entertainment-based platform for Taobao in particular combines standard social-networking functions with original features that promote online purchases. It goes a step beyond efforts to mix e-commerce and social networking by Western companies like Amazon.com and Facebook, said Benjamin Joffe, CEO of digital strategy and research company +8* (Plus Eight Star).

Western companies could potentially benefit by adding social functions like those on the Taobao platform, but the site is also uniquely suited for China's young Internet user base, he said.

Taobao designed the platform, called Taojianghu, to provide services that relate to online shopping but could also encourage users to form groups around shared interests. A main goal was to build stronger ties among consumers on Taobao, said Mi Fengtao, Taobao's team head for development of Taojianghu.

"Taobao users have many demands outside of making online purchases," he said.

Taobao, like eBay in the U.S., lets users sell items at auction or in online stores, and some of the items most commonly sold include clothing, mobile phones and laptops.

The main page of Taobao's social-networking site presents users with a feed of friends' recent updates and links to games, picture albums, surveys and other applications already common on Facebook and rival Chinese sites. But the site also offers shopping-related applications that let users bookmark items they find on Taobao and ask other users for purchase advice. Users can also post pictures of a number of items they are considering, such as makeup or cameras, and ask friends to vote on which one to buy.

The Taobao platform also rewards frequent users with points that can be turned into coupons for certain purchases from merchants. One way users can earn points is to become an "expert" in a product area, such as iPhones or other gadgets, by writing reviews that other users cite as helpful.

E-commerce, already huge, is ascending rapidly in China. Online shopping transactions were worth 46.7 billion yuan (US$6.8 billion) in China in the first quarter, nearly twice as much as a year earlier, according to iResearch, a Chinese Internet consultancy.

Over three-quarters of that transaction value occurred among consumers on Taobao, according to the iResearch statistics.

Taobao's dominance gives its social-networking platform a sizable user base to draw on. All Taobao users can also access the platform, which has some user activity but that Taobao says it has not begun promoting yet. Taobao reported 120 million registered users at the end of the first quarter, more than one-third of China's total number of people online.

Amazon and Facebook have also looked to combine elements of social networking and e-commerce. Amazon's "Wish List" lets users create and share lists of items they would like to receive as gifts, encouraging shopping on the site. Facebook two years ago attempted to introduce Beacon, an advertising system that shared information about users' activities on e-commerce and other sites. The program came under fire for privacy concerns and Facebook later allowed users to disable it.

Taobao's efforts may have more success, partly because users will enter its social-networking platform knowing that it is based on an e-commerce site, said Joffe, the analyst.

"They don't need to explain too much to their users," said Joffe. "It will feel very natural because commerce is what Taobao is all about in the first place. They are just adding social features to do it better."

The young majority in China's base of Internet users has caused online games, entertainment and instant-messaging applications to grow faster then e-commerce in the country, Joffe said. Taobao is now drawing on those proven products to drive its own expansion. It was the first large e-commerce site to offer instant messaging, and social networking is a natural next step for its expansion, said Joffe.

Nearly two-thirds of China's Internet users are under 30 years old, according to the country's domain registry agency.

Future additions to Taobao's social-networking platform could include ads in applications and links to suggested items in merchant stores, said Mi of Taobao. The site could also aim to attract new users from outside Taobao by offering unrelated services, such as online reservations for movie tickets or karaoke sessions, Mi said. Those users might then migrate to Taobao itself, he said.

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