Taobao will rival Baidu in web ads - Alibaba

New York: Alibaba Group Holding Ltd, part-owned by Yahoo! Inc, said its online commerce unit will challenge Baidu Inc as China's biggest generator of web advertising after sales more than doubled last year.

"One of Baidu's biggest competitors is going to be Taobao," Alibaba Group Chief Financial Officer Joseph Tsai said in a phone interview on Wednesday. "E-commerce has become an emerging platform for merchants to advertise, taking market share away from search players."

Taobao, China's biggest trading website for consumers, has sought to boost advertising sales by allowing vendors to bid for the right to associate their products with keyword searches. That tactic pits the company against search-engine leader Baidu, which posted an 85 per cent increase in third-quarter sales on higher demand for keyword-related advertising.

"If Taobao can continue to increase traffic at its website, it can achieve good growth in revenue from paid-search," said Li Ji, an internet analyst at research company Analysys International in Beijing. Still, at present, "advertisers on Baidu's paid-search platform are able to reach more web users than on Taobao's" as it's targeted at a wider range of users.

Baidu, China's biggest search engine, had 62.2 per cent of the country's advertising sales linked to web queries last year, more than twice as much as second-placed Google Inc, according to Analysys International.

Third-quarter sales rose to 919.1 million yuan (Dh493 million), from 496.5 million yuan a year earlier, the Beijing-based company said in October.

"Search and e-commerce are two different things," Baidu said in an e-mailed reply to a Bloomberg request for comment. "Looking at more mature markets like the US, the roles of search engines and e-commerce are established and clear."

Taobao was established in 2003 and less than three years later overtook eBay Inc to become China's most-used consumer-to-consumer website by not charging customers commissions on goods sold to other users. The unit, which Tsai said derives "a majority" of its sales from advertising, posted a profit in earnings before interest, tax, depreciation and amortisation in August for the first time.

Taobao users sold 99.96 billion yuan of merchandise in 2008, more than double the 43.3 billion yuan of transactions a year earlier, Tsai said. The e-commerce unit had 75 per cent of China's online shopping market, Alibaba said, citing data from research company iResearch.

McDonald's Corp, the world's biggest restaurant chain, started selling food vouchers to Chinese consumers on Taobao.