Monday, January 24, 2011

Alibaba's untapped information asset keeps growing

The Economist highlighted in a recent article the fact that through its various subsidiaries, the Alibaba Group holds a highly valuable, but as of yet, largely untapped resource: data covering the online buying behaviour and credit histories of millions of individuals and small- and medium-sized enterprises in China.

Alibaba now has a “live data monitoring room” at its headquarters in Hangzhou which offers real-time figures on the millions of users trading on the company’s various e-commerce platforms. The company’s B2C arm, Taobao, boasts 300 million registered users and facilitated transactions valued at US$29 billion in 2009 alone.

Earlier this month, Alibaba pulled back the curtain a bit to give us a glimpse into the level of information it has at its disposal. In Beijing, the company held what it calls its “inaugural Taobao e-commerce data sharing event.” At this event Alibaba released a wide variety of metrics and user trends related to online spending habits - based on its aggregated consumer data.

Alibaba reported that on average on Taobao, 48,000 items were sold per minute in 2010 and Alibaba demonstrated that it can, for example, map the number of mobile phones sold in Shandong Province by age, gender and method of payment. And as Alibaba builds its’ recently announced US$4.6 billion logistics infrastructure across China, the company will have even greater insight into exactly who is buying and where the buyer and seller live.

Alibaba’s records are an unrivalled database of the spending habits of China’s emerging middle class. The company is understandably cautious about how it will utilise this data – typically citing privacy protection issues. It is also a particularly sensitive issue given that the central government in China tends to cast a wary eye towards companies in the private sector with control over that much data. Alibaba does, however, enjoy a very cordial working relationship with the Chinese government at all levels.

Those risks aside, it is clear that Alibaba is sitting on a mountain of data treasure which is growing by the minute and the company has ample opportunities to cash in on this asset. For example, Alibaba could leverage the information to better target buyers and sellers on its on platform or it could potentially aggregate and package the data to sell it to a wide variety of players such as financial institutions looking for better credit data in China or manufacturers looking to identify opportunities to sell to Chinese consumers.

No matter how you look at it, this is a growing information asset and Alibaba is just getting started.

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