Technology of the Week Group 23: Online Market Platforms
The innovations in information technology observed of the past two decades have radically reduced the time and cost of communication and transportations for firms. Customers are more informed than ever about products and prices. We have chosen the technology of online market platforms which relate to market-making activities of firms.
Alibaba is a marketplace, search engine and bank all at once. It is China’s biggest online commerce company, dominating 80% of China’s online shopping market according to CLSA (Lajoie & Shearman, N.A.).
Alibaba Group was established in 1999 by a group of 18 people, who worked out of Jack Ma’s apartment in Hangzhou. Its first website in English-language was Alibaba.com, a global wholesale marketplace. From the beginning, the company’s founders and Jack Ma shared a belief that the Internet would bring many small enterprises closer to each other. By making the flow of innovation and technology easier, it should become easier to compete effectively in the domestic and global economies.
The Chinese e-commerce company consists of different entities, which all have their specific focus; geographically and demographically. The biggest revenue streams come from Alibaba.com, Taobao and Taobao Mall/Tmall. Alibaba.com is the biggest online B2B platform, acting as an intermediary between buyers and sellers. Taobao is a C2C marketplace which focuses on the Chinese market and was introduced to compete with eBay. Tmall is a spin-off of Taobao and it is distinct from Taobao due to the fact that offers on the site come from the more well-known brands.
TradingFloor.com is a social trading platform and exists as a service platform provided by Saxo Bank A/S. As a part of Saxo Bank’s strategy to expand and improve its existing product and service offering, the bank launched an online financial community in 2009, TradingFloor.com. The website provides customers with investment content in the form of shared trading strategies, professional market analysis, portfolio models, free trading reports and news for financial products and educational trading tools (Saxoworld, 2014). On January 23rd 2014, the bank introduced social trading functions into the website allowing clients to place trades directly through the website.
TradingFloor provides clients with a “one-stop-shop” experience for online trading by providing information, analytical tools and the ability to trade different classes of instruments on the same platform. For existing clients of Saxo Bank, TradingFloor.com is a complimentary service they can use, which enhances the lock-in effect of the customer (Gallaugher & Wang, 1999). TradingFloor’s competitive advantage therefore stems from providing a combination of multi-asset trading, high quality informational content and social trading functions in a one-stop-shop.
The two platforms display a number of differences. Alibaba is a vastly larger player and has a much stronger global presence than TradingFloor.com. Furthermore the platforms are represented by two very different industries, marketplace/search-engine/banking platforms versus social trading. Despite these vast differences, both platforms are shown to support Malone et al.’s (1987) prediction of the overall shift toward proportionately more market coordination in the market. The information technology of both platforms increases customer infromedness through transparency, it limits the seller uncertainty through data information and social proof, and it allows customers to learn from each other and thereby to base their purchase decision on observational learning. While both platforms demonstrate a number of strengths compared to competitors, their business models also reveal some weaknesses which have to be dealt with in the future (e.g. mobile versions).
Lajoie, Marc & Shearman, Nick. N.A. What is Alibaba. WSJ. Online: http://projects.wsj.com/alibaba/. Accessed 24/09/2014.
Smith, Dave. 2014. Alibaba Is Already The Fourth Most Valuable Technology Company In The World. Online: http://www.businessinsider.com/alibaba-is-already-the-fourth-most-valuable-technology-company-in-the-world-2014-9?utm_content=buffer4f9a0&utm_medium=social&utm_source=facebook.com&utm_campaign=buffer. Accessed 24/09/2014.
Malone, T.W., Yates, J., and Benjamin, R.I. 1987. Electronic Markets and Electronic Hierarchies. Communications of the ACM
Alibaba. N.A. Alibaba.com – Global Trade Starts Here. Online: http://www.alibaba.com. Accessed 24/09/2014.
Alibaba Group, N.A. Alibabagroup.com; http://www.alibabagroup.com/en/about/history Accessed 24/09/2014
Saxoworld.2014. Saxo Bank launches ground-breaking new portal combining social features with its award-winning trading platform. Online: http://www.saxoworld.com/mediacentre/press-releases/saxo-bank-launches-ground-breaking-new-portal-combining-social-features-with-its-award-winning-trading-platform. Accessed 24/09/2014.
Gallaugher, J.M. & Wang, Y.M. (1999) Network Effects and the Impact of Free Goods: An Analysis of the Web Server Market, International Journal of Electronic Commerce, Vol. 3, No. 4, p. 67-88