Alibaba.com's online business model and strategy is a combination of those adopted by some of the biggest e-commerce firms of the world, i.e. Amazon.com, eBay.com, etc. It has divided its business into different domains and thus captured the majority of the Chinese market. Alibaba has three main websites for e-commerce and each has its own unique business model:
1) Alibaba: Unlike Amazon, Alibaba does not buy and sell goods, but rather acts as a middleman and connects buyers and sellers, typically exporters and importers. Revenue is generated by taking a portion of sales and purchases.
2) Taobao: This allows for the free posting of a seller's listing, which makes it a big hit in China. The sellers pay only for advertisements to stand out from the crowd. It is China's largest e-commerce platform. Taobao gets the advertisement revenue.
3) Tmall: Unlike Taobao, Tmall lists only top brands, including Apple, Nike and GAP. Here the companies pay for subscription and upon each transaction.
So while tapping all the market domains of China, Alibaba also enjoys the sheer size of the Chinese economy and has a more profitable model than Amazon.
They also have their own payment platform and are venturing into micro-lending by setting up private banks.