Taobao's zero-commission model: Does it redefine the value of merchant traffic based on first principles?

You can understand it that way, and this perspective is very accurate.

Let's use a simple, down-to-earth analogy.

Imagine you're opening the largest marketplace in the country. There are two charging models:

Model One (Traditional Model): Charge based on transactions. It's like a vegetable market where you provide a spot for each vendor and tell them: "For every vegetable you sell, I'll take 10%." This is straightforward and easy to understand. The more they sell, the more you earn. This is the "commission model." In this model, your valuation of a vendor is based on "how much they can sell."

Model Two (Taobao's Model): Free entry, earning from "ad placements." You tell everyone who wants to set up a stall: "Come and set up your stall here, absolutely free! Just come!" What's the result? Thousands of vendors arrive, selling everything from vegetables and fruits to needles and threads, and even antiques and calligraphy. Your marketplace becomes vibrant and offers everything imaginable.

At this point, what would a customer looking to buy something think? "I'll go to that big marketplace; they have everything there, I'm sure to find what I want." So, customers from all over the city flock to your marketplace.

Now, your marketplace is bustling with people, but you haven't made any money yet. However, at this moment, new value emerges.

An apple vendor discovers that their stall is in the most secluded corner, attracting only a few people a day. Meanwhile, stalls at the marketplace entrance have huge foot traffic. So, they come to you and ask: "Boss, can I pay some money to put up a sign at the marketplace entrance, telling everyone my apples are big and sweet, and my stall is in such-and-such corner?" Or, "Can I pay extra to move my stall to the spot with the most foot traffic?"

You see, at this point, your way of making money changes. You no longer earn by taking a percentage of the vendors' transaction volume, but by selling vendors "the opportunity to be seen by customers" (i.e., traffic).

This is a re-understanding of "merchant traffic value," and it embodies the principle of first principles:

1. Return to the essence: What is the core of a trading platform? It's not "transactions" themselves, but the aggregation of "massive supply" and "massive demand." As long as these two are brought together, making money is only a matter of time.
2. Break the mold: Traditional thinking is "no transaction, no revenue." But Taobao's thinking was that to facilitate massive transactions, you first need massive goods. How can you have massive goods? The answer: zero threshold. Commission-free entry lowers the barrier to entry to the absolute minimum.
3. Discover new value: When a massive number of merchants (supply) gather, they themselves become "content" that attracts a massive number of customers (demand). And once a massive number of customers arrive, "customer attention" becomes a new, scarcer resource. By going commission-free, Taobao gave up the petty gains from directly profiting from "transactions" and instead gained control over "attention allocation," a more upstream and valuable power. Merchants, in order to gain this attention, willingly pay for advertising (e.g., Zhuanche, Zhuanzhan, etc.).

Therefore, Taobao's commission-free model is not essentially about not making money; rather, it postpones the monetization stage. It deeply understood that: For a platform, a merchant's primary value is not how much commission they contribute, but their very existence, which enriches the platform's product offerings and thus attracts more consumers. When there are enough consumers, their "attention" can then be sold as a commodity to merchants who need it.

This was disruptive at the time because it didn't imitate any offline or online predecessors. Instead, it started from the fundamental question of "how to build the most prosperous ecosystem" and derived an entirely new business model.