Shares in Chinese e-commerce giant Alibaba Group further plunged on Thursday after shedding 4.36 percent on Wednesday following a rare clash with China's business regulator over counterfeit goods allegedly found on the company's popular online marketplace Taobao.

Its shares on the New York Stock Exchange slid over 11 percent shortly after the market opened Thursday.

The losses were compounded by weaker-than-expected third-quarter earnings released before the market opened.

For the quarter ending on December 31, the company said revenue rose by 40 percent year-on-year to $4.22 billion, "mainly driven by the rapid growth of our China retail business," a statement on Alibaba's website said.

But it missed analysts' estimate of $4.45 billion.

Overall, its net income during the quarter stood at $964 million, a decline of 28 percent from the previous year, falling shy of expectations.

The disappointing quarterly earnings, Alibaba's second earnings statement since it went public on Wall Street in September 2014, come as Alibaba is embroiled in an unusual row with the State Administration for Industry and Commerce (SAIC).

The SAIC on Wednesday published a strongly worded white paper on Taobao's practices, claiming the popular online bazaar has failed to crack down on fake brands.

Along with the white paper which details a meeting with senior company executives, the SAIC revealed findings of its investigation into e-commerce sites that include Alibaba's Taobao and Tmall which found only 19 of 51 samples on Taobao were licensed products.

Alibaba's shares dropped 4.36 percent, or $4.49, to close Wednesday at $98.45, which erased $11 billion worth of the e-commerce firm's paper value.

Amazed by Alibaba's response with the filing of an official complaint the same day against Liu Hongliang, the head of SAIC's online business department, for his "procedural misconduct," Feng Lin, a senior analyst at Hangzhou-based China E-Commerce Research Center, said the row between the two sides is unlikely to further escalate.

Unless the SAIC orders the removal of all fakes on Taobao, Alibaba's business will hardly be dented, Feng told the Global Times on Thursday.

The current market fluctuations tend to be transient, he said, adding "both would eventually come to terms over the issue."

The SAIC removed the white paper from its website hours later on Wednesday, while Alibaba said that it has set up a special anti-counterfeit group.

In the case of other e-commerce sites cited in SAIC's report, including jd.com, yhd.com and jumei.com, the impact of the SAIC report remains to be seen.

Alibaba rival JD.com Inc, which kicked off its IPO in the United States in May 2014, posted an increase of 2.57 percent to close at $25.99 on Wednesday.

Still, the industry watchdog's white paper on Alibaba raises concerns over investor confidence and market regulators in the US.

The US market regulator might doubt the reliability of information disclosed by Alibaba, Feng said.

Addressing concerns over counterfeits sold online, Shen Danyang, a Ministry of Commerce spokesperson, also said on Thursday that the ministry is set to intensify efforts to crack down on knockoffs on the nation's booming online market.

The face-off between Alibaba and the SAIC has also sparked discussions over which side should be truly sorry for the row.

Ala Musi, the director of the policy and law committee of the Beijing-based China E-commerce Association, told the Global Times that the SAIC white paper is unethical.

"A privately owned enterprise daring to challenge a central government agency is encouraging. A central government agency daring to impose regulations on an established China-based global enterprise, based on the rule of law, is a good thing, as it shows it is doing its duty," read an opinion published late Wednesday on the website of China Central Television, the State broadcaster.