Investors just pumped $4 billion into Meituan-Dianping, valuing the Chinese startup at $30 billion. They’re betting the company will become, to booking haircuts online, or ordering noodles, what Alibaba is to e-commerce. With scale benefits from providing a variety of services, and a big new war chest to fend off competitors, they could be right.
There’s a term gaining traction in Chinas tech circuit: TMD. A play on BAT, referring to Chinas incumbent internet giants Baidu, Alibaba and Tencent, this is a nod towards the countrys three rising stars: news aggregator Toutiao, Meituan-Dianping, and ride-hailing giant Didi Chuxing.
Formed through a 2015 merger, Meituan-Dianping offers a host of lifestyle services in one app. Users can buy movie tickets, have food delivered, book a haircut or karaoke booth, or search for restaurants and reserve tables using promotional deals. Tourists, meanwhile, can find hotels and buy train tickets.
ADVERTISEMENT
In the West, different firms have tended to attack different parts of this market: think Deliveroo or Yelp. But Meituan-Dianpings broad approach gives it stacks of consumer data, which it can use to better target customers and place adverts.
And investors reckon this upstart will become to local services what Alibaba has become to online retail and Tencent has become to gaming and messaging: a dominant champion whose units benefit one another. That strategy has helped Alibaba and Tencent gain significant scale and influence in China. As of April, Meituan-Dianping was reporting three-digit year-over-year increases in revenue and is operating profitably.
This latest round of funding also fires a warning to anyone considering stepping on Meituan-Dianping’s turf. It already had more than $3 billion in cash as of August. The enlarged war chest arms it for a subsidy war in food delivery with Alibaba-backed rival Ele.me, and should help it compete with the likes of Ctrip in online travel. It should also deter new market entrants.
ADVERTISEMENT
China’s local life-services market is still nascent, and many investors see it as the biggest business opportunity since e-commerce. Revenues from food delivery alone tripled in China in 2016, says Meituan-Dianping. With fresh funds in its satchel, Meituan-Dianping is well-positioned to deliver.
The company said in a statement that it plans to use the new funds to strengthen its core businesses and invest more in artificial intelligence-based technology.
(The author, Alec Macfarlane, is a Reuters Breakingviews columnist. The opinions expressed are his own.)