Meituan-Dianping shifted its focus to food delivery after realizing the unsustainability of the group buying business model.
Strategic investments and partnerships with Alibaba, Sequoia China, and General Atlantic solidified Meituan-Dianping's position in the food delivery market.
The merger between Meituan and Dianping created intense competition and a highly competitive environment in China's food delivery industry.
Meituan-Dianping and Dianping emerged as dominant players in the food delivery market, driven by capital investments, review platforms, and data-driven insights.
Meituan's success lies in its diversification into various service industries and its ability to capture value through a single platform.
Deep dives
The Rise of Wang Xing: Cloning Successes and Failures
Wang Xing, the founder of Meituan-Dianping, had a history of successfully cloning popular Western tech companies such as Friendster, Facebook, and Twitter for the Chinese market. However, during the group buying craze of the 2010s, Wang Xing realized that the group buying business model was not sustainable and shifted his focus to food delivery. Meituan-Dianping and its competitor, Dianping, raised significant funding from investors such as Sequoia China, Alibaba, and Tencent to expand their food delivery operations. Both companies faced intense competition and even clashed on the streets with their respective couriers. The merger between Meituan and Dianping in 2015 created a dominant force in China's food delivery industry.
The Strategic Investments of Meituan-Dianping and Dianping
Meituan-Dianping received funding from Alibaba, Sequoia China, and General Atlantic, which allowed the company to expand its food delivery operations to over 100 cities. Dianping raised capital from Sequoia China and Google, while also partnering with food delivery company Ele.me. These strategic investments and partnerships solidified both Meituan-Dianping and Dianping's positions in the food delivery market.
The Consolidation and Clash with ULAMA
The merger between Meituan and Dianping created a two-on-one fight against ULAMA, a food delivery company backed by Tencent and Sequoia China. ULAMA initially had a strategic advantage through its partnership with Dianping, but the merger between Meituan and Dianping led to ULAMA losing its product integration advantage. The clash between the couriers and fierce competition between the companies created a highly competitive and intense environment.
The Market Dominance of Meituan-Dianping and Dianping
Meituan-Dianping and Dianping emerged as the dominant players in China's food delivery industry. Their success was driven by capital investments, strategic partnerships, consumer touchpoints from their review platforms, and data-driven insights. The size and scale of the Chinese market provided significant growth opportunities, with the food delivery market being four times larger than North America's. The rivalry between TenCent-backed Meituan-Dianping and Alibaba-backed Dianping set the stage for a fierce battle in the industry.
Merging to Stay Competitive
The merger between Matan and Dianping was a strategic move to compete in the market. Alibaba, the owner of Dianping, decided to sell their stake in Matan and back the smaller party in the merger, which was seen as a threat to their business. This move allowed Matan to gain an advantage in the market and solidify its position as a dominant player.
Expansion into Various Services
Matan's success lies in its ability to expand beyond food delivery and enter various service industries. By leveraging its large customer base and platform, Matan ventured into travel, local services, transportation, groceries, and more. This diversification of services provided additional revenue streams and a better customer experience, resulting in significant growth and profitability.
Capturing Value and Creating Opportunities
Matan's ability to capture value in the market is evident in its profitability and market cap growth. By integrating multiple services into a single platform, Matan created a compelling offering for consumers, which translated into revenue growth and increased market share. While concerns of market monopolization and potential controversy exist, Matan's focus on value creation and expansion demonstrates its success in building a robust and profitable business.
Scale economies and review database as sources of power
One of the key sources of power for Matoin is its scale economies. As the company has a massive user base, they can amortize the fixed costs of new businesses and ventures across a large audience, making it easier for them to be profitable. Additionally, Matoin has a significant advantage in the form of its review database. The reviews and the data derived from them provide switching costs for consumers, as they would lose access to the extensive review history if they were to switch to a different platform.
The merging of Matoin and Dianping
The merger between Matoin and Dianping was a pivotal move, as it allowed both companies to avoid being squashed by each other or losing out to other competitors. If they hadn't merged, one of the companies would have likely gone out of business due to the lack of profitability and unsustainable levels of capital raising. The merger ensured both companies had a stronger position and more resources to continue competing in the market.
We dive into the history behind Meituan, the juggernaut Chinese "super-app" which dominates China's services economy, offering consumers everything from food delivery, restaurant reviews, travel booking, bike-sharing, movie ticketing, and countless other entertainment and lifestyle services all at the touch of a button. Already China's 3rd largest tech company by market cap (behind just Tencent and Alibaba), Meituan did $15 billion in net revenue in FY2019 and continues to grow rapidly. What makes it so special, and how were they able to become the market leader in such a competitive space? This story is packed with lessons that apply equally beyond China tech to high-growth company building and investing everywhere.
