Issue 23 | February 5, 2018

996 Podcast: Tao Zhang of Dianping on Merging with Meituan and “The Groupon War”
In this episode, we interviewed Tao Zhang, founder of Dianping (大众点评), a company known as “the Yelp of China” which is much more than that. Founded before Yelp, Dianping offers restaurant reviews, bookings, coupons, group buying, and many more services. In 2015, Dianping merged with its rival, the group buying giant Meituan (美团). The new company, Meituan-Dianping (新美大), is now worth $30B and the fourth most valuable startup in the world.

This episode explores questions like: What is it like to have 5000 companies fighting for market share in the same sector? How do you approach a merger between two multibillion-dollar companies? How should startups in China think about strategic investments from giants like Tencent and Alibaba?

Memorable quotes from the episode:
“In China, having an idea is not enough. It’s about speed and execution.”
“The US has a lot of regulations. In China, you do it first, ask for permission later.”
“When you have a billion hungry and hard-working people, and a good idea, you will have hundreds of copycats.”
“If VCs don’t think too much of your category, it’s actually a good thing.”

Listen now on iTunesOvercast, or SoundCloud.
We’re on XimalayaFM too! Just search “GGV996.”

A Chart: Amazon vs. Alibaba
We compared the spheres of influence of the world’s two e-commerce empires – Amazon and Alibaba. Though Alibaba had a later start, it actually entered a few areas (offline grocery retail, healthcare, financial services, etc.) earlier than Amazon. It will be interesting to see which sectors Amazon expands into next.
Amazon vs. Alibaba
Alibaba Buys Stake in Ant Financial

Alibaba said it will buy 33% of its affiliate Ant Financial in exchange for certain intellectual property rights. The new stake is widely regarded to pave the way for Ant Financial to go public.

“Equity ownership allows us to participate in the long-term value creation of Ant Financial as opposed to the quarter-to-quarter fluctuations of a profit share,” saidAlibaba Executive Vice Chairman Joe Tsai.

Alibaba also announced its Q4 results. Total revenue grew 56% YoY, while operating margin decreased from 39% last year to 31% this year. The decline in profitability can be attributed to Alibaba’s foray into brick-and-mortar retail and offline logistics, which has lower margin but is integral to the company’s long-term vision. Tweet this

Toutiao and Baidu Go to War
One buzzword that dominated headlines this week was “百头大战”, or the Baidu-Toutiao war. Online media giant Bytedance (a.k.a Toutiao), a GGV portfolio company, has sued Baidu for unfair competition as the pair’s clash for advertising market share intensifies.

Toutiao is accusing Baidu of using its monopolistic advantage in China’s search engine market to mislead users and damage Toutiao’s image. Citing an example, Toutiao said the top result for a Baidu search of “Jinri Toutiao” was a month-old news article about Toutiao’s violation of digital content regulations.

Toutiao Baidu war

Bytedance and Baidu are direct competitors not just for online advertising, but also for top talents in AI and machine learning. On the 996 Podcast, Liu Zhen, the SVP of Bytedance, explained the company’s vision and how it generates revenue. Listen on iTunesOvercastSoundCloud, or XimalayaFM (search “GGV996). Tweet this

Ofo Reportedly Cash Strapped
Ofo, one of the largest players in China’s crowded bike-sharing market, is reportedly cash strapped and having trouble raising money. The ride-sharing giant Didi Chuxing (a GGV portfolio company), the largest shareholder of Ofo, recently announced it is rolling out its own bike-sharing service, a sign that it no longer deems its relationship with Ofo exclusive. Multiple media outlets interpreted the move as “Didi turning its back on Ofo.”

Citing anonymous sources, Caixin has reported that conflicts between the management teams of Ofo and Didi led Didi to use its veto right to block new investors entering Ofo.

Ofo’s two major competitors, Mobike and Hellobike (a GGV portfolio company), are both awash with new funding after recent financing rounds. Mobike reportedly raised $1 billion two weeks ago, while Hellobike raised $1 billion in December and is reportedly completing another $1 billion round this month. Ofo’s most recent fundraising was last July, when it raised $700 million from investors including Didi and Alibaba (though both of them now have a troubled relationship with Ofo, according toThe Information). Tweet this