This week on TechBuzz China by Pandaily, co-hosts Ying-Ying Lu and Rui Ma tell you how Wang Xing, the legendary Chinese serial entrepreneur who started out with “copy to China,” is now standing behind one of the largest unicorns in the world, Meituan-Dianping.
TechBuzz China by Pandaily is a weekly technology podcast focused on giving you a peek into what’s buzzing within the tech community in China. It is co-hosted by Ying-Ying Lu and Rui Ma, who are both seasoned China watchers with years of experience working in the technology space in China. They uncover and contextualize unique insights, perspectives, and takeaways on headline tech news that don’t always make it into English language coverage.
Meituan-Dianping has dipped its toes in almost EVERY aspect of any Chinese’s life– including food delivery, payments, ride-hailing, movie tickets sales, and travel booking. The fifth-largest unicorn is the result of a $15Bn merger between the Groupon-clone Meituan and the Yelp-predecessor Dianping, and was last valued at $30Bn, possibly soon to double in valuation if the rumored upcoming IPO holds true.
How did Wang Xing create one great venture after another, from the Facebook copycat Xiaonei (now RenRen) to the Twitter clone Fanfo, yet Meituan being his only real success?
Why did the the review app Dianping, created a whole year before Yelp, merge with Meituan? And why is Wang Xing now leading Meituan to compete in all these industries? Listen to this week’s episode to find out!
As always, you can find these stories and more at pandaily.com. Let us know what you think of the show, and don’t forget to follow us on Twitter at @techbuzzchina and to like our Facebook page!
Full Transcript
We are TechBuzz China by Pandaily, powered by the Sinica Podcast Network!
We are a new weekly podcast focused on giving you a peek into what’s buzzing within the tech community in China. We uncover and contextualize unique insights, perspectives and takeaways on headline tech news that don’t always make it into English language coverage. TechBuzz China is a part of Pandaily.com, a new English language site that tells you “everything about China’s innovation.”
[00:02] We are talking about a superapp, or an app that does many, many things. Wechat is one of them, it does messaging, payments, social media, gaming, — but today we are talking about Meituan instead, the super app that is like a Yelp + Groupon + Ubereats + Fandango, and they are now also doing bikesharing, and ridehailing. Last valued at $30Bn, Meituan now makes it to the 5th largest unicorn in the world, after Ant, Xiaomi (rumored IPO valuation), Uber, Didi. It is now rumored going public at $60Bn in Sept.
[01:56] Big THANK YOU to— Liyun Li, Lillian Kho, Jamila Trindle. If you enjoy listening to us, please take the time to leave us a rating or review on iTunes and elsewhere!
[02:20] Almost all the Chinese characters in the HBO show Silicon Valley were scammy copycats with really questionable ethics indeterminate intelligence, looking at the role they have Jimmy Yang play, and even the latest twists and turns set in China fail to have a character who is both clearly smart and clearly ethical. But today we are talking about a copycat in a different league. Wang Xing is a master copycat, is category defining, and he copied not as much as integrated.
[03:11] Wang Xing is the founder of Meituan and only 39 yrs old. He is from Fujian, a province known for producing clever businessmen, and went to Tsinghua, arguably the top university in China, where he studied electrical engineering. In 2001, after graduation, he was accepted into the PhD program at University of Delaware, but didn’t last long before succumbing to the lure of entrepreneurship and returned to China in 2004 to start a company with his former classmates.
[03:36] He has stated that he had no idea what he was doing, “we were totally in the dark” But even from beginning his projects were social in nature, his first project was a sort of friendmaking website, and by fall of 2005 the team had decided to make university social networks their focus.
[03:58] They studied Facebook carefully and learning from the mistakes of their prior projects, launched Xiaonei, which means, “inside campus.” Within 3 months, they had 30K users, which is a lot for the time. However, with no money to buy more servers and bandwidth, he had to sell it to Joe Chen for about $2MM in Oct 2006, He was just 27 yrs old at the time. He wrote defiantly quoting Winston Churchill: “This is not the end. It is not even the beginning of the end. But it is, perhaps, the end of the beginning.”
[04:36] Xiaonei, rebranded as Renren later on, raised money from Softbank and IPO’ed in May 2011. I (Rui) actually worked on this IPO, and it was known as the Facebook of China at the time. At IPO, it raised $740MM, and made Joe a billionaire. Wang Xing didn’t get much of that upside though, because he quit Renren in back mid 2007 to launch Fanfou, which was the very first Chinese clone of Twitter. After cloning Facebook, he set his eyes on Twitter.
[05:09] Fanfou is such a great name, it actually comes from an ancient text where this noble person is asking after the health of a very old official, and literally means – is he still eating? Fan meaning food, and Fou meaning whether or not. However, in the 2000s it became a meme meaning “have you eaten?” 吃了吗 which any beginner Chinese student will know is the Chinese way of asking, hey how’s it going?
[06:01] Fanfou’s earliest adopters were understandably geeks, programmers, nerds, etc. But after being really hot in 08 and 09, it fell victim to censorship and was shut down, along with many competitors, in the summer. And it was inoperable for over a year and a half, or 505 days. During this time, however, Sina Weibo came along and won the market, and this marked the second time he lost a great multi-billion-dollar opp.
[06:35] Wang Xing probably thought to himself, “This is still the beginning”, because by March 2010, he had launched Meituan, yet another clone, this time of Groupon. Groupon was launched in late 2008 and was THE darling of the internet industry. Which meant, of course, that people were gonna try to replicate the model, globally, especially since it was a relatively low tech biz. And in China, who better than Wang Xing, who had already spent five years of his life trying to understand how to build communities online, because people at the time understood it as “social selling” even though it wasn’t really. Clones for Groupons sprang up everywhere, and nowhere more quickly than in China where it was known as the Thousand Groupon War or 千团战.
[07:35] If Wang Xing was mostly known to geeks on Fanfou before the war, he became really known after starting Meituan. The Thousand Groupon War was one of the first bubbles of Chinese internet, when a lot of capital poured in and everyone was getting funded left and right and most of it went to user subsidies in the form of discounts.
[07:53] Which was great for consumers but terrible cash flow for the startups, and pretty soon, by the end of 2011, just a year and a half later, the thousand strong Groupon clones had whittled down to just Wang Xing’s Meituan, plus a few others, including ones started by the internet giants, BAT.
[08:09] It was really crazy. But it really took entrepreneurship to a whole new level. Group buying was a pretty easy biz to start. So everyone had one. Rui invested in not one but THREE founding teams who had previously started top 10 China groupbuying businesses.
One of them actually went public eventually in 2015 and was called 55tuan, Rui didn’t invest in that co, she invested in their subsequent company, which redirects to Meituan now.
Meituan outlasted its independent competitors and is really the only one you go to now.
But while it had pretty much won the Groupon war back in 2011 and 2012 the respite was brief … because it quickly found itself in another war. The war of takeout.
[09:06] Dazhong Dianping or just Dianping, which literally means reviews, was both a great product for its time, it had a pretty introverted founding team, so they were not really loud in either Chinese or Western media. But they have such a good story. 1) they’re founded by cal alumni, my alma mater and 2) they were founded in 2003, almost a whole year before Yelp was launched. At least for the first nearly ten years of existence, Dianping was very similar to yelp. A review service for restaurants and other offline services. It basically had a monopoly in the cities it operated in, pretty much everyone used it, especially for anything food related
[09:49] To this day I (Ying-ying) rarely get any invites for getting together that isn’t a Dianping link. It is better than Yelp because from very early on it allowed you to rate the restaurant on different dimensions, such as taste, ambience, and service, and even tag specific dishes.
It was one of the first investments by Sequoia China when it got $1MM way back in 2006. Google also made an investment, one of its very few in mainland China, in 2007, for $4MM
[10:20] It was really capital efficient and didn’t raise any more money until 2011, when it accepted $100MM to grow its groupbuying and other businesses, which was by this time called O2O in China – Online to Offline, kinda like how everything is AI or blockchain these days, everything was O2O in China for some good 3 years.
[10:50] Back in 2013 Zhang Tao, the founder and CEO of Dianping, predicted that groupbuying would die. Especially for Dianping, who already knew what users were looking at and considering to buy. So Dianping put in “flash discounts,” which allowed users to get instant discounts off their purchase in the store … basically like coupons. Because users of Dianping had such high intent to purchase already, this obviously worked very well, way better than Groupons that directed traffic from scratch and tried to create intent to purchase.
[11:20] However, Dianping, being born in the early 2000s and having just a generally slower approach to expansion, had really locked down the first and second tier cities, but much slower to expand compared to its newer “move fast break things” competitors. The media called it a “slow company,” 慢公司.
[11:38] But group buying was really spurred at that time the largest wave of venture capital investment, and even slow Dianping was forced to adapt. It then expanded into food delivery, and small business services. It made a $80MM investment in ele.me, a food delivery service that was recently bought by Alibaba for $9.5Bn. At the same time, Tencent invested for a 20% stake back in 2014.
[12:09] Things didn’t go as well as they seem. These were capex intensive businesses. Getting Groupons required thousands of offline salespeople going door to door signing up vendors on individual campaigns. A lot of O2O businesses were capital intensive offline. Food delivery isn’t cheap as it required thousands of delivery workers on scooters. Meituan, who already had millions of users for Groupons, saw the same opportunity in food delivery and small business services. And had the same need for capex. For all of 2015 it seemed, there were constant rumors about upcoming megafundraisings for both companies, but none were confirmed. Both were losing money very quickly.
[13:00] In October 8, 2015, smack in the middle of Golden Week, or China’s annual weeklong national holiday, Dianping and Meituan suddenly announced a merger. The press release said that the transaction had the support of Alibaba, Tencent, Sequoia, three of the major shareholders. The new combined entity would have co-CEO and co-Chairman roles, with Zhang Tao and Wang Xing taking up both. So at least on the surface it looked like a complete merger of equals. Even the new name was a combination of the two companies. Xin Mei Da, or new Mei Da. Mei for Meituan of course and Da for 大众点评, Dianping’s full name. Both brands were supposed to operate independently after the merger, and focus on “innovation.” The combined entity would have 80% market share of the group buying business and would immediately try to complete a $2-3Bn fundraise.
[14:05] Just over a month later, on 11/13/2015, the new company announced key HR changes. Zhang Tao was forced out of the company. I remember there was a photo of him sobbing on the shoulder of his cofounders that was all over the news that week. It was real sad.
Team Wang Xing had won. First he had survived the Thousand Groupon War, now he had survived the Dianping merger. But he wasn’t going to stop there.
[14:35] There’s a common saying in Chinese about the four pillars of life. 衣食住行。clothing food shelter and transportation. Alibaba and Tencent have been especially aggressive about taking a piece of all 4 of those businesses as much as possible. Chinese people often joke that there’s not one day that can go by without at least one of the companies or their subsidiaries interacting with you and knowing what you’re up to.
Wang Xing had a leading position in Food, or 食, but he was not gonna let the other ones go so easily. Where others saw big competitors in fashion (Alibaba), lodging (Ctrip), and transportation (Didi), he saw synergies and the opportunity to integrate.
[15:19] Meituan bought its own payments license in 2016 and so can transact independently of Alipay and Wechat payments. It aggressively expanded into travel and now has wrestled significant market share from Ctrip and Qunar. It bought bike-sharing leader Mobike in April 2018 for $2.7Bn. It has began experimenting with ride hailing last year and has engaged in open war with Didi this year, getting 20% market share quickly in Shanghai and Nanjing.
[15:53] A year ago, in a rare public announcement, Meituan said it sells 1.2MM rooms sold daily in its hotel, 1.15MM tickets sold to travel destinations, and 11MM takeout orders per day. In 2018, on its 8 yr anniversary, it claims to have 600MM users and 5MM businesses on its platform.
And on the food delivery front? Meituan is winning. Earlier this year, a report showed that in 2017, Meituan had market share of 54% [1], followed by ele.me of 30% and Baidu of 14%.
Wang Xing is doing even better in group buying. In 2016 post merger, Meituan-Dianping had 75% marketshare, with Baidu Nuomi a distant second. Wang Xing is officially kicking butt.
[16:49] James Hong, a long time friend of Wang Xing on why he thinks the guy is so successful:
“My name is James Hong, I am an angel investor, and I met Wang Xing around 2006 when he was working on a startup called Xiaonei with a team of 4 or 5 guys in Beijing and I met him back then when he was trying to scale that up and I was able to help him out a little bit with that. I’ve known him about ten years and have kept in touch with him over the years as friends.”
James is being modest. He’s the founder of Hot-or-not, which is basically a site that does exactly what you think it does, and if you look him up on Wikipedia, he is known to have had a “significant influence” on the people who went on to create Facebook and Youtube.
He had some observations about Wang Xing:
[17:45] “Wang Xing has a lot of characteristics that make him a very strong entrepreneur. He’s obviously very smart and thoughtful, but he’s also kind of very unemotionally methodical about his approach to solving problems. In addition to that, he has a very low ego, he’s smart but he also recognizes that there are other smart people in the world and that he seems to spend a lot of effort to speak to other people to get their perspectives and look for more data to solve his problems. In doing that he’s also very patient and I think he has a lot of faith in common sense and believes that hype is not what wins in the end, but actually solving problems and making forward progress on his companies. So he’s not the type of person who gets caught up in trying to look successful. He just is very heads down and focused on solving his problems and moving his business forward and I think that’s what makes him so successful.”
We then asked James what he thinks of Meituan specifically:
[18:55] “I’m very bullish on Meituan and I always have been and mainly because of Wang Xing. I remember ten years ago when it was pretty early days in the company, he was telling me about his competitors and some of them he felt were kind of making up numbers or at least pumping them up in ways that were not sustainable and didn’t really make much business sense. Rather than copying those tactics, I remember saying that he would never lie about his numbers and I think that’s the main thing, he won’t lie to others and especially won’t lie to himself, and that’s what makes him face those problems, the business truths that he has to solve, whether they are pretty or not. He just has this laserlike focus on improving his company to the point where it eventually starts working.”
[19:40] As Wang Xing said to our friend at The Information back in April, it wants to become the Amazon of services. If the other companies are making people’s virtual lives better, that’s fine. But he’s interested in that O2O online to offline piece. Because until we all become cyborgs, that’s still where we are spending a lot of our time and money, in the offline world. It’s kind of like the exact complement to livestreaming, which is all about living online. And Wang Xing wants to capture all of that.
[20:08] If you google Amazon of services, that was Thumbtack’s tagline back in 2011, as well as many other startups that have come around since. But none of them have come close to what Meituan has been able to achieve.
[20:27] Meituan did raise that large round of funding post merger after all. It ended up being $4Bn at a $30Bn valuation back in October 2017. But earlier this year, there’s already been leaks that Wang Xing is headed for an IPO in Hong Kong by the end of 2018, to raise another $3Bn.
[20:41] Media site The Information updated that news last week saying that the rumored price is a whopping $60Bn. In comparison, Groupon has a market cap of about $2.5Bn these days and Yelp is not much better at $3.5Bn. In this case, the copycat has really outshined and outgrown the original.
[21:03] James’s view about that:
“Wang Xing succeeds because he’s patient and he outlasts his competitors. He never rests on his laurels. He knows that until he’s done he can’t stop improving and he just has to keep moving forward and this seems to be a common trait among my more successful friends I’ve noticed. And Wang Xing, definitely, in addition to being smart, in addition to being good at figuring out strategies and tactics and things like that he also just has a personality where he can work through these things and kind of, go through the painful process of solving those problems until he’s finally at the finish line.”
[21:44] Wang Xing posted on Weibo the day Meituan was founded, about eight years ago on 3/4/2010: “Every time you spend money, you are casting a vote for what kind of world you want.”
So what do you guys think, would you cast a vote for Meituan?
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[1] Note that the stats of China’s food delivery market share we quote here is according to an industry report released by research agency DCCI as of July 2017. This is different from Wall Street Journal’s recent piece on Meituan, where it quotes food deliver.
