China’s Meituan-Dianping Deal Mirrors Didi-Kuaidi Merger

MD1The merger of China’s Meituan, a “Groupon for China,” and Dianping, “China’s Yelp,” to create a $15 billion giant respectively backed by Alibaba and Tencent as well as several prominent VC firms,  marks the largest combo in China’s Internet industry in a year when Internet deals involving Chinese companies are pegged at $58.4 billion, nearly double the amount for 2014.

Mirroring this year’s merger of Didi-Kuaidi, in which Alibaba and Tencent put aside their rivalry to focus on a fast-growing ride-sharing market, the two Internet giants have once again set their sights on jointly taking advantage of a massive opportunity. From dining to lodging to entertainment, the two collectively cover 82 percent of the group-buying business in China.

The landmark merger sees Meituan and Dianping remaining as separate brands but working together to boost business. Following this deal, the combined company is expected to raise new capital at a higher valuation.

Both Meituan and Dianping already have substantial capital to draw upon – Meituan raised $700 million in January at a valuation of $7 billion while Dianping raised $850 million in April, valuing the company at roughly $4 billion.

Meituan’s shareholders are to own about 60 percent of the combined company, and the two current CEOs — Wang Xing of Meituan and Zhang Tao of Dianping — will share leadership as co-CEOs.

Five-year-old Meituan, part-owned by Alibaba, is hailed as the leader of China’s “O2O” (online-to-offline or location-based services market) space, holding more than half the $12.1 billion group buying market in China.

Meituan, operating in 1000 cities in China and claiming 20 million daily mobile users, reported $7.4 billion in transactions in the first half of this year, and aims to increase more than double that figure by year end.

Tencent owns about 20 percent of Dianping, which has been in operation since 2003 and now spans 1,100 Chinese cities plus 14 million-plus merchants on its platform. Dianping focuses on restaurant reviews and offers group deals. Dianping reported more than 200 million monthly active users in the second quarter, with 85% of page views coming from mobile users.

The Meituan-Dianping combo will put pressure on still another of China’s Internet giants in the same space. Baidu is investing $3.2 billion over three years into its own local services platform Nuomi.

China, as the world’s largest smartphone market, boasts huge potential for O2O services, which are still in the early stages. According to Internet consultancy iResearch, Chinese users of location-based services could rise 29 percent to 400 million by 2017. As the use of smartphones and tablets to book everything from car rides to hotel rooms becomes mainstream, the O2O market, estimated at $1.6 trillion, is large enough for multiple players.

AliCloud Continues Ramp Up In U.S. With New Data Center

AliCloud, the cloud computing arm of Alibaba Group also known by its Chinese name Aliyun, has opened a new data center: its second in Silicon Valley this year and its ninth internationally as Alibaba pursues global growth and facilitates cross-border China-North American Internet business.

The opening comes amidst a $1 billion investment by Alibaba in its cloud computing business internationally, as well as rising demand for cloud and big data analytics services, which counts 1.8 million customers. To serving West Coast customers, Alibaba has signed partnerships with cloud solutions providers including Mesosphere, Bankware Globa and Appcara.

Cloud computing is one of Alibaba’s most important verticals, and AliCloud is increasingly seen as a competitor to the more established Amazon Web Services in key markets.

Alibaba’s footprint in the U.S. is growing. Earlier this year, Alibaba partnered with the USPS to enhance cross-border e-commerce between the U.S. and China.

 

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