Founded in 2010, Meituan finally knocked on the door of IPO after eight years. On June 22, Meituan submitted a listing application to the Hong Kong Stock Exchange. If the IPO is successful, Meituan will become the largest listed company in the O2O field in history.
According to the Meituan prospectus disclosed by the Hong Kong Stock Exchange today, the number of transactions completed by the company’s platform in 2017 exceeded 5.80 billion, and the transaction volume reached 357 billion yuan. The operating income from 2015 to 2017 was 4 billion yuan, 13 billion yuan and 33.90 billion yuan respectively, an increase of 223.2% and 161.2% respectively year-on-year, and the income increased by more than seven times in three years. Meituan’s adjusted net loss continued to narrow, from – 5.90 billion yuan in 2015 to – 5.40 billion yuan in 2016, and further narrowed to – 2.85 billion yuan in 2017, and the loss was halved within three years.
Among the many start-up companies in the O2O field, Meituan should be regarded as a lucky "outlier". From imitating Groupon’s group buying business earlier, to expanding its business scope with the Amazon model as a reference in the later stage, Meituan has been reclassified into the team of Internet Tech Giants.
Make another Meituan
Meituan’s most recent financing was in October 2017, when it received a $4 billion round of F financing led by Tencent, with a post-money valuation of $30 billion. If calculated at the valuation of $60 billion listed on the market, it means that Meituan’s valuation has doubled in less than a year.
In the past few years, Meituan has shown extremely strong ambitions in its field and has become a force to be reckoned with on China’s internet landscape.
Starting from group buying, but not ending with group buying. Meituan has its own logic and considerations, starting from a single group buying business and gradually expanding to local life service related fields including Internet takeout, online travel, fresh food e-commerce, online car-hailing, shared bicycles, etc.
2015 was an important watershed since Meituan was established. At that time, it completed the acquisition with Dianping, which enriched Dianping’s store-to-store service in addition to the original group buying and takeaway business. It was a year when Meituan focused on building a platform and an ecosystem. After winning the war in the era of group buying and O2O, Meituan began to open up a new battlefield.
The intensive organizational restructuring witnessed the expansion of Meituan’s size.
In 2015, Meituan established a total of four business groups, including the takeaway delivery business group, the hotel tourism business group, and the store business group, and established a wholly-owned subsidiary, Maoyan Culture Media Co., Ltd. (later spun off and acquired by Guangguang Media).
The latest adjustment is after the completion of 4 billion US dollars financing in December last year, Meituan will build a new store business group, large retail business group, hotel tourism business group and travel business unit four business systems, and establish Strategy and Investment platform.
"Looking to the future, the opportunities and challenges are great," said Wang Xing, Meituan’s chief executive, in an internal email at the time. The opportunity is that the new business will hopefully help Meituan achieve faster growth, but at the same time, the challenges from peer competitors should not be underestimated.
According to the prospectus, Meituan has maintained partnerships with approximately 339,200 hotels in China as of December 31, 2017. In 2017, the number of domestic hotel room nights booked on Meituan’s platform totaled about 205 million, an increase of 56% over 2016, and set a record for 1.57 million domestic hotel room nights in a single day.
Online domestic attractions and excursion package booking service, as of December 31, 2017, Meituan covers about 330 cities and about 16,500 attractions across the country. Meituan provides consumers with a convenient, safe and cheap way to buy national attractions and excursion packages. In 2017, Meituan sold approximately 97 million domestic attraction tickets.
In terms of numbers, Meituan’s wine travel business has ample confidence to fight against Ctrip, and it has also begun to attack Ctrip’s core business, high-star hotels.
Not only the wine travel industry. Since February last year, Meituan has been operating a low-key online car-hailing business in Nanjing. At 0:00 on March 21, 2018, Meituan took a taxi and officially landed in Shanghai. At about 22:00 that night, Meituan announced that Shanghai had completed the first day of breaking through 150,000 orders. Obviously, Meituan extended its competitive tentacles to the Internet travel giant Didi, and caused the latter to respond violently.
These later diversified businesses provided Meituan with sufficient foundation to enhance its own value.
Benchmarking Amazon, but more than that
While bringing innovation impetus to the industry, Meituan is also inevitably involved in multi-dimensional chaos.
This is not unrelated to the ultimate goal of Wang Xing and Meituan. A person close to Meituan’s senior management once revealed Wang Xing’s thinking to "Deep Web": Wang Xing’s strategic thinking and goal has always been to be a super platform for life services, and new businesses including taxi-hailing are in line with such strategic goals in his opinion. In this way, it can not only acquire more new traffic for the super platform by continuously launching new businesses, but also find more channels to monetize the huge users and traffic gathered by the super platform, so as to continuously enhance Meituan’s value and valuation.
Mr. Wang has mentioned Amazon on many occasions and it is often compared to the tech giant, but Meituan does not seem content to stop at the Chinese version of Amazon.
In an interview with The Information, a Silicon Valley technology news outlet, Mr. Wang said: "Users can buy a lot of things on Amazon or Taobao, but both are just e-commerce platforms for physical goods, while Meituan is an e-commerce platform for services." He added, "What kind of e-commerce platform can have millions or even billions of transactions?"
In fact, in the past year, 320 million users have made at least one purchase on Meituan. Meituan says that about 90% of user traffic comes from its own app, which greatly reduces the cost of users trying new services.
Meituan is not satisfied with this. It has bigger ambitions. Wang Xing believes that Meituan will serve the middle class 650 million China in the future, and smartphones are almost all ubiquitous among this group.
Among all Meituan’s businesses, high-frequency takeaway business is the core of the core, and Meituan’s "let everyone eat better and live better" just illustrates this point.
The prospectus disclosed that Meituan’s takeaway transaction volume in 2017 was 171 billion yuan, and Meituan’s transaction volume in 2017 reached 357 billion yuan, which means that the takeaway business accounted for 47.8% of Meituan’s overall transaction volume.
In May this year, Meituan Takeaway announced that it completed more than 20 million orders per day, becoming the first takeaway platform in the world to reach such a scale. Looking back at past data, Meituan Takeaway has reached 10 million daily orders in more than 3 years since its establishment, and it took just one year to break through 20 million daily orders.
Compete with the giants
While food delivery data is growing wildly, Meituan’s competitors in the food delivery market are also escalating.
Since the establishment of Meituan takeaway, the takeaway market has evolved a new pattern with new retail as the core. If it was a one-on-one showdown between Meituan and Ele.me before, then after Ali acquired Ele.me at the beginning of this year, Meituan needs to face the coordinated battle between Ele.me, Baidu takeaway, word-of-mouth and Ali.
In dealing with the relationship with Ali, Wang Xing is very firm, and he even publicly pointed out the dispute with Ali: "The reason why it sold our old shares last year was to interfere with our financing. If you are not optimistic about this company, you can just sell it out. We have already helped them find a buyer. But he refused to sell it out. He must keep some, maybe in order to continue to cause us some trouble in the future."
According to iResearch, Meituan was the world’s largest food delivery service provider in 2017, with its market share in China increasing from 31.7% in 2015 to 56% in 2017 and 59.1% in Quarter 1 of 2018.
The difference is that Meituan is heading in a completely different direction from Ele.me, with diverse coverage centering on local services.
On the one hand, there is Ele.me, the earliest player in the takeaway market, and on the other hand, Meituan, who is backed by Tencent and the late mover, will eventually become a player in the harvest market. It is still a question in the short term. However, it is foreseeable that Ali, who is up the ante layout of new retail, and Meituan, who has just established a new retail business group, are bound to ignite the war again.
In the new travel war, Meitu also started a listing race with Didi. According to the "Hong Kong Economic Daily" report, Didi will start listing as soon as the second half of this year, initially decided to settle in Hong Kong, China, and consider different listing structures, not excluding the listing of the same shares and different rights. It is expected that the market value of Didi will reach 70 billion – 80 billion US dollars when it goes public.
Obviously, Meituan has taken the starting line one step earlier than Didi, but it remains doubtful whether it can shake up Didi, the transportation giant.
potential threat
Wang Xing’s goal of unlimited boundaries has allowed Meituan to step into some of the most expensive battlefields of the Chinese internet in a short period of time. But when it tries to raise more capital from domestic investors to expand its business, it has few options.
The Information reported in early June this year that Wang Xing had approached SoftBank for a capital injection, but was unsuccessful. Meituan had also intended to raise $3 billion from the Private Offering Fund at a valuation of $40 billion. Meituan later denied the news.
Meituan’s earnings pressure cannot be ignored. Although other businesses other than food delivery have achieved overall profitability, with the competition in the food delivery market "three into two" and the competition with Didi in the travel field, Meituan still needs a lot of capital investment.
According to the prospectus, Meituan’s adjusted net loss fell from 5.90 billion yuan in 2015 to 5.40 billion yuan in 2016, and fell to 2.85 billion yuan in 2017, halving the loss within three years.
In addition, the travel business is also the source of Meituan’s cost. Although it has experienced many close battles in the group buying and takeaway markets and achieved good results, Meituan is undoubtedly a new recruit in the travel industry, and there are still many variables in whether it can achieve a turnaround against the wind. Investment subsidies are obviously the best way to quickly gain market share.
According to the "deep net", Meituan taxi in Nanjing on the line when the single subsidy is about 20 yuan, if according to its announced in December 2017 the daily order volume exceeds 100,000 single calculation, its subsidy in Nanjing only one day reached 2 million.
36Kr also revealed the power of Meituan taxi investment, including Beijing and other cities on the line of taxi business, the company prepared 1 billion dollars (about 6.30 billion yuan), and not capped.
Meituan acquired Mobike in April for a total price of $3.70 billion, including 65% cash, 35% Meituan stock, and assumed Mobike’s debt between $500 million – $1 billion.
In an interview with foreign media, Wang Xing said, "In the past few years, we have been working hard to ensure that the company is always ready to go public at any time." In addition to financial considerations, another impetus for Meituan’s listing came from the many investors behind it. Data show that Meituan has raised a total of 8.30 billion US dollars since its establishment, and investors have reached the moment to reap the rewards.
In the eight years since its establishment, Meituan has experienced many variables in the market, and it can be said that it has come to this day through thorns. However, going public is obviously not the end of Meituan, and a competition with giants has really begun.
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