Bottom line: Alibaba’s purchase of Ele.me and Tencent-backed Meituan’s purchase of Mobike underscore the growing rivalry between Alibaba and Tencent, as each uses its deep pockets to try and dominate money-losing emerging sectors.
Alibaba swallows Ele.me
Trade wars are making all the big headlines these days in US-China news, forcing a couple of mega-mergers that would normally be front-page news into the back pages. Each of the latest deals is quite significant for China’s Internet, as both quietly underscore the increasingly intense rivalry between titans Alibaba (NYSE: BABA) and Tencent(HKEx: 700).
The larger of the deals has Alibaba forking out more than $5 billion to buy the remaining stake of Ele.me it doesn’t already own, adding important fire power to the leading takeout dining service whose chief rival is Meituan-Dianping. In a separate but also quite large deal, Meituan, which counts Tencent as one of its largest backers, has acquired leading shared bike operator Mobike in a deal that values the latter at about $2.7 billion. Read Full Post…
Bottom line: Alibaba’s potential purchase of Ele.me could be the biggest piece yet in its pursuit of a “new retail” model, but could result in a case of indigestion as it tries to make the company profitable.
Alibaba salivates at Ele.me
When it comes to acquisitions, e-commerce giant Alibaba(NYSE: BABA) seems to have an insatiable appetite these days. After investing some 80 billion yuan ($12.7 billion) in brick-and-mortar retailing over the last couple of years, the company is now setting its eyes on take-out dining specialist Ele.me, in a deal that could cost it around another $5 billion.
This particular buying binge does seem a bit more focused than Alibaba’s previous M&A patterns, which always felt a bit more random to me and covered a wide range of areas. In this instance, the company is pursuing founder Jack Ma’s vision of a “new retail” landscape that will combine Alibaba’s mastery of e-commerce with more traditional brick-and-mortar retailing. Read Full Post…
Bottom line: Baidu could announce a sale of its takeout dining unit to Ele.me by the end of the month, in a smart exit that will leave the industry with two major players and could result in a major write-off for Baidu.
Baidu takeout gets taken out
In a move that’s been a long time coming, media are reporting that search giant Baidu (Nasdaq: BIDU) is on the cusp of a deal to unload its aging takeout delivery service to rival Ele.me, in a deal that would essentially whittle the ultra competitive space down to just two players. This particular development follows quite a typical pattern for Baidu, whose founder Robin Li has discovered he can quickly gain market share in new areas by throwing lots of money at them, sometimes through organic build-ups and sometimes through acquisitions.
Unfortunately, Li also has a strong track record of building up money-burning black holes that become problematic because they consume so much cash that they can’t be easily shut down. He has closed at least one such venture in the past, an e-commerce venture with Japan’s Rakuten. In another instance he sold off his Qunar online travel service to industry leader Ctrip (Nasdaq: CTRP). Read Full Post…
Bottom line: Alibaba could take control of Ele.me after the latter’s latest fund-raising, and then make a bid for Baidu’s take-out dining service, leaving just two major players in the sector as it nears a more sustainable state.
Alibaba set to swallow Ele.me?
The take-out dining wars have taken another interesting twist, with word that one of the oldest players, Ele.me, is on the cusp of raising a fresh $1 billion in new funds. What’s interesting about this latest fund raising is that it’s being led by Alibaba (NYSE: BABA), which is also trying to carve out a niche in the market through its own Koubei take-out delivery service. But even more intriguing is the possibility that this new funding could be aimed at giving Ele.me the firepower it needs to buy out Baidu’s (Nasdaq: BIDU) take-out delivery service, which is reportedly being shopped by the country’s leading search engine.
There are many threads to this story, but the bottom line is an end game is slowly coming into sight for China’s take-out delivery business, following the typical boom period we often see for this kind of emerging sector. The current field of take-out dining services is dominated by three names, Alibaba-backed Ele.me, Tencent-backed (HKEx: 700) Meituan-Dianping and Baidu take-out. Read Full Post…
Bottom line: Alibaba’s Koubei is unlikely to gain major traction despite its $1.1 billion in new funding, due to its late arrival to a crowded O2O take-out dining space already dominated by Baidu, Ele.me and Meituan-Dianping.
Koubei raises $1.1 billion
The longer I stay in China, the more the latest stories coming from the Internet sector look like I’ve seen them before. That’s certainly the case with Koubei, the Alibaba (NYSE: BABA) online-to-offline (O2O) take-out dining delivery service, which is close to landing a fresh $1.1 billion in new funding. In this case, Alibaba’s extremely late arrival to the space looks a lot like its vain attempt to play catch-up to Tencent’s (HKEx: 700) WeChat with a service called Laiwang back in 2013. Read Full Post…
Bottom line: A Baidu downgrade by Deutsche Bank and new developments in its takeout dining and driverless car businesses highlight its heavy reliance on its search business and costly diversification attempts with no immediate profit potential.
Baidu teaming with Starbucks?
A trio of headlines are spotlighting the difficulties faced by Chinese Internet giant Baidu(Nasdaq: BIDU) as it tries desperately to diversify beyond its core online search business. At the center of this news flurry is a downgrade of Baidu’s stock by Deutsche Bank, which looks mostly related to the company’s big revenue decline after a scandal earlier this year. But the other 2 headlines, one about Baidu’s driverless car initiative and the other about its online take-out dining service, both nicely highlight the huge money that Baidu is spending on its new businesses, nearly all of them losing big money. Read Full Post…
Bottom line: Ele.me’s new fees will raise the ire of restaurant partners on its platform but is unlikely to produce a mass revolt, and reflects growing pressure on the company to find new revenue sources and become profitable.
Restaurants grumble over new fees from Ele.me
Signs of stress are showing up at leading online take-out dining service Ele.me, which is facing howls of protest from its restaurants partners over a major new fee. This kind of mass complaining is relatively common in China’s cyber realm, especially in industries where online companies are losing money and desperately looking for new revenue sources. The take-out dining industry certainly fits that description, as stiff competition from names like Baidu (Nasdaq: BIDU) and Meituan-Dianping forces companies like Ele.me deeply into the red. Read Full Post…
The following press releases and news reports about China companies were carried on August 6-8. To view a full article or story, click on the link next to the headline.
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Chinese Buyer Purchases UK Premier League Soccer Club West Bromwich Albion (Chinese article)
Apple (Nasdaq: AAPL) Removes Toutiao News App From China Store (Chinese article)
E-House (NYSE: EJ) Announces Shareholder Approval of Merger Agreement (PRNewswire)
Ele.me Threatens Merchants with Removal for Failure to Pay Technology Fee (Chinese article)
Tesla (Nasdaq: TSLA) EV Owner Reports First China Accident Using Self-Drive Mode (Chinese article)
More than a month after Shanghai launched its campaign to tame our unruly traffic, I want to use this space to call for a similar campaign that is badly needed to clean up our city’s increasingly chaotic sidewalks. Anyone who lives here will know I’m talking about the legions of delivery bikes and scooters that have exploded onto Shanghai’s sidewalks over the last few years, creating a nightmare for those of us who actually use sidewalks for walking.
This particular tale began 5 or 6 years ago with the rapid rise of e-commerce, which spawned a flood of courier services delivering everything from major items like computers and furniture to tiny parcels like USB thumb drives. But the problem has become much worse over the last year with a newer explosion of take-out dining services, which have unleashed thousands more bikes and scooters onto our sidewalks. Read Full Post…
Bottom line: Beijing and local governments should move more aggressively to regulate O2O takeout dining services, and encourage consolidation around 2-3 players with the scale and resources to ensure the sector’s healthy development.
Ele.me gets big new funding from Alibaba, Ant
New signs of overheating emerged in China’s online takeout dining realm last week, as one of the nation’s top players and a smaller rival landed major new funds to fuel their money-losing operations. The pair of deals saw China’s two leading e-commerce companies, Alibaba (NYSE: BABA) and JD.com, collectively pump nearly $1.5 billion into new investments in the space, even as other major players like Tencent (HKEx: 700) and Baidu (Nasdaq: BIDU) are also beefing up their services.
The flood of new money has produced a rapidly escalating round of price wars, offering deals for consumers but creating chaos in the market and on the streets of major cities like Beijing and Shanghai. This kind of boom is quite typical for China’s emerging high-tech sectors, but in this case also poses unique challenges due to practical dangers such as threats to food and road safety. Read Full Post…
The following press releases and news reports about China companies were carried on April 14. To view a full article or story, click on the link next to the headline.
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