There are few stories as important right now as the internet being ripped asunder by the increasing animosity between the U.S. and China. Eric Schmidt, the former chairman of Alphabet, said last week at a private event in San Francisco that “I think the most likely scenario now is not a splintering, but rather a bifurcation into a Chinese-led internet and a non-Chinese internet led by America.”
At the heart of this split is the death of the internet as we once knew it: a unified layer for the transfer of human knowledge. As the internet has gained more and more power over society and our everyday lives, the need by governments worldwide to tame its engineering to political and moral ends has increased dramatically.
About four years ago, I wrote a piece called “From internet to internets” in which I argued that this sort of split was obvious. As I wrote at the time: “Across the world, it is becoming abundantly clear that the internet is no longer the independent and self-reliant sphere it once was, immune to the peculiarities of individual countries and their laws. Rather, the internet is firmly under the control of every government, simultaneously.”
Yet, the rules that countries like Spain put in place around media and news didn’t split the internet as I had predicted. The economic power of the U.S. and China did. Alibaba, Tencent, and Baidu may have declined in value this year, but their combined market caps is still in the trillions of dollars. WeChat, which is owned by Tencent, has more than a billion users, and while only 10% of its user base is estimated to be outside China, the ties are growing as more countries build economic bridges with the mainland.
Sometimes, those bridges are quite literal. Through the Belt and Road initiative and fledgling institutions like the Asian Infrastructure Investment Bank, China has provided massive outlays to other nations primarily around infrastructure, building partnerships and deepening economic ties.
China and the U.S. are increasingly fighting a global battle for tech legitimacy (Photo by Jason Lee / AFP / Getty Images)
Chinese-made telecom infrastructure. Chinese handsets. Increasingly Chinese apps. For all of the concerns of Congress and national security officials about Huawei and ZTE equipment entering the American or Australian markets, the real fight for the future of the internet is going to be in precisely these developing regions which have no incumbent technology.
That’s what has made the Trump administration’s strategy toward trade negotiations with China so miserable to watch. The focus has been on repeated rounds of tariffs that will ensure that Chinese goods — particularly in high-tech industries — are more expensive to American consumers, allowing domestic manufacturers to better compete. Yet, the policies have done nothing to ensure that American values around the internet are exported to continents like Africa or South America, or that Cisco’s equipment will be chosen over Huawei’s.
That might be changing at long last. The Financial Times reported yesterday that the Trump administration is preparing to double down on the Overseas Private Investment Corporation, which offers commercial lending facilities to developing countries. It would be merged into another agency and given a much more rich budget (as high as $60 billion) to go and compete with Chinese financing around the world.
Maybe that measure will be successful in closing the strategic distance between the two countries. Maybe rumors that the administration is going to broadly double down on the trade war will lead to a much more comprehensive set of policies.
But along the way, regardless of what happens, these skirmishes will lead to a fracturing of the internet, and along with it, the death of the internet as a bastion and voice of freedom and knowledge for all people everywhere.
Meituan-Dianping (3690.HK) enjoyed a strong debut today in Hong Kong, a sign that investors are confident in the Tencent-backed company’s prospects despite its cash-burning growth strategy, heavy competition and a sluggish Hong Kong stock market.
During morning trading, Meituan’s shares reached a high of HKD$73.85 (about $9.41), a 7% increase over its initial public offering price of HKD$69. When Meituan reportedly set a target valuation of $55 billion for its debut, it triggered concerns that the company, which bills itself a “one-stop super app” for everything from food delivery to ticket bookings, as overconfident.
While Meituan, the owner of Mobile, is the leading online marketplace for services in China, it faces formidable competition from Alibaba’s Ele.me and operating on tight margins and heavy losses as it spends money on marketing and user acquisition costs. As it prepared for its IPO, Meituan was also under the shadow of underwhelming Hong Kong debuts by Xiaomi and China Tower. Like Xiaomi, Meituan is listed under a new dual-class share structure designed to attract tech companies by allowing them to give weighted voting rights to founders.
The sponsors of Meituan’s IPO are Bank of America Merrill Lynch, Goldman Sachs and Morgan Stanley.
On May 11 Netflix released the teen dramedy “The Kissing Booth” just as the school year was wrapping up for teens across the country.
By June, the company had a smash hit among the tweenage set, and Wattpad, the company which owned the rights to the The Kissing Booth, had its first true breakout vehicle. The story, written on Wattpad’s publishing platform by Beth Reekles, was a proof point for the company’s thesis pitching a new twist on the old model of discovering stories and creative talent for the entertainment industry.
Behind the success of the film is a nascent movement among startup companies that are trying to open the doors of Hollywood’s dream factory to a broader group of creative professionals by riding the wave of fan fiction and user generated content all the way to the Paramount lot (or the Disney lot, or Sony Studios).
“In this obvious period of disruption in the entertainment industry how we’re finding stories is evolving,” said Wattpad Studios chief Aron Levitz.
YouTube, the short-lived Vine app, and Instagram have all created new platforms for discovering potential on-camera talent, and Amazon, Apple, Facebook, Instagram (again), Netflix, and YouTube (again) have smashed the distribution system for television and movies. But these platforms and the traditional studios they’d like to supplant have a voracious appetite for stories to tell and (many) are reluctant to risk millions of dollars behind something unproven.
Hollywood has always borrowed (or stolen) from other media to entertain the masses, but it seems like the fields it’s foraging in for new stories have narrowed to a few serialized playgrounds (comic books, old television shows and movies, and wildly successful young adult genre fiction).
While there are thousands of flowers to be found there, new tech-enabled companies are suggesting there might be other patches where new talent can be discovered, harvested and leveraged for corporate gain and viewer delight.
Startups like Wattpad and Tongal (for directors and cinematographers), and new financing platforms like Legion M (for producing features) are aiming to elevate new talent and provide what the companies hope will be built-in audiences for successful new programming on platforms like Netflix, Apple, and others — and the hundreds of networks that are vying for attention in an increasingly fragmented media landscape.
It wasn’t always this way. When Tongal was created, roughly a decade ago. the entertainment industry looked much, much differently than it does now.
Ten years ago that Netflix announced it would let its DVD subscribers watch streaming video as well — mostly old movies and syndicated shows that had already made their millions for the big networks and studios. That was the starting gun of what would become a race to roll up talent and gain audience in a creative landscape that was becoming increasingly competitive. With new entrants joining at every new lap.
At the time, Tongal was a discovery mechanism for new talent and a way for brands to pay for user generated content they liked. The company raised $15 million from Insight Venture Partners to harness the growing popularity of social media reach to create potentially viral videos for brands.
Tongal is still working under the thesis of user generated content, but the difference now is the millions of dollars these videos and their creators can bring in — and the ability o energize and inspire a fan base to connect more directly and engage more frequently with new titles. All the while Tongal gives studios a window into a wider world of talent.
One creator on the platform, Tucker Barrie, has gone from making short videos for social media for IAMS to a career as an animator on projects like Isle of Dogs. “Tongal is a good spot for people who don’t have a lot of experience to gain a lot of experience and make a name for themselves,” Barrie said.
In the past year the company has inked a deal with National Geographic to produce a series called WILD After Dark. The first late-night series from National Geographic WILD, the new episodes will feature shorts from members of the Tongal platform on animal-related subjects. It launched with an open call for submissions in February.
More recently Tongal has linked up with Wattpad to call on its network of creators to pitch a treatment for Wattpad’s wildly successful science fiction thriller Expiration Date. In July, Tongal issued its call to filmmakers for submissions from which the partners will pick three finalists. Those finalists will receive funding to produce a “proof-of-concept” series trailer.
Then, Wattpad, Tongal and their distribution partner SYFY will award a grand prize winner additional funding to create a digital pilot episode with the potential to go on to develop the entire series for SYFY.com as part of its fan creators program.
“The partnership between Tongal and Wattpad flips the script on Hollywood by changing the how and who of content creation through our open platforms for talent,” said James DeJulio, Tongal’s co-founder and President, in a statement at the time. “These new global communities are made up of diverse and passionate creators, and now they’re actually developing the shows they want to watch. I’m thrilled that SYFY.com has opened the door for this innovative, by the fans, for the fans shift.”
This marks the second collaboration between Tongal and Wattpad on project development for a network. The two companies, which have a natural affinity as creative platforms focused on the visual and storytelling elements of a production (respectively), had worked on a similar competition for the CW Seed, and its production of Cupid’s Match, another popular Wattpad story (spoiler: it’s not very good).
“It’s one of those great proof points for Wattpad and Wattpad studios,” said Levitz, the head of Wattpad Studios in a February interview. “I think it’s the first public one that we’re talking about in a strong way.”
On Wattpad, Cupid’s Match had 32 million reads, and it was that kind of viral popularity that piqued the interest of the CW Network. “We can use the strength of an audience and get someone like CW interested in the output,” Levitz said. “We have 400 million stories on the platform. We’re able to look at the data we have the audience we have and the story we have and use data to choose the right stories for the right partner.”
Like Tongal, Wattpad also took a circuitous path to becoming a player in Hollywoodland. The company initially started as an e-book community operator sharing fan fiction and classic works. Over time, the fan fiction side of the content marketplace won out and the Toronto-based company went from raising capital from a consortium of angel investors to raising $51 million from a consortium of investors including the Chinese internet giant, Tencent, earlier this year. It’s likely that Tencent (and the studios it’s partnering with) were drawn to Wattpad’s 60 million monthly users.
The foundation for the belief that fan fiction could be leveraged into hundreds of millions for the movie industry was laid by the success of the Fifty Shades franchise. The best-selling books, derived from Twilight fan fiction, were optioned into a series of three films and made for a cool $150 million.
For the past decade Hollywood has been relying on big franchises and fan-driven stories to create big numbers at the box office or online, said DeJulio.
“Fans are the lifeblood of these franchises,” DeJulio said. “We’re in this weird time right now… where marketing is very expensive and it is in a lot of ways hamstringing entertainment.”
DeJulio sees Tongal as a platform where one can influence and support the other.
“The studios, once they do get a hit… They realize that through fan communities and engaging them they can not only market it but they can actually get the work done too [of creating new content],” DeJulio said.
Mount Lee, Hollywood Hills, Hollywood, Los Angeles, California, USA.
If Wattpad and Tongal are using their network of users to find and promote talent, Legion M is hoping to use the network of fans for genre content to finance new productions.
The startup production studio has raised $3 million in equity crowdfunding over two rounds and has managed to grab a stake in well reviewed indie-projects like Colossal (starring Anne Hathaway and Jason Sudeikis) and Mandy a new Nicolas Cage vehicle already being touted as cult-classic gold. What that means as far as returns go for the shareholders that back the company’s funding campaigns is unclear, especially since the company’s Bad Samaritan project (starring David Tenant, everyone’s favorite of the new Dr. Who) was critically panned.
Founded by two serial internet entrepreneurs Paul Scanlan and Jeff Annison, and backed by partnerships with folks like the Austin-based theater chain Alamo Drafthouse, LegionM’s goal is to bring in 1 million fans as investors to back projects.
The idea is to harness fan support for sales and marketing help and to surface projects that have enough of a built-in audience to generate profits for the company.
“We believe an entertainment company owned by fans is better than one owned by Wall Street,” said Paul Scanlan, Legion M’s cofounder and CEO, in a statement announcing the company’s new crowd funding campaign.
Some of the projects Legion M affiliated itself with are based more around fan engagement than an actual dollar investment. In fact, the company isn’t a producer of the marquee Colossal film, and instead came on to provide marketing support through its network of fans, according to an interview with the director.
Scanlan and Annison launched MobiTV, which was an early developer of technology to stream digital media on mobile devices. The two went on to launch New York Rock Exchange, a company that allows fans to buy illiquid shares in songs they love. It’s like a coin offering, without the upside, and without any legal ramifications because there’s actually nothing of value that acquirers are buying.
Unlike the Rock Exchange, average investors are buying real shares in the crowd funding offerings the two co-founders are selling via the Securities and Exchange Commission’s new crowdfunding regulations. And they’re tapping into the thesis that fans and consumers are driving the creation of commercially viable content now more than ever.
Wattpad, Tongal, and Legion M aren’t alone in their efforts. Companies like Seed&Spark, Coverfly, and The Black List, are also doing their best to uncover new artists and creators for the entertainment industry to develop. While on the financing side, new cryptocurrencies like MovieCoin (which just launched a pre-sale of its tokenized financing offering for producing new movies) and TaTaTu are angling to give the moviegoing public another (ideally more transparent) way to finance movies.
“Hollywood is a notoriously difficult place to traverse in the entertainment business. What we find in content creation, and the investment process as well, is that every project is seeking an audience,” Annison said in an interview with The Niner Times(the local university paper for the University of North Carolina, Charlotte). “Among Hollywood, which is such a massive world to step into, there are limitations along with those huge companies. In essence, it’s a ‘hit-driven’ enterprise, where the lines are drawn between the artistic side of filmmaking and the business side of entertainment. That can be a complicated street to walk down.”
Indonesia’s Go-Jek is planning to raise $2 billion from investors to fuel its ride-hailing battle with Grab in Southeast Asia.
Go-Jek raised $1.5 billion earlier this year from investors that include Chinese trio Tencent, Meituan and JD.com, as well as Google, Allianz and Singapore sovereign fund Temasek. Now it is planning to raise a further $2 billion, two sources with knowledge of details told TechCrunch, as it seeks to expand on numerous fronts.
Those plans include both extending the scope of its services in Indonesia — where beyond rides it offers services on demand and financial products — and moving into new markets. The company recently went live in Vietnam, its first expansion, and it has plans to enter Thailand, the Philippines and Singapore this year.
Bloomberg first reported the fundraising plans, although a source told TechCrunch that the deal is far from being done. Existing investors — which also include KKR and Warburg Pincus — are likely to provide the new capital.
That money is likely to be spent on Grab’s ongoing strategy to broaden into services. That’s seen Grab follow Go-Jek’s lead and move into groceries, on-demand services and fintech as part of a desire to be Southeast Asia ‘super app’ for a broad range of local services.
Grab is also doubling down on Indonesia, where it recently announced plans to invest $250 million in local startups. While Go-Jek is largely seen as the dominant player in Indonesia, which is Southeast Asia’s largest economy and the world’s fourth most populous country, Grab claims to handle 65 percent of all rides and transactions in the country.
Go-Jek’s most recent valuation was $5 billion. Investors valued Grab at $11 billion when its recent round closed in August.
Nio, the Tesla -wannabe electric vehicle firm from China, enjoyed a mix start to life as a public company after it raised $1 billion through a listing on the New York Stock Exchange on Wednesday.
The stock closed its first day at $6.60, up 12 percent overall, to give Nio a total market cap of $7.1 billion.
Nio sells in China only, although its tech and design teams are based in the U.S, UK and Germany.
Its main model, the ES8, is designed for the masses and is priced at 448,000 RMB, or around $65,000. That makes it cheaper than Tesla vehicles in China but it has only just got to making money. Nio has accrued some 17,000 orders for the vehicle, but it only began shipping in June. As a result, it has posted some pretty heavy losses in recent times — including minus $759 million in 2017.
Ultimately, the firm raised $1 billion but its leadership may be disappointed that the final sum is well short of its original target.
Reasons behind lukewarm investor interest may include:
The U.S. IPO window may be wide open for Chinese tech firms, but electric vehicle maker Nio has conservatively cut the target for its NYSE listing to $1.5 billion after it released a price range for its shares.
The company plans to sell 184 million shares between $6.25-$8.25. That range would yield a total raise of $1.518 billion, which is down from the initial target of $1.8 billion from the firm’s first filing in August. The range is, of course, subject to change and it doesn’t include income from the green shoe option — which allows underwriters to take an additional allocation of shares — but nevertheless, it is a notable development.
Nio also revealed in its newest filing that its existing investors have committed to investing $250 million into the IPO which, at the middle of the range, would account for 22 percent of the allocation.
There are plenty of possible explanation as to why Nio has cut its overall fundraise estimate.
The most fundamental may be around sales. The company has only just begun to generate revenue. It opened sales for its ES8 vehicle last year but it only began shipping in June. So, thus far, it has fulfilled just 481 orders but it does claims that there are 17,000 customers who reserved a model and are waiting in the wings to purchase it.
That’s meant that the company has recorded hefty losses — a negative $759 million in 2017 and minus $503 million this year to date — as it went pedal to the metal on R&D and preparation. Just a month of revenue makes it hard to gauge that potential, even though Nio has plans to scale up and open its own manufacturing plants.
Also, however, it may also be related to general concerns around China.
Nio is an international firm which develops technology in Silicon Valley and has design teams in Germany and the UK, but China is the only market it is focused on for sales. That makes a lot of sense since China is the world’s largest market for consumer EV sales, but there is, of course, a disconnect between the country and U.S. IPO investors. While Chinese firms have performed well on U.S. public markets — Alibaba holds the record for the world’s largest IPO and the window is very much open for Chinese tech companies right now — but EVs still remain a new concept, even in the world of technology.
Tencent, the $500 billion giant, had a rare earnings miss last quarter on account of government interference in some of its core business, while arch-rival Alibaba has taken criticism about the way it dressed up its latest financials, which were good on paper. Indeed, both companies — which are China’s top tech firms — have seen their share prices drop: Alibaba’s current price is down by 15 percent from what it was on January 1, while Tencent is down by 25 percent.
All those concerns gathered together have likely caused Nio to price more conservatively, but we’ll have to wait for the list price to know for sure. Still, we’re looking at a billion-dollar IPO for the company which is seen by many as the closest competitor to Tesla — even if it currently has no U.S. sale plans.
You can read more about the Nio business from our original story on the IPO filing below.
Chinese Internet giant Tencent has announced it’s bringing in a new system of age checks to its video games which will be linked to a national public security database — in an effort to reliably identify minors so it can limit how long children can play its games.
The new real name-based registration system will initially be mandated for new players of its popular Honour of Kings fantasy multiplayer role-playing battle game.
It will be introduced around September 15, according to Reuters.
Tencent said the planned ID verification system — which Bloomberg couches as equivalent to a police ID check — is the first of its kind in the Chinese gaming industry, and claimed it will enable it to accurately identify underaged players and impose existing play time restrictions.
Last July Tencent said it would impose a playtime maximum of one hour per day for children up to aged 12, and a maximum of two hours a day for those between 13 and 18. But if kids can get around age checks such limits are meaningless.
“Through these measures, Tencent hopes to continue to better guide underaged players to game sensibly,” it said in a statement on its official WeChat account about the beefed up checks. It also said it plans to gradually expand the requirement to its other games.
The move comes amid a crackdown by the Chinese government on video gaming over fears of health problems and addiction among children.
Late last month a statement posted on the Education Ministry website said new curbs were needed to counter worsening myopia among minors.
Ministers have long said they want to limit the amount of time kids can play games — although achieving that outcome is clearly a major challenge, given the popularity of video games and the proliferation of devices from which they can be accessed.
Tencent’s move to link age verification to a public security database does seem to represent a significant new step towards the government achieving its goal of also controlling kids’ digital activity. And investors reacted negatively to the announcement — pushing Tencent’s shares down more than 3%.
Shares in the company also dived around 3% last week when the government announced its latest gaming crackdown.
Reuters notes that shares in two other major Chinese game developers, China Youzu Interactive and Perfect World, also dropped 5.5% and 3.6%, respectively, as investors digested the regulatory risk.
The odds are stacked against Google if the reports are true and the company is trying to bring its services back to China, according to the former head of Google China.
Kaifu Lee left the search giant nine years following a four-year stint, and today he’s best-known as one of the world’s leading thinkers on AI and the founding partner of Chinese VC Sinovation Ventures. Speaking at TechCrunch Disrupt San Francisco this week, he shared his belief that China’s tech ecosystem is rapidly catching the U.S. on AI — that also spills over into more general tech, and the kind of competitors that Google would face were it to return to China.
“I think re-entry is always difficult,” Lee said. But “the bigger issue really is can an American multinational succeed in China now that China has bifurcated into this parallel universe.”
Lee helmed Google’s China business in its battle against domestic search firm Baidu . He said that Google’s market share jumped from nine percent to 24 percent during his tenure, while total revenue was “approaching” $1 billion, but now the outlook in China is less rosy in 2018.
While he admitted that Google “should have a higher chance than any other company” at succeeding in China, he isn’t optimistic that it — or indeed any U.S. firm — can.
“People [in China] aren’t looking for a new search engine or an app store, new companies are emerging addressing previously unknown customer needs [and] innovations are coming out,” Lee explained.
“The new graduates generally prefer to work for Chinese companies and then, lastly, the heads of multinationals are really just professional managers. If they were to compete against local entrepreneurs who are gladiators in this colosseum, I don’t think the American companies will have a high chance of succeeding in this environment,” he added.
Google isn’t the only U.S. firm looking at China, of course.
Facebook briefly received approval for a China-based subsidiary — it was later withdrawn following media reports — while it has tested local products in the past and engaged in dialogue with regulators. Uber was more successful, but it famously spent more than $1 billion per year to compete in China before being sold to local rival Didi. The only companies that could be credited with not failing in China are LinkedIn, Evernote and Airbnb, and, in each case, the actual impact is debatable. Certainly, each has strong/stronger local rivals that remain active.
“I think any American company would have a hard time in China now, Apple being the single exception,” Lee said.” And I think that’s because [Apple is] mostly a hardware product and the product has become a fashion symbol… so that’s different.”
In the case of Google, the challenge is far different. Even local social media companies struggle to adhere to adequately police online content according to the whim of authorities. New media firm Toutiao, for example, had numerous apps temporarily suspended from local app stores, while it massively strengthened its content checking teams and made a public apology. Tencent, Alibaba and others also employ in-house teams to police the content and users on their platforms.
That’s a huge challenge without even thinking about finding the right product-market fit or engaging an audience.
Tencent-backed Maoyan Weiying, China’s largest online movie ticketing service, has filed for a public offering on the Hong Kong stock exchange. The company, which submitted a prospectus under the name Entertainment Plus, didn’t say when the IPO will be or valuation details, but reports earlier this year said Maoyan aims to raise up to $1 billion.
The timing of Maoyan’s IPO is noteworthy because it comes as another Tencent investment, Meituan-Dianping, is preparing for its own debut (Meituan is also one of Maoyan’s investors). Both Meituan and Maoyan are key chess pieces in Tencent’s online-to-offline services rivalry with Alibaba. Meituan holds the leading market share for online services in China by market volume, though Alibaba wants to challenge that with Ele.me and Kuobei, which it recently raised $3 billion for after consolidating the two into one holding company. Likewise, Maoyan is the largest online movie ticketing app service in China, but is up against Alibaba’s Tao Piao Piao.
Last November, Maoyan raised RMB 1 billion (about $150 million) from Tencent at a RMB 20 billion valuation, a couple of months after merging with Weiying, another ticketing service backed by Tencent. In addition to Tencent and Meituan, Maoyan’s investors include Beijing-based Enlight Media. It also co-finances and distributes movies in China, such as Paramount’s “Transformers: The Last Knight.”
Both Maoyan and Tao Piao Piao are fighting for domination of what is set to become the world’s biggest market for movies. In its prospectus, Maoyan cited findings from iResearch that show China’s entertainment market is currently second only to the United States, but is expected to become larger by 2019. It reached a market size of RMB 76.1 billion in 2017 and is expected to grow at a compound annual growth rate of 20.7% to RMB 194.5 billion by 2022.
Maoyan says its revenue grew to RMB 2.54 billion in 2017 from RMB 596.7 million in 2015, with a CAGR of 106.6%. In the first half of this year, it recorded revenue of RMB 1.9 billion and a net loss of RMB 231 million.
Maoyan says it held market share of 60.9% by gross merchandise volume in the first half of 2018, according to iResearch. The public offering will led by Bank of America Merrill Lynch and Morgan Stanley.
Meituan-Dianping is reportedly aiming for a $55 billion valuation in its upcoming initial public offering in Hong Kong, but the company’s net losses and increasing competition from Alibaba are already raising questions about whether that is too ambitious, despite the company’s market leadership in China. Meituan-Dianping, which bills itself as a “one-stop super app” that offers everything from food delivery to travel bookings, has set an IPO price range of HK$60 to HK$72 (about $7.64 to $9.17), with a valuation of $46 billion to $55 billion, according to Reuters.
A document filed today with the Hong Kong Stock Exchange didn’t provide more information about IPO pricing or valuation, but it did give some insights into the company’s financials. It said that Meituan-Dianping’s total revenues increased by 161.2% to RMB 33.9 billion in 2017, and by an additional 94.9% from RMB 8.1 billion in the four months ending in April 30, 2017 to RMB 15.8 billion in the same period of 2018.
In 2017, the platform generated over 5.8 billion transactions, totalling RMB 357 billion in gross transaction volume. It served 310 million transacting users and 4.4 million active merchants, with each transacting user making an average of 20.3 transactions in the 12 months ending April 30, 2018.
Meituan-Dianping recorded a gross margin of 9.3% for food delivery in the four months ending on April 30, 2018, while its second-largest business segment, in-store, hotel and travel services, recorded gross margin of 88% in the same period. Overall, the company had gross margin of 25.5% in that time frame.
In the same periods, however, it also recorded high net losses. In 2017, the company said it recorded net losses of RMB 19 billion, as well as net losses of RMB 8.2 billion and RMB 22.8 billion for the four months ending on April 30 2017 and 2018, respectively. Meituan-Dianping said the losses were due in changes to the fair value of its preferred shares, user acquisition expenses, including incentives to attract users and delivery riders, and new product launches.
The pressure of acquiring new users and marketing expenses probably won’t ease up anytime soon, as Meituan-Dianping faces down rivalry from Alibaba. The e-commerce giant used to be an investor in Meituan-Dianping, but offloaded its shares to focus on building its own online-to-offline services, including a combination of Ele.me and Koubei which recently raised $3 billion from investors including SoftBank.
TechCrunch has contacted Meituan-Dianping for comment.
Robinhood, the app-based investment platform for all your speculative investing needs, has launched a tool for investors to throw money at publicly traded international companies through the rollout of American depositary receipts.
ADRs are the investment mechanism that U.S. investors use to invest in foreign companies whose shares aren’t traded on U.S. stock exchanges like the New York Stock Exchange or the Nasdaq, and, as of today, the company said it would roll out opportunities to invest in 250 stocks from global companies.
The list of potential investment targets include Tencent, Nintendo and Adidas the company said. And opportunities will exist to invest in public companies from China, Japan, Germany, Canada and the United Kingdom whose shares trade in the U.S.
A full list can be found by searching “New on Robinhood” in the company’s app or on desktop.
For the Francophiles in the room, French companies like LVMH, Michelin and Ubisoft Entertainment will be made available soon, Robinhood said in a statement.
Alibaba has confirmed that it has raised $3 billion for its new-look local services business after it united its Koubei local services business with Ele.me, the on-demand delivery business it recently acquired.
We have established a company to hold Ele.me and Koubei as our combined flagship local services vehicle, which we plan to separately capitalize with investments from Alibaba, Ant Financial and third-party investors. As of the time of this announcement, we have received over US$3 billion in new investment commitments, including from Alibaba and SoftBank. As a result of this reorganization, subject to closing conditions, we will consolidate Koubei, which would result in a material one-off revaluation gain when the transaction closes.
Koubei, the company’s local services platform, got a $1.1 billion injection in early 2017 and is predominantly focused on enabling local commerce. Other investors besides Alibaba include Silver Lake, CDH Investments, Yunfeng Capital and Primavera Capital.
Ele.me, meanwhile, first landed an investment from Alibaba two years ago. The e-commerce giant bought it out in April in a deal that valued Ele.me at $9.5 billion. Ele.me is a key piece of Alibaba’s recent partnership with Starbucks — the on-demand service will be used to deliver coffee to Starbucks customers across China as the U.S. coffee giant seeks out new growth opportunities and competes with rival services.
The deal may be a footnote in Alibaba’s Q1 earnings report but it is representative of a new battle that’s taking place to own China’s ‘local services’ market. That is on-demand services such as groceries deliveries, takeouts, movie tickets and other commercial activities within local areas.
Local services — and in particular food delivery — remains its core focus. Alibaba is betting that pairing Koubei with Ele.me, throwing in a couple of billion and adding a dash of SoftBank can give it a strong rival that can compete for China’s ‘online to offline’ market. Another war is brewing.
