Alibaba and Tencent seemingly do everything from mobile payments, online retail, to travel. The competition between the two Chinese juggernauts is taking a new turn with Tencent leading a $4 billion series C investment in Meituan-Dianping, which launched its new travel platform this year.
The move is likely another attempt by Tencent to put competitive pressure on Alibaba, with the competition between the two heating up substantially in the last two years.
The two have also made significant investments in entering the travel market. Alibaba has its own online travel agency (OTA), Fliggy, and both Tencent and Alibaba have heavily marketed their mobile payment platforms to Chinese tourists. It’s also hard to ignore Tencent’s Wechat messaging app’s influence on marketing travel and destinations to Chinese consumers.
Meituan-Dianping’s vision focuses on creating a one-stop consumption experience for its customers. Its four core businesses are in-store dining, entertainment, on-demand delivery, and travel. It’s unknown how much of the $4 billion capital will be allocated for the firm’s travel business.
Interestingly, Priceline Group also participated in the round, illustrating Meituan-Dianping’s growing presence in the travel market. Meituan-Dianping’s travel platform has also established a strategic partnership agreement with Agoda.com, which is owned by Priceline Group.
These factors seem to indicate that Meituan-Dianping’s travel division will be the key the recipient of this new capital.
Much like Alibaba and Tencent, travel booking isn’t everything that Meituan-Dianping offers. Meituan-Dianping is primarily an online retail and delivery platform, which started out as a Groupon-like business that sold vouchers for promotions at retailers back in 2010.
For Alibaba and Tencent, competition in every sector is necessary for competition in any sector
Alibaba and Tencent seem to operate under the assumption that competition in every sector is necessary for competition in any sector. It’s possible that the philosophy will pay off as it has for Korean chaebol like Samsung, who use profits from high performing subsidiaries under their umbrella to boost the competitiveness of underperforming firms.
Conversely, competition along all fronts may also result in substantial competition in every sector, meaning that large firms with the anything and everything modus operandi may be forced to cut prices for goods and services across the board and making many of the ventures unprofitable.
However, Meituan-Dianping is much smaller than Tencent and Alibaba. Even with its diverse offerings, it’s still substantially more focused than the Tencent and Alibaba.
Thus, travel is a key facet of Meituan-Dianping’s business. Meituan’s travel platform was launched in May and has become an important actor in the business of luxury hotel bookings.
The investment in Meituan-Dianping also underlines how Priceline Group has doubled down on its strategy of partnering with domestic travel firms, opposed to directly entering the Chinese market. For example, Priceline Group holds 13 percent of Ctrip shares.
Both foreign firms and smaller domestic companies are taking sides in the battle between Alibaba and Tencent
At this time, it’s important to stress that it is still unclear where and how the investment will affect Priceline, Tencent, and Meituan-Dianping’s strategies going forward. However, a key takeaway is that both major foreign firms and smaller domestic companies are taking sides in the battle between Alibaba and Tencent.