Analysis: Why Alibaba Gave Up On China's Huge Uber/Yelp/Groupon/GrubHub-Like Start-Up

A Mandarin language analysis of Alibaba's decision to sell its stake in the hugely popular Chinese start-up Meituan states that Meituan was beginning to compete with Alibaba, creating a "shaky" situation. Moreover, Meituan refused to utilize Alibaba's payment unit, Alipay, hurting Alipay and "clearly annoying" Alibaba CEO Jack Ma in the process, the article asserted. 

Alibaba sold its 7% stake in Meituan - which Bloomberg now calls the world's "fourth most valuable start-up"- for $900 million in 2016.

Some may call the decision a big mistake, since Meituan's valuation has reached $30 billion, and its app - which now provides ride-sharing services like Uber, restaurant reviews like Yelp, coupons like Groupon, food ordering services like GrubHub, and payment services like PayPal - was used by about 320 million Chinese citizens to facilitate $57 billion of transactions last year, according to Bloomberg. Additionally, Tencent, Alibaba's archrival, is now a major backer of Meituan, which Bloomberg calls the world's fourth largest start-up. Meituan, which is reportedly mulling an IPO in Hong Kong with a $60 billion valuation, could become one of China's largest companies. 

But according to the Mandarin article by Jun Shi Tai Bao, Alibaba CEO Jack Ma "decided that since" Meituan would not utilize Alipay, he had "no choice" but to back two other food ordering services, Eleme and Alibaba's Koubei subsidiary, instead. The article also points out that "from a purely financial perspective, Alibaba’s ROI from Meituan surpassed 300%," and asks "with these returns, can Alibaba’s venture truly be seen as a failure?'


 

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Larry Ramer 2 years ago Contributor's comment

Looks like Tencent could really benefit from the success of Meituan.