Exploring the War of a Thousand Groupons.
The War of a Thousand Groupons was a battle among internet entrepreneurs to build the best Chinese version of the successful site Groupon. It led to tough skirmished among various tech titans, such as Wang Xing, who began Meituan. As the battles among group-buying companies intensive, it looked from the outside as if these types of venture-funded battles for market share would be determined solely by who could raise the most capital and thus outlast their opponents.
That’s half-true: while the amount of money raised is important, so is the burn rate and the “stickiness” of the customers bought through subsidies. Startups locked in these battles are almost never profitable at the time, but the company that can drive its losses-per-customer-served to the bare minimum can outlast better-funded competitors. Once the bloodshed is over and prices begin to rise, that same ruthless efficiency will be a major asset on the road to profitability.
As the War of a Thousand Groupons progressed, combatants fought for survival in different ways. Like gladiators forming factions in the coliseum, weaker startups merged in hopes of achieving economies of scale. Others relied on bursts of high-profile advertising to briefly rise above the fray. Wang Xing's company Meituan, though, held back, consistently ranking in the top ten but not yet pushing to take the top spot.
Wang Xing embodied a philosophy of conquest that can be traced back to the 14th Century emperor Zhu Yuanzhang, the leader of a rebel army who outlasted dozens of competing warlords to found the Ming Dynasty: “Build high walls, store up grain, and bide your time before claiming the throne.” For Wang Xing, venture funding was his grain, a superior product was his wall, and a billion-dollar market would be his throne.
By 2013, the dust began to settle on what had been the wildest war of copycats the country had ever seen. The vast majority of combatants had perished as victims of brutal attacks or their own mismanagement. Still standing were three gladiators: Meituan, Dianping, and Nuomi. Dianping was a longstanding Yelp copycat that had entered group buying, while Nuomi was a group-buying affiliate launched by Renren, the Facebook copycat that Wang Xing himself had founded and sold off. These three accounted for more than 80% of the market, and Wang’s Meituan had grown to a valuation of $3 billion. After years spent photocopying American websites, he had honed his entrepreneurial skills and won a huge chunk of a massive new market.
But Meituan became the powerhouse it is today by doing something other than sticking to group buying. The American company Groupon had largely stayed with its original business, coasting on the novel idea of discounts through groups. By 2014, Groupon was trading at less than half of its IPO price. Today it’s a shell of what it had been. By contrast, Wang ceaselessly expanded Meituan’s lines of business and constantly reshaped its core products. As each hot new consumer wave washed over the Chinese economy—a booming box office, a food-delivery explosion, massive domestic tourism, flourishing online-to-offline services—Wang pivoted and ultimately transformed his company. He was voracious in his appetite for new markets and relentless in his constant iteration of new products, a prime example of a market-driven lean startup.
Meituan merged with rival Dianping in late 2015, keeping Wang in charge of the new company. By 2017 the hybrid juggernaut was fielding 20 million different orders a day from a pool of 280 million monthly active users. Most customers had long forgotten that Meituan began as a group-buying site. They knew it for what it had become: a sprawling consumer empire covering noodles, movie tickets, and hotel bookings. Today, Meituan Dianping is valued at $30 billion, making it the fourth most valuable startup in the world, ahead of Airbnb and Elon Musk’s SpaceX.
Entrepreneurs, Electricity, and Oil
Wang’s story is about more than just the copycat who made good. His transformation charts the evolution of China’s technology ecosystem, and that ecosystem’s greatest asset: its tenacious entrepreneurs. Those entrepreneurs are beating Silicon Valley juggernauts at their own game and have learned how to survive in the single most competitive startup environment in the world. They then leveraged China’s internet revolution and mobile internet explosion to breathe life into the country’s new consumer-driven economy.
But as remarkable as these accomplishments have been, these changes will pale in comparison to what these entrepreneurs will do with the power of artificial intelligence. The dawn of the internet in China functioned like the invention of the telegraph, shrinking distances, speeding information flows, and facilitating commerce. The dawn of AI in China will be like the harnessing of electricity: a game-changer that supercharges industries across the board. The Chinese entrepreneurs who sharpened and honed their skills in the coliseum now see the power that this new technology holds, and they’re already seeking out industries and applications where they can turn this energy into profit.
But to do that they need more than just their own street-smart business sensibilities. If artificial intelligence is the new electricity, big data is the oil that powers the generators. And as China’s vibrant and unique internet ecosystem took off after 2012, it turned into the world’s top producer of this "petroleum" for the age of artificial intelligence.