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Meituan Dianping’s Path towards Profitability

September 16, 2019

Inside the Business of Super Apps

By Hans Tung and Rita Yang, with Contribution from Erica Yu

Hans is an early personal investor in Meituan Dianping.

China’s Super App Meituan Dianping just turned profitable. A year after its IPO, the 9-year-old company finally arrived at the inflection point investors have pined for.

Similar to Amazon’s profitless path to domination, Meituan Dianping had been aggressively focusing on expansion over profitability since its founding. It merged with Dianping in 2015 and acquired the bike-sharing app Mobike in 2018. 

In its latest financial result for Q2 2019, it booked 3.17 billion dollars in revenue and 56 billion in market cap. That number means it has replaced Baidu as the third most valuable tech giants in China, right after Alibaba and Tencent. It also coincides with Uber’s Q2 number in both revenue and market cap, who is still struggling to break-even. 

How did Meituan Dianping manage to profit off the notoriously loss-making food delivery business? How did it rise to domination in a cutthroat arena for on-demand services, outstripping Alibaba’s and Ctrip in market share? How does the app work for consumers and merchants?

We hope to shed some light on these questions with this post. 

Click here for a downloadable PDF version of the deck.

The Super App Effect 

If you ask Chinese consumers on why they downloaded the app in the first place, you will get a diverse set of answers.

It started as a Groupon-like business and gradually evolved into a Super App that can provide most of the services you need in daily life, from ordering food to house cleaning. To illustrate its Super App nature, we recorded what typical weekend day on Meituan looks like for you.

Now let’s look at the same variety of services from a revenue perspective.

57% of its revenue comes from food delivery and it only became profitable this quarter, after 6 years of cash burning war in the crowded market. In-store, hotel and travel counts for 23% of Meituan Dianping’s revenue. The company surpassed Ctrip to become the No.1 player in China’s online hotel booking business in 2016 and maintained a market share of over 50% ever since.

According to an earning call in 2018, 85% of Meituan users first came to the app for scouting restaurants or food delivery.  More than half of the users who had been on the platform for more than 3 years have bought all 5 top-selling services on the platform. 

Meituan’s Super App approach played a critical role in its food delivery business to be profitable. Comparing to its Alibaba-backed rival, the user retention and stickiness for Meituan’s standalone food delivery app have gained a significant advantage.

The kind of Super App effect is not unique to Meituan Dianping. Since GGV’s investment in Grab’s series B in 2014, with its expansion to GrabPay and GrabFood in 2016, we have also seen a steady increase in Grab’s user retention and stickiness.

The Economy of Scale 

It doesn’t take a genius to figure out that food delivery can be a gateway to users’ attention and pocket. The trick is in how to increase the volume so the food delivery becomes cost-efficient. 

Yelp bought and sold the delivery startup Eat24 within a short span of two years and still gets 97% of its revenue from advertising. a13% of Uber’s revenue comes from Uber Eats, the food delivery subsidiary launched in 2015. It served Uber well in telling the growth story but has not turned profitable yet.

Meituan’s food delivery became profitable for two main reasons. One is the improved economy of scale. The other is its growing advertising revenue.  

As the number of transactions on our platform increased, order density also increased, and so the probability of grouping more orders together in one trip improved, which allowed us to further reduce our average delivery cost per order. Meituan’s AI-powered intelligence order dispatching system was able to collect more data to optimize our advanced routing algorithms and improve delivery efficiency.

Meituan's Quarterly Financial Report

The sheer impact of population density has on this business is jaw-dropping. Meituan Dianping’s cost per order is 6 cents (0.47 RMB), comparing to Grubhub’s 2.8 dollars. 

China’s high urbanization and dense population is not the only reason it can bring down its cost. From its Groupon time, the company had made a strategic choice to go into the lower-tier cities of China for the lack of competition, making it much less expensive to acquire users and merchants. 

As the number of new users plateaued in first-tier cities, Meituan was able to continue to lower its cost per order through a significantly higher market share. In the first half of 2019, more than 80% of China’s new users for food ordering came from non-first-tier cities.

Meituan’s market leadership in lower-tier cities with its stronger brand recognition and first-mover advantage over the competition has increased the efficiency to advertise on the platform. SMEs in China, who are underserved by traditional online advertising players like search engine or social media, are more likely to spend their marketing budget on the platform after seeing increased orders and revenues from Meituan users. 

It is only seeing the beginning of that. If we look only at profitability, food delivery to Meituan is what eCommerce to Amazon. It is a long and costly way to profitability. Once it does, it can propel the company to enter what Bloomberg called the virtuous circle

As the Super App gets bigger, consumers rely more on the app to find new places to eat, shop or watch a movie. Merchants need visibility in the app to drive sales. And once one restaurant starts doing it, rivals have to as well. Meituan Dianping’s advertising revenue tells the story in number.

Stay Longer and Spend More   

As the growth of China’s mobile internet users flattened, tech companies are looking for different ways to increase transaction frequency and the amount for each user.  

From the latest available data, Meituan users spent an average of 10 minutes on the app, which triples the same number for Yelp. Since its merger with Dianping, it expanded Dianping’s Must Lists from the "Must-Eat List" to include the "Must-Shop List" for top shopping malls, the "Must-Visit List" for top tourist destinations and the "Must-Stay List" for top hotels and resorts. The carefully curated and reviewed page for each segment provides users with enough guidance to explore the options and seamless ways into booking. 

On the merchant side, the Must Lists generate higher sales, enhance brand influence, and improve their operations and product offerings based on authentic and dynamic consumer reviews.

Besides content curation, Meituan Dianping also started to sell Prime-like membership from last year, giving certain exclusive benefits for a flat membership fee. It is still early to tell how big of an effect this could be. But for people who want to get exclusive content on Tencent video anyway, why not spend 5 more kuai to get membership deals on Meituan? 

The Rise of Super Apps in Emerging Markets 

Following Meituan Dianping’s rise, unicorn startups are emerging from the on-demand economy in other emerging markets like India, Latin America, and Southeast Asia.

With Grab’s 14 billion USD valuation, we can see the potential of emerging market companies adopt and adapt business models from China. With Meituan Dianping turning profitable, we can expect capital and talents flowing into these companies even faster. 

In Bangalore, Jakarta, Mexico City, among the racing scooters with bright color delivery boxes, the next profitable Super App might be just around the corner.


Full deck on Meituan's Profitability

Past deck on Meituan


Goldman Sachs Equity Research on Meituan

Meituan 19Q2 Financial Report 

Grub Hub 2018 Full Year Financial Report

Uber’s Secret Gold Mine: How Uber Eats Is Turning Into A Billion-Dollar Business To Rival Grubhu

What Are The Key Drivers Of Uber's Expenses & When Can It Break-Even?

Hans Tung is a Managing Partner at GGV Capital. Rita Yang is a Marketing Manager at GGV Capital.

Hans and Rita co-host a popular English-language podcast on tech in China, India, Indonesia and other emerging markets, where they interview local champions and global giants who are reshaping the lives of the next billion internet users. Subscribe on iTunesOvercastSpotifySoundCloudXimalayaFM, or wherever else you listen to podcasts. To reach Hans and Rita directly, join the listeners’ community via WeChat/Slack at