Meituan's Wang Xing: 8 Years of Reflections on Business

In the recently past In October, Meituan's market capitalization exceeded 500 billion Hong Kong dollars, surpassing JD.com to become the third most valuable internet company in China. Meituan founder Wang Xing's net worth also exceeded 50 billion as a result.

Surviving the 'Thousand Group War', weathering the O2O bubble burst, launching its takeout service, completing the Meituan Dianping merger, finally going public, and achieving record-high market capitalization—Meituan's journey has been fraught with challenges, yet it has emerged stronger each time.

Today's recommended article compiles Wang Xing's internal speeches over the past 8 years at Meituan. You can see the early days of this outstanding entrepreneur and his growth trajectory, as well as his understanding and thoughts on business. I hope this inspires you.

 

Article Source/ V Business (ID: V-VIEWS)

With Meituan's market capitalization exceeding 500 billion Hong Kong dollars, becoming the third-largest internet company after Alibaba and Tencent, the person who many years ago was considered somewhat unfortunate (there's a saying that 'the internet owes Wang Xing another success') will now become an unavoidable figure in the development and theoretical research of the internet.

 

Wang Xing is innately a good entrepreneur. From Xiaonei.com (later acquired by Xiaonei.com and renamed Renren, which was once a hugely popular social networking site) to Fanfou (an earlier Chinese Twitter-like platform) and finally the successful listing of Meituan, Wang Xing possesses the essential qualities of a successful entrepreneur.

 

Gan Jiawei, formerly Alibaba's employee number 67, chose to join Meituan instead of the larger Wowo Tuan, recognizing the unique qualities in Wang Xing, his insight into products and user needs.

 

Gan Jiawei foresaw that in five or ten years, Wang Xing would be among the ten most important figures in the Chinese internet landscape.

 

But that wasn't enough.

 

Wang Xing also has shortcomings, such as in people management, which is an area where Gan Jiawei's expertise has helped him grow and improve over the years they worked together.

 

Through countless trials and tribulations, Wang Xing has continuously learned and grown, becoming the Wang Xing we see today. What is Wang Xing? He's a natural product manager with an innate understanding of things, combined with acquired skills in areas like organizational management.

 

Every year, Wang Xing gives an internal speech at Meituan. From 2011 to the eve of its IPO in 2018, these internal speeches reveal Wang Xing's ideological evolution over eight years, the progression of his understanding of the industry, and the changes in his own perceptions.

 

01

Meituan's Beginnings

 
Wang Xing: Group Buying is a Superlative Business Model
Time: 2011 Background: The Thousand Group War, Meituan's First Anniversary

1. Opportunities for Small Businesses in a Pyramid Structure

The development of China's commercial internet follows a pyramid structure with three layers, representing businesses of different scales and quantities. All businesses need promotion, and the internet, as an excellent platform for information dissemination, can be the best way for commercial promotion. However, different scale businesses will find different suitable internet promotion methods in different environments.

In around 2000, at the dawn of China's commercial internet, the largest enterprises at the top of the pyramid were Fortune 500 companies like Procter & Gamble and BMW. Starting in 2000, they used promotion methods such as display ads on Sina's homepage, paying per impression. Only a small number of companies participated.

As the internet continued to develop, by 2005 many businesses—manufacturing and foreign trade companies—had promotion needs but lacked the financial resources for portal advertising or found the results insufficiently precise and the return on investment too low. However, in 2005, they discovered a new business model that could help them: search engines. These SMEs were previously unable to afford pay-per-impression portal advertising but could pay-per-click on Baidu and Google, which provided more direct results.

Therefore, businesses with a pay-per-click model are generally smaller in scale but far greater in number. Portals like Sina might have a few hundred or a thousand clients, but Baidu could have hundreds of thousands. So this in 5 years, the internet took another step forward. Businesses that previously couldn't use the internet for commercial promotion found a new business model.

But history did not stop there; it continued to progress.

Another 5 years passed, and in March 2010, Meituan.com pioneered group buying in China. This could meet the needs of even more businesses. Consider the base of the pyramid: these businesses may be individually small or local service businesses with a sales radius exceeding 5 or 10 kilometers, making it unlikely for customers to visit their physical location.

These local businesses, though small in size, are extremely numerous. According to the National Bureau of Statistics, there are 7 million such businesses (Note from V Business: By the end of 2017, the number of SMEs in China reached 27.263 million). These businesses all need promotion. Portals couldn't help them, nor could search engines, as many local businesses might not even have websites, rendering click-through rates meaningless. They don't care about impressions or clicks; they care about the number of customers coming to their store, about transactions.

So they need an internet promotion method that directly drives transactions and charges purely based on results, which Meituan.com can provide.

I can honestly and wholeheartedly say that I believe the group buying model is one of the most elegant business models ever devised.

2. Opportunities in Mobile

We believe mobile phones are extremely important, and we have already released the Meituan Android client, making it even more convenient to use Meituan.com on mobile phones. Another important platform within smartphones is the iPhone; Meituan's iPhone app has been submitted for approval.

3. Innovative Rebates and Viral Marketing

Over the past year, since our launch on March 4th last year, we pioneered a method: a 10 yuan referral rebate. We didn't want to waste money on advertising; we believe in word-of-mouth marketing.

Today, we're introducing an even more exciting measure: no referral needed, register directly, and receive a direct rebate of 10 yuan.

4. Guaranteed User Experience

Meituan.com is now introducing an "expired refund." We will fully refund all expired balances—a 100% refund—giving peace of mind to all members who previously trusted and participated in Meituan.com group purchases, regardless of why they didn't use them. What they thought was a loss, actually wasn't. We've implemented these measures to ensure consumer confidence and eliminate any concerns about choosing Meituan.com.

5. Superior Business Models Ultimately Prevail

Regarding our understanding of business models, I think the model itself isn't the most crucial aspect. A model can be very simple and transparent; business models are common. The key is execution—that's my understanding of business models.

In the short term, there can be all sorts of tricks, but in the long run, productivity determines production relations. Efficient business models will always win. For businesses at the base of the pyramid, Meituan.com's business model is more suitable for their needs than portal display fees or search engine pay-per-click. Therefore, in the long run, better business models will prevail.

6. Micro-Innovation

Individual merchants have limited order-handling capacity; we can't handle hundreds of thousands of orders for a single deal. Therefore, to better meet customer needs, we've implemented appropriate divisions, offering more than one group purchase project per day. (Note from Da V Business: Groupon, the originator of group buying, still only offered one deal per day at the time.)

Xiaonei.com had many localized modifications, but because they were subtle, people didn't notice. Initially in China, universities were identified by email suffixes. This was very simple and easy to understand, but when we developed Xiaonei.com in 2005, we found that some schools didn't have them—even prestigious schools like Beihang University. Therefore, we couldn't operate in that way and needed alternative methods, such as on-campus registration or IP-based identification. These were all minor differences.

The same applies to demographics, which also form a pyramid. Internet adoption initially started with the most highly educated population. As time goes on, internet penetration gradually spreads to lower demographics, becoming increasingly localized and closer to offline interactions. The overall trend is clear.

7. Specialization or Comprehensiveness

In this massive wave of change, there are many opportunities, and each opportunity provides ample room for company growth. Therefore, at this stage, we don't need to combine everything at once. We choose one thing, specialize in it, and strive for excellence, ensuring satisfaction among all parties involved in the industry. I believe this will lead to a promising future.

8. Emphasis on Technology

Another aspect, perhaps overlooked by many, is the investment we make in technology research and development. The core of e-commerce is low cost and high efficiency. This efficiency isn't solely achieved by increasing manpower; people need to grow, and the workforce needs to expand, but it's largely driven by the development of the technology platform. By continuously accumulating consumer and merchant data, we can understand the types of consumers merchants need and the types of projects consumers want. We can achieve more precise data matching and provide convenient user experiences.

9. Long-Term Value

To date, no localized e-commerce strategy has succeeded on a large scale, leading many to question Meituan's strategy. However, in 1998, search engines were considered a completely unviable industry. Many had tried and failed, seeing no commercial model.

I have a friend who graduated from Peking University in 2000 and worked at Peking University's network. At that time, two people returned from abroad, rented an office in the Peking University Resource Building, and wanted to develop a search engine, aiming to recruit the best talent. Many people joined, but he didn't. He thought, "I could do a good job with a search engine, but it has no business model." So he didn't join. That company was Baidu, which later went public and became one of China's largest internet companies and the fifth largest globally.

This story tells us that if something has long-term value, even if it's very difficult and has failed in the past, it doesn't mean it will fail in the future.

Local e-commerce is a huge market because millions of businesses need marketing, promotion, and sales. Previous attempts with search methods haven't worked well, and rating systems seem ineffective. We've reached a fascinating point in history, where a good business model has emerged to meet these existing needs. The problem has always existed, but the solution hasn't been found until now. We may be close to finding it.

10. Team Building

Some very young employees, currently 22 years old (Note from Da V Business: Wang Xing is likely referring to Shen Peng, the current CEO of Shui Di Hu Zhu), joined Meituan.com last year before graduating and later expanded into other markets. The growth of these young people in less than a year has been a pleasant surprise, showing us that young people have opportunities and advantages in this industry. Passion and drive—it's not that difficult.

In our future development, we judge a person's suitability for Meituan.com not by age, but by their attitude—drive, understanding consumer needs; ambition; a 9-to-5 job isn't for us. Those who are willing to embrace this goal, willing to dedicate themselves and take on more responsibility are the people we need.

Team building is about mindset, not age.

02

Long-term strategy
 
Wang Xing: How to Weather the Industry's Cold Winter
Time 2012 Background: Lashou's failed IPO, on the eve of the end of the Thousand Group War

1. Advance 30 kilometers every day

Before December 1911, no human had ever reached the South Pole. Therefore, this was the goal of all the greatest explorers and most adventurous people a century ago. There are many interesting stories from this period, and their experiences hold lessons relevant to our endeavors.

The final two competing teams were Amundsen's team from Norway and Scott's team.

Amundsen's team had five people, while Scott's had seventeen. They set off around the same time, because competition in this world is always fierce. When a great opportunity arises, it's unlikely you're the only one who sees it; there are usually others who recognize it around the same time. This is similar to countless other competitive situations. A truly attractive opportunity will almost always attract more than one team, company, or individual, resulting in fierce competition.

Amundsen's team reached the South Pole more than two months ahead of Scott's team. This illustrates the difference between success and failure.

Amundsen reached the South Pole first and successfully returned to their base 21 months later, all according to their plan. This was because they conducted thorough research, made meticulous preparations, stocked sufficient supplies, and anticipated potential difficulties. Scott's team, however, suffered constant setbacks and losses, with no one surviving.

The difference between success and failure is not merely whether you achieve glory or accomplish your goal, but a matter of life and death.

The expeditions undertaken by these pioneers were more challenging, thrilling, and high-stakes than what we face. Understanding the factors behind their drastically different outcomes can offer valuable insights for our work.

Post-event analyses of the two teams' strategies and preparations reveal significant differences.

Amundsen's team, despite being smaller, was incredibly well-supplied with three tons of provisions. Scott's larger team, however, only had one ton. Was one ton sufficient? Theoretically, yes, provided they made no mistakes. However, navigating over 2,200 kilometers of unknown terrain and unpredictable weather leaves no room for error. Any slip-up would compromise their survival. The sheer impossibility of this requirement highlights the perilousness of inadequate preparation.

Therefore, overly tight schedules and seemingly sufficient but ultimately inadequate preparation with no margin for error are extremely dangerous.

Amundsen's team had a substantial surplus of supplies. Even if they missed a planned resupply point, lost some gear, or encountered more severe weather than expected, they still had enough resources to persevere.

This is what adequate preparation truly means—not just barely enough, but anticipating the challenges and preparing extensively, allowing for mistakes, or, in our case, for learning and growth.

This is a key difference: whether resources are sufficient and whether there's room for error.

There were also many other differences, such as the tools they used, reflecting their preparations. Amundsen, a Norwegian, meticulously planned his expedition, identifying the best tools and methods for his objectives, and learning from the best practices.

Recognizing the similarities between the Arctic and Antarctic, he spent considerable time with the Inuit, learning to use the best tools for the environment—dog sleds.

Scott's team made several mistakes. Instead of dogs, they chose horses, which proved to be a significant error. Dogs don't sweat in snowy conditions, but horses do, and sweating in freezing temperatures leads to freezing. So, despite being stronger and seemingly faster, horses were unsuited to the environment, proving that a superficially advantageous choice might actually be inefficient.

They quickly realized this and attempted a more adventurous approach with the most advanced tool available at that time: snowmobiles. However, snowmobile technology, particularly the internal combustion engine, was still quite underdeveloped in the early 1900s. While snowmobiles, in theory, might have been faster and more powerful, the reality was that they proved unreliable in the harsh environment, as the technology was untested under such extreme conditions.

Ultimately, they had to resort to pulling sleds themselves.

This is a crucial difference. In similar environments, with roughly the same objective, the chosen path, methods, and preparation can often mean the difference between success and failure, even life and death.

Another critical strategic difference: Regardless of weather conditions, Amundsen's team consistently traveled approximately 30 kilometers per day. While seemingly simple, this principle was identified as key to Amundsen's team's consistent success and survival.

There's a lot of subtlety involved. In an extreme environment, you need to perform at your best, but for sustainable excellence, you can't push yourself too hard. Once you start sweating, it's extremely bad; if you get excited and sweat, the wind will freeze it later. So, at any time, being too aggressive can easily lead to long-term negative consequences.

Achieving this requires strict adherence to established discipline. When things are easy, when the environment is favorable, don't get carried away; stick to the discipline. When conditions are good, when it seems easy, advance 30 kilometers, then set up camp and rest. When the weather is bad, Amundsen also insisted on leading his team, even if they moved very slowly, to advance 30 kilometers and achieve the day's goal. Because the set goal had a margin, if the weather was bad, they would slow down; if the road was steep, they would slow down, but they persisted in completing it.

Amundsen devised a feasible plan, a plan with a margin. Although they faced an almost completely unknown area and unpredictable weather, they basically followed the plan. In contrast, judging from their logs, Scott's team was rather arbitrary. When the weather was good, they pushed very hard; when the weather was bad, they slept in their tents, cursing the bad weather, cursing their bad luck, hoping for clear skies and the ability to move forward as soon as possible.

This is a natural reaction; many people easily have this idea—to do more when it's easy, and to rest when it's difficult, when the season is bad, the weather is bad, or the market environment is bad. But in retrospect, these two approaches may be their biggest difference.

This story has many similarities to the environment we are in today and the things we are doing.

We believe that the ultimate scale of e-commerce for goods and services will be similar; the final scale will be in the trillions. We also face a goal: to do local e-commerce.

What we fear most is underestimating ourselves and not fully understanding the situation. As long as we are aware of the difficulties and prepare and overcome them accordingly, it is possible to overcome them. What we fear most is underestimating the situation.

We should be like Amundsen's team exploring the Antarctic, fully utilizing and learning all the best methods available, methods suitable for us, having a sufficient estimate of the difficulties, having clear goals, and formulating plans to execute them firmly. Our goal in 2011 was to grow by 20% each month, approximately 10 times a year.

2. Learn from competitors, learn everything advanced, surpass competitors

We should value every competitor; they have many merits.

We can learn a lot from Alibaba, but ultimately we must surpass Alibaba. We should learn from any competitor, any peer, but our ultimate goal should be to surpass them. This is the goal of the entire company and should be the goal of every individual, no matter what position you are in. There is always a way to do better, to learn new things, and the goal is to surpass them.

3. Regarding Going Public

Going public is not our goal; it should be something that happens under the right circumstances as we achieve a more long-term goal.

You cannot set going public as the goal; instead, you should have a more solid goal: to serve consumers well, serve merchants well, and allow the entire enterprise to operate healthily and sustainably. At that time, going public will be a natural progression.

Before going public, another thing is very important because the entire company's achievements are made together. Meituan's most important products and assets are people. We hope that going public will bring funds to the company and allow everyone to share the fruits of victory. So, in the second half of last year, we had our first company-wide stock ownership plan, available to everyone who has been with the company for a sufficient length of time.

4. Winter

In the first half of 2011, everyone was investing crazily, with various ridiculously high valuations. Then, in the second half of the year, as we expected, winter came. It may not just be winter for group buying, not just winter for e-commerce, but even winter for the entire internet and the entire investment world. It's the same now; many people think the market environment is bad. All of this is actually like the changes in weather during their Antarctic expedition—sometimes sunny, sometimes rainy—all within a roughly controllable range.

We don't rely on luck; we want to be like the successful Amundsen team, like how they persisted in advancing 30 kilometers every day, regardless of the weather.

Only this seemingly unexciting approach truly tests perseverance and may be the most productive. Repeating a simple task, doing it better and better, becoming more and more professional, no matter what position you are in. This may sound boring, but it actually contains countless passions. This is true passion, not inexplicable changes, but the things you accomplish. You want to do it to the best of your ability, better and better, even better than the best, better every day.

This is a difficult thing, but it is an exciting thing and something worth striving for.

 

03

Goal
 
Wang Xing: From Meituan's Three Years to Ten Years of O2O
Time: 2013 Background: Meituan became the leader in national group buying, Meituan Waimai launched at the end of the year

1. Every time you spend money, you are voting, voting for the world you want to support

About three years ago, when Meituan was still very small, a friend asked me, you previously did Xiaonei.com and Fanfou, which are social media and social networks. Doesn't it seem like they have more influence on information dissemination and are more socially significant? Doing e-commerce with Meituan is also good, but isn't it a bit mundane? I answered without hesitation,

and very confidently told him: Not mundane!

I believe it's incredibly important that everyone has the freedom to spend money. Every purchase is like casting a vote, a vote with your wallet, a vote for the world you want to see. You use your money – no one can stop you. It's your ballot, deciding which companies and businesses you support, who you do business with, where you choose to spend your money, and which enterprises you believe deserve greater success and growth in this competitive landscape.

This is everyone's freedom, everyone's right to choose, consumer democracy; and that's precisely what Meituan does. It offers everyone more choices, more freedom, and allows trustworthy businesses providing high-quality service to thrive and flourish in this democratic marketplace.

Therefore, I want to reiterate this point: every time we spend money, we're voting, choosing the world we want to support. Each vote is a transaction, and the transaction amount represents the magnitude of the vote, the number of consumers influenced. I believe the transaction volume is crucial to Meituan.

2. Identifying Industry Opportunities from Major Trends

Taobao and Tmall have grown exceptionally well, primarily focusing on e-commerce for goods. We have every reason to believe that e-commerce for services is a market of equal or even greater scale, with even more robust demand. This can also be seen in another report.

By following macroeconomic trends, you'll notice the distribution of China's GDP and various industries in 2012. I believe 2012 was the last year where the tertiary industry's output was less than that of the secondary industry. The tertiary industry, or service industry, is rapidly closing the gap with the secondary industry (manufacturing). 2012 is likely the last year where the tertiary industry was smaller than the secondary industry. From 2013 onwards, statistical reports will show that the tertiary/service industry's total output value will exceed that of the secondary industry. Meituan operates precisely within the tertiary/service industry, specializing in e-commerce for services.

3. With 5.5 Billion RMB, Daring to Set a 100 Billion RMB Target

Looking back at the past three years and forward to the next year and the following three years, I want to share another goal with you: In 2015, I believe Meituan should achieve an annual target of 100 billion RMB. (Meituan's revenue in 2012 was 5.55 billion RMB)

A total of 100 billion RMB for the whole year of 2015. What does 100 billion RMB mean? Is it difficult? It sounds like a huge number, but it's not actually unattainable. Because even the most challenging task becomes manageable if you break it down, divide it into smaller parts, and allocate responsibility to each step and team. If everyone is reliable, the entire project will be reliable.

If we break down the seemingly large number of 100 billion RMB, we'll find that as long as we successfully achieve our target of 18.8 billion RMB this year, and then maintain an average annual growth of 140% (2.4 times per year) in 2014 and 2015, we can easily reach the 100 billion RMB goal in 2015. An annual growth of 140% is much slower than our growth in previous years (10 times, 3.8 times, 3.4 times). We have every reason to believe that as long as we don't make mistakes, enhance our product depth, provide a wider range of goods, maintain high quality and low prices, and ensure convenience not just on PCs but also on mobile devices, and with such strong consumer and business demand, we can grow rapidly. We expect Meituan's annual transaction volume to exceed 100 billion RMB in 2015.

Notice my title: “From Meituan's Three Years to O2O's Ten Years.” Essentially, the first decade of this century witnessed the rapid growth of traditional e-commerce. With the development of group buying, O2O truly began at the start of 2010.

Boldly projecting ahead, by the end of the first decade of O2O, by 2020, I believe Meituan's annual transaction volume will exceed one trillion RMB (Note from Big V Business: In 2018, Meituan's transaction volume was 515.6 billion RMB).

I want to share something simple with everyone. From 100 billion RMB to 1 trillion RMB is a tenfold increase. If we give ourselves five years, we only need an average annual growth of 60% (1.6 to the power of 5 is more than 10). When the entire tertiary industry is worth tens of trillions of RMB, and with further improvements in internet penetration and mobile internet usage in five years, we have reason to believe this industry will be enormous. As the leader in this industry, we have every reason to set our sights on exceeding 1 trillion RMB.

So, that's the goal. Regardless of how ambitious it may seem, breaking it down makes it understandable. I believe a high goal is motivating for everyone. This is what I've learned most from the past three years.

The next ten years of O2O will be both exciting and challenging. Why challenging? Because we all know that competition is fierce in every department and aspect, with diverse consumer and business needs. This is inevitably a high-quality, low-price, low-margin business.

Here, let’s remember this saying: The more confident you are about the future, the more patient you’ll be in the present. The past three years, and the coming year or two, will likely be grueling and difficult However, the overall prospect is bright and immense.

04

Meituan was 6 months away from bankruptcy

 

Wang Xing: "Crisis" and "Growth"
Time: 2014 Background: Meituan becomes the leader in group buying

At the beginning of 2013, we set three goals. We achieved two, but we missed one: an annual transaction volume of 18.8 billion RMB, reaching only 16 billion RMB. I think there's no need to hide this; it is what it is.

Looking ahead to 2014, I want to emphasize two words: the first is "crisis." If you hope for consistent success in a good startup, every year is crucial. This statement remains true every year.

Although we've achieved over 50% market share in group buying, we're in the local e-commerce business. We don't just want national leadership; we want to be the leader in every city.

We currently occupy over 50% of the market share in this area, which is only 30 to 40 billion. Offline transactions amount to several trillion, while online transactions account for only about 1%, and within that 1%, we only hold over 50%. What does that even mean?

Whether it's traditional internet giants or traditional business giants like Wanda, they all promote O2O. As everyone enters this industry, we need to do better. If we can't do better, we're in a very dangerous position. It's no exaggeration to say that Meituan is always only six months away from bankruptcy.

If you're at another company that thinks it can rest on its laurels, then it's not far from death.

This industry, this era, this world changes very quickly. Any company without a sense of crisis, any company that isn't vigilant, no matter how strong it seems now, is very dangerous, and even more dangerous than those smaller companies that remain constantly alert.

In the current internet industry, Tencent is considered the most powerful company, but Tencent's leader, Ma Huateng, once said: "When giants fall, their bodies may still be warm." To survive in this era and industry, I believe that every individual and every company must have this sense of crisis.

The second word is "growth." Many problems stem from our rapid growth. In terms of transaction volume alone, Alibaba, JD.com, and Xiaomi haven't grown as fast as we have.

Such a fast-growing environment brings many problems. Because personal growth requires time and opportunity, but when the company's business grows two or three times a year, it brings many problems; not everyone can keep up with every step.

At this time, we need job rotation and a more patient approach to better solve this problem.

 

 

05

The Decisive Year

Wang Xing: 2015 was the decisive year for O2O
Time: 2015 Background: The O2O bubble burst

Five years ago, before Meituan officially launched, in Huaqing Jiayuan, Qinghua East Gate, Haidian District, Beijing, a group of over ten people held a simple meeting in a three-bedroom apartment. We faced many difficulties at that time, and many people, including myself, shed tears at that meeting.

In 2012, we aggressively launched websites, increased orders, and made numerous visits. By the end of 2012, Meituan had secured a dominant position in group buying. I believe that today everyone can see the results of our persistence in walking 30 kilometers a day for three years.

1. The Ostrich Principle (Pursuing Absolute Strength)

When encountering problems, I think there's a principle that an elder taught me many years ago, which applies to individuals, teams, and the entire company.

Many people may have heard of the Ostrich Principle. Turkeys are larger than chickens; from an observer's perspective, a turkey is indeed a circle or two larger than a chicken. However, a chicken looking at a turkey might think they are about the same size; the chicken wouldn't feel the turkey is significantly bigger, perhaps only a little larger.

But when an ostrich comes along, no matter whether it's a chicken or a turkey, no matter how不服气they are, in the face of a powerful contrast, they will admit that the ostrich is indeed much bigger. This principle is very profound, and applies to comparisons between people, teams, and companies.

So in the early days, we may have believed that our values were more correct than our competitors', our team was better, and our foundation was better, but our competitors may not agree. It doesn't matter; arguing is pointless. What should we do? We should return to the fundamental issue: consumers first, merchants second, team third, and shareholders fourth. We have sufficient resources and a good team; we work with many good merchants and work together with them to provide excellent service to consumers.

Today, Meituan has over 200 million users nationwide, and on mobile phones, Meituan is the largest e-commerce marketing platform after Taobao, larger than Tmall and JD.com. So as long as we continue to move forward and faster than our competitors, you will see that those who were once considered our competitors have been left far behind.

2. BAT enters O2O, Meituan is ready to build a platform and ecosystem

In the face of future challenges, I believe this year will be the year of a true showdown for O2O. We occupy 60% or more of the market share in group buying, but it's not over yet. In the film industry, BAT and other companies are making various online and offline attempts just like us.

I believe this year should be a key year for Meituan to build its platform and ecosystem. We need more and more products and services to meet users' and merchants' needs, and different products and businesses require platforms. We also need to cooperate with various external partners in different ways. Therefore, this year, both internal and external development requires us to have the awareness of building a platform and an ecosystem.

I believe this year's competition will be very exciting, and building a platform and an ecosystem is a beginning this year, a very important beginning.

3. Don't overestimate the change that will occur in two years, and don't underestimate the change that will occur in ten years

I believe Bill Gates is right when he said, "People always overestimate the change that will occur in the next two years and underestimate the change that will occur in the next ten years." The same is true for five years. Especially in this era, two years seems like a long time, but looking back five years, I believe everyone will agree that the changes have been greater than they imagined.

06

The Second Half of the Internet
 
Wang Xing: 2016: Return to Fundamental Services, the Second Half
Time: 2016 Background: Meituan Dianping had just completed its merger

 

2015 was a very special year in the history of the Chinese internet. Many internet companies merged that year, including Didi and Kuaidi, 58 and Ganji, Ctrip and eLong, and Qunar. In this environment, Meituan and Dianping also announced their merger on October 8, 2015.

 

Consumers first, merchants second
 
I believe the simplest criterion is: Do you think a service is good enough? Would you recommend it to your family and friends? If we truly want to do this well, to become a long-term valuable, respected company where people enjoy working, we must solve this problem, answer this question, and ensure that the services we provide are something we are proud of and confident in recommending to our family and friends. This criterion applies to all industries, and particularly to ours. Because what we provide is no longer a simple information service, but a service that touches all aspects of their lives – eating, drinking, and entertainment – so the answer to this question is especially important.
Our biggest business at present is in-store dining. This huge market is still in its infancy, and we can clearly see a major wave approaching; this industry will undergo enormous changes.
 
In the past year, mobile payment has taken a step forward, partially forming a closed loop and partially improving the experience.

Less talk of disruption, more talk of innovation

The internet has developed in China for over a decade and has reached a certain stage. I would make a bold judgment: The golden age of pure internet startups is over, "Internet Plus" represents a much greater opportunity. The internet will still have a wide and profound impact on people's lives, but it will provide services in the model of "internet plus various industries".

To achieve this, we should talk less about disruption and more about innovation. If we talk about disruption, the biggest concern is whether we ourselves will be disrupted by a newer model. We should talk more about innovation, whose ultimate goal is to create value, reduce industry operating costs, improve industry efficiency, and enhance user experience.

In 2016, we will begin to build our capacity for open collaboration.

Finally, if you can only remember one thing I said today, I hope you remember this: The standard for judging whether our service is good enough is whether we are willing and confident to recommend it to our family.

China's internet has entered the "second half".

The entire Chinese internet has just entered the "second half." Previously, the development of the Chinese internet largely relied on demographic dividends. But that era has passed; annual smartphone sales are no longer growing, and overall internet user growth has slowed significantly.

At this point, there are two paths: exploring overseas markets and cultivating existing ones.
 
For the development of the entire Chinese internet, a change in the growth model is needed; the next test will be everyone's true skills.

Looking ahead, "Internet Plus" needs to involve the industrial internet transformation of various industries from upstream to downstream, not just stopping at the very end to do marketing and transactions, but truly using the internet and IT to comprehensively improve the efficiency of the entire industry. I previously said "less talk of disruption, more talk of innovation." I think it's meaningless to talk about "disruption" all day long. "Internet Plus" ultimately depends on innovation to serve various industries, relying on the internet and IT technology to enhance the experience, improve efficiency, and reduce costs for all aspects of various industries.

If this is the goal, then the capabilities required for "Internet Plus" will be different from before. Previously, our development was basically in the "first-half mode," which was to aggressively acquire users and merchants and then do the relatively thin layer of "marketing and transactions." Now, entering the "second half," new capabilities are needed, and we haven't accumulated much, only some explorations. But overall, this accumulation is limited, and we don't yet have a complete ability to delve into industries, which is a huge challenge for us.

At the same time, we must also see that this is an opportunity for us, because the vast majority of internet companies do not currently have this capability, especially some internet giants, who also lack this ability. For historical reasons, some giants may find it even harder to acquire such capabilities, which is a good thing for us.

 

 

07

To B, Supply Side
 
Wang Xing: My Judgment on the Macroeconomy and Industry
Time: February 2017 Background: The internet dividend is exhausted
 

 

The "second half" is at several levels: Meituan Dianping entering the second half, the internet and mobile internet industry entering the second half, China's industry and economy entering the second half, and the global economy and politics also entering the second half, in our view.

The macroeconomic environment's demand for refined enterprise management

I'll give you an example to show you how important the macro is.

You know that humans have lived on this earth for many years, but many things in the human living environment are very fundamental, only they haven't changed much over the years on earth, so people don't notice. For example, air, water, and another important one is temperature.

How sensitive is human survival to temperature? The human brain's upper temperature limit is 42 degrees. If the temperature of the human brain exceeds 42 degrees, the proteins in the human brain used for thinking and memory will undergo a chemical reaction. Once a chemical reaction occurs, it is irreversible, it becomes a lifeless solid, and the person becomes senile.

Now, few people see this situation. Older people might say that this person has a fever-induced dementia. Fever-induced dementia is when the brain temperature exceeds 42 degrees, causing a chemical reaction in some proteins. Therefore, this is the upper temperature limit of the human brain. The human heart is also quite sensitive to temperature; the lower temperature limit for the human heart, as far as I know, should be 35 degrees. If the heart temperature falls below 35 degrees, it stops pumping blood.

Therefore, the temperature range for human survival is actually very narrow. What is the level of this narrow temperature range in the entire universe? If the Earth's distance from the Sun changes by 1%, closer or farther, that 1% would exceed that temperature range, and humans would be gone, and the entire human society would be gone.

Even a tiny fluctuation in the macro environment can be a fatal blow, a fatal injury, to the microcosm—to every living entity, to us humans, to our businesses. Therefore, our company pays close attention to the macro environment.

In 2013, two concepts were very popular: O2O and Internet thinking. Both terms were wildly popular. Coincidentally, at that time, I searched for information on O2O and Internet thinking in the United States and discovered something that shocked me: both terms were coined by the Chinese.

The Chinese have a pretty strong innovative capacity, but they don’t realize they are innovating when they do.

How did Americans really learn about the term O2O? It was when Robin Li said he would spend 20 billion yuan to enter the O2O market. Then the American capital market asked, "What is O2O? How did this O2O thing come about? Robin Li is going to spend 20 billion yuan?" Americans were completely baffled: Suddenly, something called O2O appeared, and a company with a market capitalization of five or six hundred billion dollars said it would spend half its funds on this, what exactly is going on?

So, at that time, Robin Li spent a lot of time explaining to them what O2O is. Therefore, although we had been doing O2O in China for a long time, it was mainly Robin Li who exported O2O to the United States.

So the term O2O was spread from China to the United States; the Chinese were educating Americans. For the first time, we took the lead in the world in innovation in the field of world technology. Returning to observe the situation in China, I discovered something that shocked me: The term O2O was not only popular in the Internet industry, investment circles, and media, but a new phenomenon emerged—it became extremely popular in traditional industries. It was even more popular in traditional industries than in the Internet technology and media circles. This was a first in the history of the Chinese Internet.

What is the usual dissemination pattern of all new concepts and terms in the history of the Chinese Internet? Investment circles, media circles, Internet circles, and entrepreneurial circles are the first to catch on, and then traditional industries selectively follow suit. This has always been the dissemination path. However, when the term O2O became popular, the path was reversed, and people in traditional industries were even more enthusiastic.

Interestingly, before O2O, when I attended all internet conferences, I rarely saw people from traditional industries. Even if they did attend, they would say they were there to learn. After the term O2O became popular, many people from traditional industries came to participate, and they were also talking about O2O. Interestingly, when we talked about what O2O really is, they would explain it to me for a long time, and the explanations of two people would be quite different.

This was a very strange thing that happened in China in 2012 and 2013. So what caused the term O2O to become so popular in China, and especially so popular in traditional Chinese industries? The reason is actually quite simple. In 2012, China's self-owned clothing brands experienced a massive industry-wide inventory backlog. The inventory backlog in the clothing industry was terrifying; basically, if they couldn’t clear it, they would go bankrupt.

Why did the clothing industry experience inventory backlogs in 2012? China's clothing brands were mostly established in the 1990s. Over the years, they had lived too comfortably and their methods were too simple.
Clothing companies could achieve success by doing just a few things: First, advertising on CCTV. Second, expanding and opening stores.

However, changes occurred. First, when the post-90s generation became the main consumers, their personal pursuits were not just different from our generation; they were completely opposite. Second, consumers' attention shifted away from television; they played games, read novels online, and watched videos online. The platform for disseminating consumer attention has changed.

 

Many companies you can't imagine will die.

After 2012, internet companies could finally be listed on the A-share market.

For example, companies like Storm Video, etc., all experienced a surge in value. I asked the investment bankers at the time why this was happening, why the valuations were so high. The investment bankers gave me an answer that I thought was very profound. They said, "Do you think the valuations are high? Let me ask you a question; take a look at the growth assessments of traditional companies."

For example, in the United States, do you know the growth rate of a certain famous chain restaurant brand? 2%.

There is a lot of money in the capital market, but traditional industries are not growing. When there is nowhere for the money to go, even if someone tells them a possibility, they are willing to invest. Because there is no possibility for traditional industries; they are destined to die, so the money won't go there.

Fewer investment targets are available. For example, several European economies have negative interest rates.

The entire internet industry in the A-share market was overvalued. The owner of a certain company told me that he never expected to go public. He felt that the company was almost bankrupt, but when it went public on the A-share market, it was worth 70 billion yuan, equivalent to 10 billion US dollars. This is what happened in China in 2012 and 2013. When the entire Chinese traditional economy reached 2012 and 2013, it fell into a very deep pit. An internet bubble emerged afterwards, with a very large internet bubble appearing in 2014 and 2015. The reason is very simple.

When the traditional economy stagnates and there's nowhere for money to go, investment flows into the internet. People, including netizens and investors, lacked understanding of the internet market. With limited investment options, the perceived success of internet companies attracted capital. Initially, this involved purchasing stocks in the A-share market.

Later, finding limited appealing options in the A-share market, investors shifted to purchasing shares of unlisted companies. Funds were established, using RMB to invest in these unlisted companies. After a period, the prices of these unlisted company shares increased, companies proceeded through various funding rounds (Angel, A, B, C, D, E rounds), eventually culminating in an IPO.

Consequently, companies with minimal operations, even just a newly formed team, achieved valuations of $200 million. A team, at its inception, valued at $200 million.

By 2015-2016, the internet and mobile internet exhibited new characteristics.

Firstly, the transition from the internet to mobile internet was largely complete, with smartphone user growth slowing. The overall size of the mobile internet is essentially a product of several factors: the number of smartphones, the number of apps on each smartphone, and the usage time of each app.

Therefore, the significant factor of smartphone numbers plateaued.

Secondly, a concerning trend emerged: users, who previously consistently installed apps, now frequently deleted them.

Our extensive research among prominent investors revealed that only 11 apps consistently remained on consumers' phones.

Recently, venture capitalists have become less willing to invest due to a lack of emerging companies securing funding. Another significant difference between the internet and mobile internet eras is the ease of transition between websites in the browser-based internet era. Users often unknowingly transition to other websites through simple link clicks.

Secondly, search engines played a crucial role in distributing user traffic across various websites. However, in the mobile internet era, transitioning between apps presents a considerably higher barrier. Many apps don't support cross-app transitions, leading to users remaining within a single app. Without the decentralized traffic distribution of search engines, mobile internet traffic distribution relies primarily on app downloads. The only options to increase app visibility are purchasing app store rankings or paying for pre-installation on smartphones. These channels offer limited reach, resulting in a strong Matthew effect.

When smartphone manufacturers' businesses stagnate, they seek profitability. This is achieved by charging for pre-installation and app store promotion, with these fees increasing substantially each year.

We estimate that pre-installation and app store fees will increase by 30% in 2017 compared to 2016. These factors combined pose significant challenges for mobile internet companies. Firstly, the number of smartphones has plateaued; secondly, users are uninstalling apps; and thirdly, promotion costs are rising by 30%. Therefore, I believe 2016 marked a watershed moment for China's mobile internet. The future looks grim; many unforeseen companies will fail.

3. To B

Businesses evolve through three stages: market-driven growth, leadership-driven growth, and innovation-driven growth. Globally and in China, the global economy, the Chinese economy, and the internet economy all face the same challenge—the end of market-driven growth.

Market-driven growth is characterized by advantages or benefits; in recent years, the global economy's benefits have been globalization and technology.

Unfortunately, since 2012, these drivers have faltered. Technological breakthroughs have been scarce. Without technological advancements in the next decade, warfare is inevitable in the following twenty years.

Peter Thiel mentioned in the early 2000s that the lack of technological breakthroughs would cause problems.

China's economy has been driven by several factors: demographic dividend, real estate, and consumption. Unfortunately, these drivers have waned. The continuous rise in real estate prices, the loss of export benefits, and the diminishing demographic dividend due to severe aging and rapid decline in the labor force are all contributing factors.

The internet is no different. Previous growth relied on expanding internet users and faster CPU speeds. The primary drivers were user growth and Moore's Law. With user growth reaching its peak, the market advantages have ended.

Given these challenges, based on the three-stage model of business development, a shift from market-driven to leadership-driven and innovation-driven strategies is necessary.

Regarding leadership-driven and innovation-driven solutions, Europe has already exhausted these strategies. With advanced development and a lack of further innovation, Europe's prospects appear bleak. The United States has a few more years, as it hasn't fully utilized its resources. Europe's future is grim; if you dream of visiting Europe, do so soon, as safety concerns may arise. This is already evident, with Paris becoming a dangerous city.

Supply-side reform. Industries comprise two parts: demand-side (consumers and markets) and supply-side (businesses and suppliers).

What changes should be made? Improved efficiency, reduced costs, innovative services, and enhanced user experience.

In 2013, I did something. I compiled a list of American publicly listed companies in the technology and internet sectors, as well as those in China. Generally speaking, China's development has followed that of the United States, as many innovative technologies originate there. So I looked at which industries in the US had already produced very successful companies that hadn't been truly established in China, yet which, given the right time, could also become highly successful in China.

The methodology was very simple: I made a list of American companies and a list of Chinese companies for comparison. The comparison revealed something astonishing: While leading American internet companies like Facebook, Google, and Amazon are incredibly successful, there's another group of equally successful US publicly listed technology companies that are simply less well-known and receive less media attention.

However, this other group is very profitable. Companies like Salesforce essentially occupy the other half of the tech industry. In 2012 and 2013, the to C companies occupied half the market capitalization, while to B companies like Oracle occupied the other half. So there are many successful companies, but looking at China, we find that the to C companies are highly successful (Alibaba being the largest, followed by Tencent and Baidu), yet there are practically no successful to B companies; those that exist struggle.

So I wondered why Chinese to B enterprises were struggling. I spoke with several insightful people, one of whom provided an answer I found quite credible. He said that American to B tech companies provide solutions to businesses and merchants.

As mentioned earlier, Salesforce provides sales team management solutions, and Workday provides HR solutions – all providing solutions for businesses and merchants. Why do these solution-providing companies thrive in the US but not in China? The reason is simple: the US has very long business cycles. Because of these long cycles, companies essentially exhaust all available means of competition and growth, eventually reaching a bottleneck. When this occurs, they start focusing on internal efficiency improvements, cost reductions, and innovative services.

To improve internal efficiency, reduce costs, and innovate services, they require technological support. In short, US companies encountered market saturation much earlier. This saturation necessitates improvements in efficiency, cost reduction, and innovation, leading to interest in new tools that enhance efficiency and reduce costs.

What was the situation in China during this time? Even incompetent management could make money. It might seem that we were worse off than them, as we were making losses—strategic losses, of course. In the past, many industries in China were incredibly lucrative.

In recent years, the development of the Chinese market and Chinese enterprises was remarkably easy, driven by market dividends alone, resulting in profits. Therefore, their willingness to adopt new tools and methods was exceptionally low.

Today, I believe this situation has changed. All enterprises and businesses are facing obstacles as sales and profits stagnate.

Recently, I believe that if China's internet industry is to recover, a crucial direction will be innovation in the supply chain and the to B sector, driving its growth. If supply-side reforms are to take place, what changes might we expect?

 

08

On the eve of listing

Wang Xing: Reaching for the Sky, Delving into the Earth, and Globalizing
Time: April 2017. Background: Meituan's listing the following year.

Three major directions are the most exciting: reaching for the sky, delving into the earth, and globalization.

1. Reaching for the sky: From business model innovation to technological innovation

Twenty years ago, the internet itself was high technology. Today, however, most internet companies are simply traditional technology companies.
Whether it's the 20-year development of the internet or the nearly 50-year development of information and communication technology, the underlying principles are based on Moore's Law, proposed in 1965 by Gordon Moore, co-founder of Intel, which states that the density of semiconductors doubles approximately every 18 to 24 months.

Moore's Law, in the traditional sense, has reached a relative limit. Future global growth factors may be different. The total number of chips is increasing, as global capacity is ultimately the computing power of these chips. Determining whether growth stems from an increase in the number of chips is somewhat abstract, yet fundamental to all aspects.

Everyone needs many chips—phones, computers, but especially cars, which can have nearly a hundred chips each. Therefore, there will be increasingly more data and demand for computation.

This is only part of high technology. I often discuss this with friends, some of whom say that every time they return from Silicon Valley, they feel what they are doing is low.

In terms of high-tech startups, China will have more and more space and demand. This type of entrepreneurship is different. It's no longer something a student can tinker with in a garage or dorm room for a few days and achieve groundbreaking results; it may require substantial underlying accumulation and significant investment, demanding patience.

China's internet industry has seen great success, but many believe this is due to business model innovation, not technological innovation. This was true in the past because China was generally lagging behind. Now, having reached this stage, it may even surpass the United States. In the future, there may indeed be significant investments at a fundamental level. Many AI experts say that China is not behind in AI, but more fields require longer-term investment. Beyond Moore's Law, our overall talent pool is growing, which requires national investment and support.

High technology will be a major driver over the next five to ten years, but it will not be done in isolation, just as the internet is combined with various industries.

2. Cultured meat

Or another example of high technology. Because Meituan is in the food business, during the 2017 Spring Festival, I saw a company that made impossible foods. It was founded by a professor, a biochemistry professor for 26 years. He believed that people love to eat meat, and that to get meat, we need grass to feed cattle and sheep. He thought this was very inefficient and wasteful, and that technology should be used to directly transform food protein into animal protein, skipping the step of raising animals. He succeeded, and he presented a sample at the event. The meat he made was delicious, and his company's artificial meat burgers are very popular in six or seven restaurants in the United States.

This is a completely disruptive thing, because cattle and sheep do not evolve. For tens of thousands of years, the speed at which beef produces meat from grass has been basically fixed, and evolution is slow. But if this company uses high technology to break through, it will be revolutionary, instantly disrupting the beef farming industry and producing healthier meat. Previously, raising cattle and sheep involved antibiotics and additives, but in a laboratory setting, they can control things more precisely. So this is related to food, which seems like the most basic thing, but it could be a high-tech breakthrough. Of course, as the largest consumer of agricultural products, China's technology in this area is something worth paying attention to.

3. Go Deep: Not just the C-end, but also the B-end and the entire industrial chain

Entrepreneurship needs to be grounded. Being grounded means not just touching the surface, but reaching the fertile depths below. Currently, if you're only focusing on the C-end, it's not enough; this is both unfortunate and a reality.

Shared bicycles are very popular now. Looking back, I believe Mobike was on the right track. Truly good things, based on customer needs and new scenarios and models, will excel in terms of user experience and cost. I believe creating such things requires not only being grounded but also having a strong foundation.

Take Meituan as an example. In the catering industry, Dianping started the earliest third-party restaurant review platform in 2003, Meituan did group buying in 2011, and food delivery in 2013. We focus on the C-end, but we can't stop at just connecting. So, on the B-end of the catering industry and other industries, we have made a lot of investments, including catering pressure systems, cash register systems, and hotel systems, including their PMS (Property Management System) and room management.

4. Globalization: Competition between China and the US, and vast opportunities in developing countries

In the second half of the global internet era, I believe it will be a competition between China and the US. Because the internet was originally invented in the United States, and twenty years later, only China and the US have produced major internet companies. We see that Tencent is very powerful, and it has already reached the top ten globally, relying solely on the Chinese market.

But this is not enough. If we look at it broadly, the value of a company depends on the size of the problem it solves, the size of the market, and the size of the economy. Although China's economy is becoming increasingly developed, we only represent one-sixth of the world's population. If we only focus on this, even if we succeed, we will still be smaller than the other part. Because the strength of the United States lies in the fact that American internet companies do not only serve the US market, but almost the global market, except for China. Therefore, if Chinese companies cannot successfully go global and serve larger economies, they will lack long-term competitiveness. Because, going back to the idea of reaching for the sky, high technology requires high investment. If you don't have a large enough market and scale, you won't have enough investment to compete, and in the long run, you will lack competitiveness.

In contrast, globalization is a great opportunity for Chinese companies and something China must do in the future.

On the other hand, I think there are opportunities because, although the US is stronger than China in high-tech fields, China has made a lot of efforts, especially in terms of business model innovation, and is already leading in many areas.

When expanding overseas, I think it's a simple question of whether to go up or down, whether to target countries with higher per capita economic weight or lower economic weight. I think Chinese companies can try this. We may have greater opportunities in third-world countries, developing countries, countries similar to China, or countries less developed than China. We know what's happening there and at what stage, and we can better implement our strategies there.

 

Japan's overseas expansion involves Japanese banks, media, and companies working together. I think Chinese internet companies should do the same, because it's impossible to do it alone. There are companies doing distribution, e-commerce, finance, and O2O. Working together will create stronger combat effectiveness. I think this is a very good opportunity. China's GDP growth rate is not that fast now. Look at India and Southeast Asia; their markets are not small. Southeast Asia has 600 million people, half of China's population. Their infrastructure is a bit behind ours, but it's also developing rapidly. I visited several countries in 2016, and one major feeling I had was that China has a large number of talents, while many countries lack talent and computing power. I think these three points—reaching for the sky, going deep, and globalization—are the most exciting aspects of the second half of the internet era that I've seen.