Good Sunday evening. It’s Xiaochun.
April 3rd, two of the world’s most-watched internet unicorns headed towards two different pathways in moves that are the epitome of how two once promising startups ended up in opposite trajectories.
On the one hand, Spotify, believed by many to be the future of music industry, became the first company to hold a direct stock market listing on NYSE – meaning that instead of issuing any new shares the company just lists its existing shares directly on the exchange for open trading and the whole process works sans investment banks, saving the company millions of dollars of broker charge.
Spotify’s floating doesn’t just speak to the company’s own success, its innovative way of listing also serves as a prophecy of what tech IPOs look like in the future.
According to local media, Mobike was sold for US$ 2.7 billion at a valuation much lower than how much it was valued in its last financing.
The different destiny of the two unicorns, especially the selling of Mobike, reveals a long-standing dilemma for Chinese startups – even the very big ones: you either side with established tech giants or contend against them.
That is what Mobike CEO WANG Xiaofeng said at the shareholder meeting on April 3rd. WANG, who has already known back then that the fate of Mobike was pretty much decided but still voted against a sellout, told shareholders before the voting: ” I hope you won’t regret your decision (of selling Mobike to Meituan-Dianping).”
As one of the poster children of Chinese bike-sharing business, Mobike’s retreat couldn’t help but get people thinking that, given the thin profit margin of the business, is bike-sharing an independently sustainable business at the end of the day?
For Meituan-Dianping, the reason to merge Mobike into its service ecosystem is obvious. For one, users on its lifestyle e-commerce platform, after their restaurant hunting or movie ticketing, have the need for transportation, which can be implemented through ride-hailing and bike-sharing. Mobike’s mobility services add an essential pillar to its e-commerce empire.
The deal made in such a rush also revealed that the company’s business was not well-formed. Local media CYZone reported that Mobike’s net loss in last December reached RMB 681 million (approx. $ 108 million).
But Spotify’s was losing more than Mobike, as it’s reportedly losing $ 1.5 billion a year (on average $125 million a month) according to the Verge, meaning money probably wasn’t the biggest push for the Mobike merger.
Actually, Pony Ma, founder and CEO of Tencent, a major shareholder in both Meituan-Dianping and Mobike, was reportedly facilitating the merger, in a bid to create a larger synergy between its investees.
Mobike, as Meituan-Dianping CEO WANG Xing says so after the merge, is a real and rare “created in China” business model. LI Bin, the founder of NYSE-listed auto information portal Yiche.com, first came up with the idea of bike-sharing and asked HU Weiwei, who was the founder of auto media Geekcar, and ex-Uber exec WANG Xiaofeng to work on the idea, the two hence co-founded Mobike.
Since its inception, Mobike was locked up in a brutal competition and bleeding price war with Didi Chuxing and Alibaba-backed rival Ofo. According to WANG, the company once insisted on the independent development.
Mobike tried to follow the Didi practice – subsidies to quickly garner market share and then try to monetize, however what works for Didi, doesn’t seem to work well for Mobike. Comparing to ride-hailing, which is also money-losing, bike-sharing is a business with an extremely thin profit margin. It usually costs only RMB one yuan per ride.
From the acquisition on, Mobike becomes one part of the Meituan-Dianping’s service ecosystem, serving as a portal for traffic and offline data. That probably means the bike-sharing business is half dead as an independent business model, as another duopoly company Ofo is also struggling to keep its independence with Alibaba and Didi Chuxing’s control over the company.
At the same time, Mobike now can rely on the ecosystem that it’s serving and its competition with Ofo is more likely to level up instead of subsiding.
Meituan’s acquisition of Mobike, coupled with Alibaba’s bailout of Ofo, might portend that bike-sharing as an independent business, has come to an end. However, by marrying the service with a larger ecosystem, such as the one Meituan provides for Mobike, or what Alibaba will be providing for Ofo, bike-sharing will keep living up to what Chinese municipalities and consumers expect from them – a green, environmental-friendly, and cheap way for short transportation, and that’s enough.