Ep. 1: Toutiao’s Apology and Mobike’s Acquisition by Meituan

11 min read 

TechBuzz China is a new weekly technology podcast powered by Pandaily hosted by Rui Ma and Ying-Ying Lu. To listen to this week’s conversation on Toutiao’s Apology and Mobike’s Acquisition by Meituan-Dianping, you can tune in to TechBuzz China on iTunes Podcast, SoundCloud, or simply search for TechBuzz China in the podcast app of your choice.

TechBuzz China is a short weekly podcast that talks all about China’s Innovation, co-hosted by Rui Ma who is an angel investor and entrepreneur, and Ying-Ying Lu who is also an entrepreneur. The two hosts are both China experts who lived and worked in the technology space in China for many years.

This week on TechBuzz China, Rui and Ying-Ying talked about the recent news involving three Chinese unicorns: Toutiao, Didi, and Meituan. Toutiao was recently under fire for posting fake ads on their flagship news app, but their punishment came in the form of a permanent ban on their jokes app, Neihan Duanzi, which you can read more about here. Rui compared Toutiao CEO’s open apology with Facebook CEO’s congressional hearing happening concurrently in the U.S. Ying-Ying shared about Didi’s move into food delivery, and what it means for the on-demand sector which you can read here. She also shared her thoughts and a personal story related to the recently acquisition of Chinese bike-sharing giant, Mobike, by the unicorn Meituan-Dianping, which you can also read more about here.

If you are interested in learning more about what’s happening in China’s technology sector, you can also follow us on Twitter @thepandaily and like TechBuzz China on Facebook. If you would like to provide commentaries for the show, you can contact Rui or Ying-Ying on Twitter @ruima and @ginyginy.

Don’t forget to subscribe to TechBuzz China and tune in next week!

Transcript

[00:08] R: Welcome to TechBuzz China! We are a new weekly podcast focused on bringing you the most relevant, interesting and buzzworthy headlines in China tech. Seriously, this is our very first episode. That means you’re an early adopter.

Anyway, let me introduce myself real fast. I’m one of your two cohosts, Rui Ma, and I live in San Francisco. I’m an angel investor, entrepreneur, and self-proclaimed China expert. Well, quite a few other people think so too. Anyway, I was born in China and worked there from 2007-2015, mostly in tech advisory and investing, and still go back regularly.

[00:44] Y: I am Ying-Ying Lu, your second cohost, also a resident of SF, also an entrepreneur, and also a self-proclaimed China expert. I lived in China from 2010-2014, and worked there as early as 2007. Have worked for and with a number of Chinese companies and tech startups. I am usually the moderator or behind the scenes project manager for this type of content, so being asked to provide commentary instead of getting to ask probing questions will be an interesting experiment.

Techbuzz China is a part of Pandaily.com, a new English language site that tells you “everything about China’s innovation.”

R: Pandaily works with leading Chinese tech news outlets to translate some of their best news content.

[1:26] Y: You may have noticed that our cover art for the podcast is that of pandas riding bikes. This a nod to several things — first, obviously Pandaily is named after pandas. Hah. Also, we give a nod to the explosive popularity of bike sharing services in China (which we’ll actually talk about in a bit), and their emergence as a popular “copy from China” business. It’s also a reference to the fact that in the old days, news used to be delivered on bicycles.

[1:54] R: Yeah I totally thought those pandas were riding mobikes. Doh! Soooo, we are not full-time journalists, but people like you, who aside from being super smart, are also, we hope, super curious about the latest developments in one of the largest and most influential tech markets in the world. We see TechBuzz as an opportunity to give you some more color and context behind some of the most fascinating tech companies, people, and trends in the world right now.

[2:21] Y: That’s right. And we know there are many other podcasts out there on China tech. But while many of them do great deep dives into certain topics, we are just here to give you a taste of what’s most current and top of mind. So you can think of some of them as sumptuous dinners. But we want to be your morning cup of coffee, the quick pick-me-up that gives you a lay of the land and gets you ready to go. Oh, except we are weekly.

[2:44] R: That’s right, we are your weekly cup of coffee. We are so awesomely strong we can last you a whole week. And here we go, your first sip today is on the totally crazy story of the Chinese government shutting down a major content sharing app called Neihanduanzi, which I totally will not bother spelling out. Anyway, Neihan is a subsidiary of Toutiao, which means Headline, sometimes referred to as the most valuable AI company in China, rumored to be valued at $30Bn last December. Neihan in Chinese officially means connotation, but on the interwebs, refers to more to innuendo, and duanzi means wisecracks or jokes. So yeah, it was a community where you can share funny stories, photos, and videos. Kind of like an FML plus 9gag plus whatever entertainment app you go to for short videos. It had a real community and real following. People really connected with the brand and would even put bumper stickers on their cars and had a secret honk they used to self-identify as fans. And it had a lot of users. About 200 million.

R: Alas, it was shut down this week for being too vulgar. Let me read you what the CEO wrote in his very public apology: “The product has gone astray, posting content that goes against socialist core values. It’s all on me. I accept all the punishment since it failed to direct public opinion in the right way.

Toutiao, which is famous for its AI-curated news app and for acquiring Flipagram and Musical.ly, has been under heavy fire for the past few months from the government for inappropriate content and fake ads. For example, some ads were for unlicensed or just straight up fake drugs, similar to scandals that plagued the search engine Baidu a few years back. Trouble had been brewing for a while, but it’s still quite a drastic measure for the government to step in and require permanent closure, as opposed to a temporary break, which is what it usually asks for.

[4:41] R: So for me, this was kind of a weird week in that in my English feed, I saw nonstop tweeting about Zuck’s Congressional hearing. In my Chinese feed, it was all about Neihanduanzi getting shut down. It was really interesting to see two high profile CEOs in two different markets apologize profusely for their products and taking personal responsibility. Two different markets, two different outcomes.

R: Now Zuck’s performance, if we can call it that, resulted in a 4.5% gain, which apparently netted him $3B personally in stock value personally. Toutiao isn’t a public company yet, but if you were a shareholder, how would you rate the CEO’s handling of the matter? I personally think Toutiao has a ways to go to convince the government that it truly has learned its lesson. It’s said publicly that it would beef up its content review team from 6,000 to 10,000 people. For reference, Facebook had about 7,500 as of February. But will that be enough? Will it be able to remain in the top decacorns club, which by the way, I learned recently, is the proper way to refer to companies valued at $10Bn and above? But that’s enough about this decacorn, let’s go onto another one. I understand you have a story about the the $56Bn Didi, Yingying?

[06:00] Y: Yes, in logistics news, we have a big story this week about Didi Chuxing, or the “Uber” of China, launching a food delivery platform. It hasn’t caused as big a buzz as the Toutiao story by far, but it’s a clear indication of big brands going after new verticals. The news also comes barely two weeks after the major news of lifestyle site Meituan-Dianping, or “Meituan” for short, acquiring Mobike, one of the world’s largest bike-sharing companies, for a whopping $2.7 billion dollars. Now that was big news. So here we have two examples of two big brands and market leaders essentially creeping into each other’s spaces– not unlike UberEats, Yelp, and others in the on-demand space in the U.S.

Y: As background, Didi Chuxing, or “Didi” for short, is China’s answer to Uber; in fact, it acquired Uber China back in 2016. Today it’s the clear market leader in China’s massive ridesharing space– it’s got over 400 million users — that’s well over the total number of people in the US.

Y: Didi has called its food delivery service simply “Didi Waimai,” or “Didi food delivery,” and launched in 9 cities including Wuxi, Nanjing, Chengdu, Xiamen, and several others. Note that none of these are first-tier cities; I think Didi did this to test out their service before going big in a market like Beijing or Shanghai.

[07:31] Y: Whatever the reason, it’s clear that Didi has been plotting this move into a vertical market (aka ridesharing into food delivery) for a while now. For example, in 2015 Didi invested in 饿了吗, or Ele.me (which was recently acquired by Alibaba for $9.5Bn). At the time, Ele.me was a growing company that could only deliver within a three mile radius — linking with them Didi gave the promise of eventually being able to deliver everywhere.

Y: On the other hand, Meituan-Dianping, the world’s fourth largest unicorn, is itself the result of a groundbreaking merger between lifestyle site giants Meituan and Dianping. Prior to the acquisition of Mobike, Meituan already provided on-demand services ranging from food-delivery to ride-hailing, and has even been developing autonomous vehicles.

[8:29] Y: Mobike, founded by ex-Uber China employees, was one of the market leaders– if not THE leader, in bicycle sharing, which really took off in late 2016. It was crazy! In case you haven’t visited China in the last couple of years:
I remember a trip in March 2017, and a reunion with some local Beijing friends who literally sat me down and told me about their awe of waking up and one day there were just “bikes everywhere!” Even as folks well attuned to the pace of rise and fall of urban trends,, they were in awe of how quickly these teams had executed and how fast the trend had spread. That moment for me, of really taking in their awe and excitement in explaining how the phenomenon was affecting their everyday lives, was a visceral time of realizing that the tide was shifting.

Y: Indeed, we often cite ridesharing as one of the most prominent examples of a growing trend of “copy from China”– in the U.S., for example, we soon saw former Tencent exec Brad Bao create Andreesen-founded Limebike, and today on the streets of San Francisco we see all sorts of ridesharing bikes in multicolor not unlike (though on a smaller scale) those in China.

Fast forward to late 2017 and early 2018… and now it’s old news. In fact, people are complaining about how the excess number of bikes are cluttering the streets and making it hard to walk. They are also beginning to view the waste created as a sign of environmental thoughtlessness in gaining market share, not to mention burning VC money in the process– not unlike battles between leading on-demand services such as X in the US.

This is just glimpse of how fast things change.

Taken together, the stories of Didi getting into food delivery and the somewhat older story of Meituan acquiring Mobike show that lifestyle and on-demand companies are both consolidating and building into other verticals. Combine that with ample VC money to fuel battles for users, arguably the fastest market feedback/turnaround in the world, and we can expect to see more innovations in these sectors. Finally, as Meitun and Didi go into each other’s territory, consumers as the ones to benefit… at least for now.

[10:34] R: So there we go, that’s the end of this week’s highlights that we wanted to share with you. Just to recap, we talked about a major content sharing app getting shut down by the Chinese government, partly for fake ads and disseminating content that harmed the public good. A kind of bizarro world version of what happened this week in DC with Zuck and the congressional hearings here.

Y: That’s right. We then talked about Didi getting into food delivery, and touched a bit on the acquisition of Mobike by Meituan-Dianping. Though “BAT,” or Baidu, Alibaba, and Tencent are the largest tech companies in China and still are the most active acquirers, we are seeing the addition of players such as Didi and Meituan-Dianping. TMD

R: OK, that’s all for this week folks! Thanks for listening. We really enjoyed putting this together, and are always open to any comments or suggestions. Fan mail is cool too! Or bitcoin. Yeah. Just kidding. You can find us on twitter @thepandaily, that’s spelled THEPANDAILY, and my personal Twitter account is @ruima, that’s spelled RUIMA.

Y: And my twitter is spelled @ginyginy, don’t be a stranger, see you guys next week!

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  1. Thanks for the good topic selection and well-done research.
    Kudos to both hosts!

    One comment to Ying-ying: I’d advise you to minimize tone variation. Cheers.

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