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TMD, China’s Next BAT

Three emerging tech powers aim to re-define the Chinese tech industry and give the current BIG THREE a run for their money

Feb 12, 2018 by Chauncey Jung
TMD, China’s Next BAT

In China, the acronym BAT has a special significance – it is the combination of the first letter of three tech giants – namely Baidu, Alibaba and Tencent – that have a decisive impact on the Chinese economy. These giants invest in cutting-edge technologies, acquire many leading startups and in other ways consolidate their commercial empires. Their names are uttered with reverence, awe and a tinge of envy.

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Yet this Three-Kingdom era might be coming to an end. Three other emerging star organizations – namely Toutiao, Meituan, and Didi, also known as the TMD – are actively expanding into new business domains and reducing the gap between them and BAT. In other words, they are using their diversified investments and insights to challenge the traditional BAT hegemonies.

Let’s take a closer look at each emerging star.

*Didi: monopolizing the “sharing” market *

While many still see Didi as merely a ride-sharing mobile application, the truth is that, in the past three years, this firm focused on merging its smaller competitors and . For example, Didi invested in Uber’s rising competitor Lyft in early 2015 and acquired Uber China in 2016.

To add to their unquestionable dominance in the taxi segment, Didi ventured into bike-sharing. Here, they attempted to merge two bike-sharing rivals, namely Mobike and Ofo and failed to do so. So they acquired Bluegogo in January 2018 and thus hit the market running. With both Ofo and Mobike struggling to acquire additional funds to compete and operate, Didi seems poised to monopolize China’s bike-sharing industry as well.

Meituan: the entertainment empire

Meituan started as a discount coupon site and has developed into a giant covering all forms of entertainments. From watching a movie to ordering take-out food, a user has strong reasons to spend their spare time and money on services offered on Meituan’s platform. It’s not surprising, therefore, that Meituan’s business is growing like a snowball rolling down the hill.

Of course, Meituan has respectable rivals – Eleme in the food take-out business and Alibaba’s Taopiaopiao in the retail of movie tickets. Yet, none have been able to match the dexterity and growth of Meituan. With a current net worth of $40bn, Meituan can aspire to enter other business domains. Early indications suggest that Meituan might enter the ride-sharing market in direct competition with Didi Chuxing. It would be wrong to see this as a tit-for-tat move against Didi, which invested in Meituan’s food take-out rival Eleme earlier in 2017. Didi, or any other rival for that matter, must take Meituan’s moves seriously. In it, they have a formidable rival.

Toutiao: the content conglomerate

Toutiao is best known for having the most savvy tech algorithms in China. Unlike the typical news aggregator, Toutiao has the uncanny knack of providing information to users based on their very specific interests and preferences. Thanks to their innate intelligence-gathering mechanism, Toutiao’s main application, the Jinri Toutiao app, has around 120 million daily active users. This is the highest amongst all information apps in China.

Yet Zhang Yiming, the founder of Toutiao, did not rest in his laurels. Toutiao garnered its video program license by acquiring a smaller video firm named 365YG in 2016. In 2017, Toutiao invested in its own short-video application, Tik Tok, and thus brought the wisdom of their algorithms to the video market.

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Like Didi, Toutiao also placed a huge emphasis in overseas markets. It acquired the musical application Music.ly in November and is currently busy constructing a fleet of content aggregators for overseas users. By the end of this phase of their consolidation, Toutiao will offer Music.ly, TopBuzz, Hypstar and Buzz Video to a much broader set of users in China and overseas.

Major competitors such as Sohu, Netease, and Tencent have been trying to mimic the algorithm-dirven content model of Toutiao. As of now, Toutiao remains the undisputed leader of the market; it is the firm that has redefined how China consumes content. With a current net worth of more than $20 billion, Toutiao is keeping an eye open for strategic investments.

An Ambivalent Feeling for Entrepreneurs

Entrepreneurs in China used to go to the BAT group to seek supports and funds. Now, they have another three additional giants to go to.

Yet, in practical terms, the benefit of having more potential investors is more than offset by a harsher reality: the entrepreneur is not just finding an investor, he is also picking a side. And he will now have to prove his loyalty to the chosen side, irrespective of the business costs he has to bear. For example, by receiving investments from Alibaba, a start-up entrepreneur may enjoy the benefit of better promotions on Taobao, but suffer in the realm of website SEO in Baidu.

The emerging giants simply deepen this issue. If the entrepreneur makes an error in judgment, he might experience zero impressions on Toutiao, complete ban on Meituan and/or embargos in Didi-controlled services. In effect, the enviable resources of BAT and of TMD have become a double-edged sword. Clearly, the game of investor relationships has turned tougher.

Only time will tell whether the emergence of 3 new giants will be a boon for start-ups or a curse, making their entry into the saturating market that much more difficult.

Chauncey Jung

Chauncey Jung works with a unicorn Internet firm based out of Beijing. In his earlier stint with Sohu, a lead online-news platform headquartered in Beijing, Chanucey wrote in English on various subjects, spanning from culture, politics to social changes. His professional experience pays him off an insider perspective over China's internet industry. Completed his bachelor and master education in Canada, Chauncey is obsessed with trending technologies and economic developments across Asia. He can be reached at chaunceyzhang@foxmail.com

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