China's online arms race shows no sign of cooling

epa05020467 A consumer views online shopping websites at a store of JD.com online shopping website in an university in Beijing city, China, 11 November 2015. Chinese internet giant Alibaba made 5 billion dollars in the first 90 minutes of the country's 'Singles Day' online shopping binge on 11 November, defying fears of an economic slowdown in the world's second-largest economy. Alibaba rival and China's largest online direct sales company, JD.com, said on 11 November that its website had clocked up 10 million orders by 10 am (0200 GMT), which is up 180 per cent from the site's total number of orders on Singles Day last year. EPA/WU HONG

HONG KONG: The online arms race in China continues. Local-deals specialist Meituan-Dianping has just raised more than US$3.3bil (RM14.45bil). 

That's a huge sum for a startup, eclipsing the US$2.1bil (RM9.19bil) that Uber, the world's most valuable venture capital-backed outfit, is reportedly seeking. 

Meituan-Dianping was created from a merger that was meant to curb brutal competition. But this new warchest, and the huge resources of rivals, suggests subsidies will keep flowing. 

The new funding round values the provider of group-buy deals, takeaways, and reviews at US$18bil (RM78.84bil). It makes Meituan-Dianping the fifth-most valuable private tech company in the world, according to CB Insights, ahead of US messaging app Snapchat and India's Flipkart. 

Sales are booming on Meituan-Dianping's platforms, which offer web users discounts on everything from movie tickets to travel. Transactions topped 170bil yuan (RM113.10bil) last year. But transaction volume is no guarantee of profitability, and in China, the battle for market share is highly expensive. 

Sites are gorging on subsidies to undercut rivals and win users. For example, Uber China is now valued at US$8bil (RM35.02bil) but admits it remains unprofitable due to intense competition. 

The merger that created Meituan-Dianping, once bitter rivals, was meant to herald a truce. Instead, more competition emerged for the platform, which is backed by gaming giant Tencent. Alibaba, another of China's three Internet titans, invested US$1.3bil (RM5.68bil) last year in rival Ele.me, according to Chinese business weekly Caixin. Search engine operator Baidu, the third huge player, also owns a leading group-buy site. 

All signs point to a prolonged spending contest. For investors, profits still look elusive. — Reuters