Playbooks

1. Adding product offerings (post initial product-market fit) isn't losing focus. It's smart business.

• A huge part of Meituan's success and longterm defensibility versus its literally thousands of past competitors is its ability to cross-sell customers across many different product lines. Meituan can afford to spend much more on acquiring and retaining a new user who'll end up purchasing food delivery, groceries, hotels, travel and more through the platform vs. standalone competitors in each vertical. Most western companies woefully misunderstand this dynamic. (Amazon being a notable exception)
• Meituan enjoys an average of 26 transactions per user per year (vs e.g. Airbnb users which book an average of 0.5 transactions/year). With each additional offering, Meituan increases the number of revenue streams it can amortize its CAC over, while also offering superior experiences to customers.
• Key to making this strategy work is having the discipline to follow the same playbook as any startup: launch new initiatives quickly, test and improve based on real customer feedback, don't let perfect be the enemy of shipped, and kill what's not working and move on. Meituan and Amazon's new initiatives often lack polish — but they either quickly bring in $billions of revenue, or they die and the company goes on to the next one. Again with few exceptions, western tech companies completely misunderstand how to execute this playbook effectively.

2. When you spot a market that's both large and growing fast — ride that wave!!

Chinese e-commerce was a 20% saturation industry in 2017 and still growing nicely. However real world services was only 5% online, and poised to grow even faster. Staying nimble to capitalize on this online to offline (or "O2O") trend allowed Meituan to accelerate while Alibaba was caught flat-footed. Today Meituan (along with its fellow Tencent portfolio company Pinduoduo) represents probably the biggest threat Alibaba has faced in its entire history.

3. Many still don't realize what a powerful moat (trusted) reviews provide in online platforms.

Once it merged with Dianping, review data became Meituan's biggest competitive advantage vs other food delivery (and other product line) competitors. A deep database of reviews creates an incredible barrier to entry: any competitor can standup a set of listings, but without trusted reviews those listings are just "flat". This same dynamic helped Airbnb successfully defend against European clones early in its life.

4. Old news, but always worth repeating: the days of China simply cloning American tech companies are long gone. Today it's China, not the US, that's leading innovation on mobile and the internet more broadly across many categories.

Ironically, Meituan's founder Wang Xing started his career as perhaps China's top Web 2.0 company cloner, and Meituan itself began as a Groupon knockoff. But to say the the tables have turned today is a massiveunderstatement, haha.

5. Meituan capitalized on the secular trend of China's growing middle class and mobile-first economy.

• Meituan's growth followed the growth of China's middle class. They were able to capitalize on the emergence of Tier 2 and 3 cities that provided newly addressable populations.
• Meituan was smart to pay attention to these non-Tier 1 cities from the very beginning. Founder Wang Xing realized that smaller cities where people were beginning to access the internet via mobile phones and internet cafes were a good fit for their initial group-discount platform.

Links

• Meituan's English language walkthrough video
• The Tech Buzz China podcast
• GGV's Evolving for the Next Billion podcast
• Bernard Leong's Analyse Asia

Carve Outs

• Extraterrestrial
• John Luttig's newsletter