In this episode, we’re joined by Freeman Ding, a pioneer of China’s consumer internet boom who worked in Chinese tech giants like Baidu, and even Dianping during the $9.5B Meituan-Dianping merger.
Tune in as Freeman dives into why China’s tech ecosystem remains unmatched and Shanghai’s crucial role in the development of consumer tech. He also breaks down the key drivers behind Meituan’s food delivery dominance, and the need for local services platform to balance between low frequency and high frequency use cases.
Freeman also challenges the buzz around “super apps,” arguing that only WeChat truly fits the label. Finally, we explore the global ambitions of Chinese tech giants — TikTok, SHEIN and Meituan — can they replicate China’s playbook? Or will regulatory and cultural barriers prevail?
Also Available on Spotify and Apple Podcast.
[AI-generated transcript]
[00:00:00] Jianggan: The following is a discussion that Sabrina and I had with our old friend Freeman Ding in Shanghai earlier this year. So Freeman is one of the earliest pioneers of consumer internet in China. He did an MBA with the University of California, after his MBA with Berkeley Freeman went back to China in the early 2010s to join Baidu and structured some of the largest acquisitions in the Chinese tech space.
He later joined the Dianping and he was with Dianping when. The company merged with Meituan to form the largest local services conglomerate in China. So he actually talked in one of the earlier episodes of the Impulso Podcast by Momentum Works where he mentioned about why with 2020. 11 to 2016, the golden years of tech in China.
Over the discussion , we talked about, , the role of Shanghai in the whole tech development in China and why super apps will only exist in China or in his words, why he didn’t like the notion of super apps, we also talk about food delivery and how the whole local services were developed over the years.
And some of the lessons that companies in other regions can learn from. So enjoy the podcast.
[00:01:14] Sabrina: So today we are in Shanghai. We have a special guest joining us today, Freeman,
[00:01:18] Jianggan: Freeman appeared in an earlier podcast.
No, not appeared, but that was before we, we started the video.
[00:01:25] Sabrina: I will link that down below if you guys are interested to check out the podcast with Freeman. So Freeman, you used to live in Singapore, right? And now you’ve moved back to China.
[00:01:32] Freeman: Yeah. I currently Split my time between Shanghai and Singapore.
[00:01:35] Sabrina: So what do you think are the main differences as when you live in Shanghai versus when you live in Singapore?
[00:01:41] Freeman: Oh, yeah. That’s quite a difference, living in Shanghai versus living in Singapore. Where can I start? I guess, yeah, let’s start from the very basic part of life.
For example, the first is about eating, right? Mm-hmm . I mean, you know, Chinese care a lot about eating . So first, if we talk about the Chinese cuisine, a set of work were coming from the Lingnan part in.
You can easily find this kind of Chinese cuisine in Singapore. But for the other regions, northern part of China’s region, there are much less choices in Singapore If you compare to that to Shanghai and that’s for a Chinese cuisine part. If we talk about Western cuisine, Japanese, Korean, I think because Shanghai and Singapore, both are very international city, so you can easily find all these kind of cuisine also in Shanghai.
So in that part, they are quite similar, but I think Singapore is better than Shanghai because Singapore has a lot more Indian,
[00:02:41] Sabrina: ah, Indian cuisine.
[00:02:42] Freeman: Because there’s no such an area called Little India in Shanghai.
[00:02:47] Sabrina: Yeah. How about in terms of lifestyle? So like, the way you live, what’s the differences between Shanghai and Singapore? Because for me, when I come to Shanghai, when I come to China in general, I find that everything is so convenient. Everything I want, I can find online.
[00:03:00] Jianggan: Can I add one thing? You have been going to Shanghai and Hangzhou like a few times, like last six months, right? And one thing you should notice here versus Singapore is that there are seasons.
[00:03:09] Sabrina: Yes, that’s why we are in sweaters today.
[00:03:14] Jianggan: Yeah, and you dress differently, different seasons according to the weather.
[00:03:18] Sabrina: Don’t have to think about that in Singapore.
[00:03:19] Jianggan: You come to the office in slippers, right?
[00:03:21] Sabrina: I don’t come to the office in slippers. I wear shoes. But you don’t have to think about, like, I have to wear like four, five layers here.
I miss the weather in Singapore. Yeah, but in terms of lifestyle, what are the differences? So for example, obviously one of the biggest differences to me is food delivery, meituan. Yes. So whenever we are here, sometimes if we’re lazy or if it’s cold and I don’t want to go out and eat, I’ll just get my colleagues to order meituan to the hotel.
[00:03:44] Freeman: Yes.
[00:03:45] Sabrina: And sometimes we can order meituan at like 2, 3 a. m. And someone will deliver it to you. And it’s less than a dollar, Singapore dollar.
[00:03:51] Jianggan: Do you do that in Singapore at 2, 3 a. m.?
[00:03:54] Sabrina: No. Oh. Cool. No, because the delivery fee is 4. I will cook instant noodles at home.
[00:04:00] Freeman: Yeah, I think in general, no matter the food delivery or e commerce logistics, I think that will be much, much easier in China. I mean, not only in Shanghai, but also in every city. In China. Yeah, in Singapore. Yeah, we basically give up because that’s that’s that option
[00:04:21] Sabrina: You don’t order food delivery as much in Singapore, right?
[00:04:23] Freeman: We ordered and there were some problem and we try to get our customer service and we realize the customer service of Foodpanda is in Malaysia They can only I mean that cannot resolve the problem at all. They can just, , maybe make some returns, yeah.
[00:04:41] Jianggan: Foodpanda customer service is still in Malaysia. So, I was running Foodpanda, like, almost 10 years ago. I was also in Malaysia. No, back then the customer service was in Malaysia because it’s cheaper and it’s much easier to hire people. But we had one problem which I think at that time we couldn’t resolve, is that While you can train a customer service agents to answer the questions in a standard way, but food delivery is a very local business.
And we don’t have the local knowledge when the customer tells you that, okay, I’m at this street and the driver tells you that I’m at the other street. When you have the local knowledge. You can easily direct them. But when you don’t, it’s very difficult. I mean we had lots of frustrations.
[00:05:17] Sabrina: I think that’s true for a lot of the Southeast Asian countries, right? Especially when the maps are a little more ambiguous. It’s a lot harder for these riders.
[00:05:26] Freeman: Yeah. I think the essence of the question is basically China is a united big huge market and
Southeast Asia is a more fragmented market. So fragmented. I
[00:05:39] Jianggan: think another thing about customer service in food delivery in China, they let you talk directly to the rider, they let you directly talk to the merchant.
So the customer service interaction is not that much.
[00:05:48] Freeman: Yeah.
[00:05:49] Jianggan: I actually don’t know why. This is interesting because I think for Grab lots of things you need to reach out to customer service and customers will help you reach out to merchant
[00:05:58] Sabrina: yeah, I think generally if let’s say the merchants forgot your orders or something you file your complaint through Grab Instead of directly to the merchant.
Yeah, so The platforms kind of just have to serve as a middleman
[00:06:10] Freeman: That’s also a burden Internet such as And they have like a group chat inside of the app to let consumers and merchants can directly communicate but within the platform.
[00:06:25] Sabrina: We don’t have that outside yet.
[00:06:29] Freeman: Anyway, I think the topic of logistics, e commerce or food delivery.
Yeah, we have to say it’s way more sophisticated in China versus, in other countries.
[00:06:40] Sabrina: How about in China itself? So where do you think Shanghai stands in terms of the development of the Chinese internet services as a whole?
[00:06:49] Freeman: . I think Shanghai is very important during the progress of the Chinese consumer tech industry.
There are many, many companies actually were started or founded in Shanghai. For example, the first vertical is about media including search engine, you know, video.
So actually, do you know, , Musical. ly was founded in Shanghai before it was acquired by Bytedance and to become tik tok
[00:07:17] Jianggan: Yes
[00:07:17] Sabrina: haven’t heard musically in a while.
[00:07:19] Jianggan: Yeah So I think for the people who are not familiar is so it’s an app which allowed people to lip sync with us Yeah,
[00:07:25] Sabrina: so you film videos of yourself lip syncing over Different songs and post them.
So it was like a social media platform where people would just post videos of themselves lip syncing.
[00:07:36] Jianggan: And it was acquired by ByteDance and it was the basis of TikTok.
[00:07:39] Freeman: Yeah, but that was just the latest part Before that, before Musical. ly, there were also other video giants were founded in Shanghai such as Tudou and TPS, and but they were acquired or merged with other video websites in in China about 10 years ago.
So even talk about non video format media companies. I guess the hottest one right now is Xiaohongshu. Xiaohongshu ifoundeded and currently still operated in Shanghai. Shanghai. So I guess even today I heard that there’s a hashtag. Xiaohongshu is called the tiktok refugees.
[00:08:19] Sabrina: Ah, yes, Elody and I were just talking about this this morning. So essentially for those who don’t know, right, Xiaohongshu is kind of a social media platform that’s pretty popular in China. They have photos and videos format where you have an external Explore page and you can see different posts.
It’s something used by a lot of Chinese people, when they’re finding restaurants aDE was just telling me this morning, that’s a hashtag called TikTok refugees. So essentially it’s a bunch of consumers in the US who use TikTok, but obviously as the time we are filming this, you know, that’s kind of the discussion going around about the TikTok ban in the us.
So a bunch of them have started moving to s show and what’s what’s interesting to me is ’cause. Initially, I downloaded Xiaohongshu as well, but I cannot use it because I cannot read Chinese. So, to me, Xiaohongshu is just to look at photos, right? But Elodie was telling me Like Instagram for you. Yeah, yeah, yeah.
So, but Elodie was telling me that now, because of the hashtag TikTok refugees, there are actually a couple of posts on Xiaohongshu where the description is in English. For the like us consumers.
[00:09:15] Jianggan: This one is our friends. We’re talking about it saying that, Hey, if Xiaoguangshu becomes popular in the U S would that get the risk of being banned? And somebody made a comment saying, Oh, look, I mean, you, you would take a us congressman like 50 years to understand how Xiaoguangshu works.
[00:09:32] Freeman: Xiaoguangshu is founded here in Shanghai. So let’s look about another important segment. e commerce. Yeah, we all know Alibaba was founded in Hangzhou, but actually there’s another company, very old company called EachNet.
Eternet was founded in Shanghai, and Eachnet then was acquired by eBay. And that actually was triggered or inspired Alibaba in the early days to turn itself from a B2B marketplace. To a consumer facing e commerce website.
[00:10:09] Jianggan: So that was the shark.
[00:10:11] Sabrina: Yeah.
[00:10:11] Freeman: Yeah. Each net was the, was the kind of the main competitor to the very early stage of Alibaba.
But even now we know Pinduoduo is here, right? Pindo is also high pin’s, like very close to where we are, right? Pindo is just a single within two kilometers from where we are.
[00:10:29] Sabrina: So it’s founded in Shanghai
[00:10:30] Freeman: in Shanghai I think in 2015, right?
Yeah. So that’s pinduoduo so that’s for e-commerce, right? So another important sector is actually gaming company. There are a lot of gaming studios in shanghai. . I think the most, maybe the most famous one currently is . MiHoYo.
[00:10:52] Sabrina: MiHoYo.
[00:10:53] Freeman: Okay.
[00:10:53] Sabrina: MiHoYo is the company that is behind Genshin Impact.
[00:10:56] Freeman: Yeah. But before that, there used to be also a very large gaming company called Shengda. Shengda Gaming.
[00:11:03] Jianggan: Shandao was founded by this guy called Chen Tianqiao, right?
Chen Tianqiao, yeah. So he became the richest man in China, like, early 30s, right? Because he was distributing Korean games, then he started building his own games.
[00:11:14] Freeman: Shanda used to be the big name, like equivalent to BIT, I mean, once in a while.
[00:11:19] Jianggan: Yeah, it was a long time ago, yeah.
And the funny thing is that there’s a story about the Shopee’s parent, like, C Group, right? At that time, Tencent and Shanda went to Singapore to say that, who can help us distribute our games in Southeast Asia? Then there’s I think there’s some other studio or some other company which made alliance with Shanda and when Tencent went there, Garena was the second.
So they invested in Garena and then Garena later became like Seagroup, Shopee and stuff. So lots of stories there.
[00:11:47] Freeman: So definitely Shanghai is very important for gaming sector.
[00:11:51] Jianggan: That’s also another company Moonton.
Yeah. So that company developed this game called mobile legends.
[00:11:56] Sabrina: Mobile legends is very popular in Southeast Asia. Is it popular in China as well? No, I don’t think they’ll market in China. So I remember like before the pandemic in Indonesia, when you go to like a convenience stores, you have all the young people gathering there.
[00:12:10] Jianggan: We use the free wifi to play mobile legends.
And also the company will be in Indonesia, right? People go for tea break, sometimes they go for smoke break and then they go for mobile legend break.
15 minutes, play mobile legend and come back to work.
[00:12:23] Freeman: Yeah. So and another Important sector is location based services, you know, such as food delivery, or even travel. This side, I mean, Shanghai also plays a very important role.
For example, Ctrip or the trip. com was founded here. It’s has been and it’s always been the number one in the travel sector in Chinese tech industry. Ctrip.
[00:12:49] Jianggan: Do you use trip. com? Yeah.
[00:12:51] Sabrina: Trip. com.
[00:12:52] Freeman: Which
[00:12:52] Jianggan: is the overseas version of Ctrip.
[00:12:54] Sabrina: So essentially you book your hotels, your Train tickets as well.
[00:12:58] Jianggan: And I think they bought SkyScanner as well.
[00:13:00] Sabrina: Oh, did they buy SkyScanner?
[00:13:02] Jianggan: Bought SkyScanner, yeah. It’s also quite close to here, right?
[00:13:05] Freeman: Yeah. Yes. I mean, we are currently in the Changning district in Shanghai. Yeah, I think the Chinese district is almost the Silicon Valley in Shanghai.
[00:13:16] Sabrina: No wonder every company is like near here somewhere.
[00:13:19] Freeman: Yeah, so another two important company founded in Shanghai is Dianping and Eleme. Erlema is The first food delivery company in China.
Was founded in 20 2009. And the Meituan delivery business was started in 2013. Four years later.
[00:13:40] Sabrina: If you guys are kind of interested in Meituan as well, we do actually have a case study on Meituan how they kind of pivoted from doing group buy to becoming one of the biggest food delivery players in China.
And of course before Meituan, there was Elema, which was started in Shanghai as well.
[00:13:56] Freeman: And before, there was a company called Dianping, which I worked for. Dianping used to be a search engine for in store dining. Dianping was merged with Meituan in 2015.
And it’s one of the biggest mega merger in China’s tech industry. And later on that company went to IPO with the name of Meituan Dianping, only recently renamed as Meituan.
[00:14:21] Sabrina: So Erlema was also acquired by Alibaba, right? Yes.
[00:14:25] Freeman: Eleme was founded here in Shanghai and later after Erlema was first invested by Dianping,
but later on, it was fully acquired by Alibaba for 9. 5 billion US dollar in 2018.
[00:14:40] Jianggan: As you just mentioned, there are lots of companies which started here. But there’s also another saying that, okay, amongst the BAT, I mean, ByteDance, Alibaba, Tencent, or now ByteDance Baidu or whatever, so none of these companies are based in Shanghai.
So historically people are saying that, okay, I mean, Shanghai doesn’t breed this kind of like huge companies. But as you said, there are lots of like consumer focused companies which came from here, which became fairly sizable and fairly known. So how do you reconcile these two?
[00:15:08] Freeman: I think it’s just, maybe just a coincidence. And also you can notice, that a lot of companies were founded in Shanghai, but at some point they were either merged or controlled by another company. I guess that’s only a mindset of the entrepreneurs in Shanghai, probably they are more open to the merger and acquisition instead of just the IPO.
So from the exit point of view, I think that’s a good mindset, at least it brings good exit for the management team and as well as for investors
[00:15:43] Jianggan: Yeah, and the other company will carry on with the ups and downs.
[00:15:46] Sabrina: So as we’re saying a lot of these kind of consumer internet tech companies are started in Shanghai, right?
Is there a reason for it? So are there a lot more consumers in Shanghai or at least more advanced?
[00:15:58] Freeman: More fashionable.
[00:15:59] Sabrina: Like maybe trendier consumers in Shanghai,
[00:16:02] Freeman: I guess so. Historically, I mean, Shanghai used to be the most trending city.
In China, even for the whole East Asia, during World War II, definitely Shanghai consumers are the most sophisticated group in China. So that’s also many consumer facing product, no matter it’s beverage coffee, or many Western company, Western consumer products like bakery products, they’re, they’re first store in, in China, often, you know, choose to be in Shanghai.
Yeah.
[00:16:32] Sabrina: What is the population of Shanghai?
[00:16:34] Freeman: It’s the largest city in China,
[00:16:35] Sabrina: right?
[00:16:35] Freeman: The population in Shanghai is around 25 million people.
[00:16:40] Sabrina: 25 million? Yes.
[00:16:41] Jianggan: What’s the population of Singapore? you don’t know.
[00:16:45] Sabrina: 6,
6 point something.
[00:16:46] Freeman: Know. 6. 9 million. Yeah, the residents, I mean, people living in Singapore, the population is around 6 million.
So the other, a little bit of less than half are either PR or foreigners working in Singapore.
[00:17:01] Jianggan: So if you think about that, and now the, the GDP per capita in China is about like 11, 12, 000 us dollars.
And Shanghai has a population of 25 million, right? And GDP per capita is probably more than twice that of the national average. And Shanghai itself is surrounded by a group of cities, what we call the Yangtze River Delta, or historically what we called the Baoyou Qu, free shipping area.
[00:17:24] Freeman: Yeah.
[00:17:24] Jianggan: The Shanghai, Jiangsu and Zhejiang provinces. Right. So, the whole river Delta has a population of 227 million people.
[00:17:33] Freeman: It’s the most advanced region in China.
[00:17:37] Jianggan: I have a feeling that, whatever business model you do, right? You test with the Shanghai consumers because they are open to new trends, right? And once it proves to work, then you tell the investors, Hey, the whole of China works this way.
[00:17:52] Sabrina: So is that why you think a lot of the consumer internet tech companies started in Shanghai? Just because most of the people here are probably like early adopters and they have a much higher spending power.
[00:18:01] Freeman: Yes.
[00:18:03] Jianggan: I think when they started by people who live here, they know the consumer pain points and they know the possibilities, right? They are consumers themselves. And then they can build business models so is that what you see as well?
[00:18:14] Freeman: Yeah, yes. And also you just mentioned the population comparison Shanghai to Singapore. I also want to mention the size of the area. I checked the numbers. So basically Shanghai is almost nine times of Singapore in terms of their, land size. The size of Singapore is only equals to the so called within the outer ring of Shanghai.
[00:18:38] Jianggan: So then you can see that with such a large population, and consumption power and the concentration of consumption power, you can start testing business models and then the business model could be expanded to the surrounding cities. And that, that’s often, I mean, 227 million people
[00:18:54] Freeman: yeah,
[00:18:54] Jianggan: like only three, no, no, for five countries, it’s, and then consumption power wise, it’s, huge, right? Yeah.
[00:18:59] Freeman: So basically what Jianggan said is Shanghai and the nearby provinces together is already a united, huge market for many consumer facing applications.
And there’s a importance that the project is already united. I mean, everyone talks the same language, everyone using the same, logistic company, free shipping.
[00:19:24] Sabrina: Is the infrastructure development also similar?
So like, it’s more well developed in Shanghai and like the surrounding areas, or do you think across China, the infrastructure is kind of at the same level now?
[00:19:34] Freeman: Currently, logistic efficiency is definitely for the top tier cities, but overall for the whole China, no matter the extent it can reach and also the delivery speed. Speed, I think both are very satisfactory. But if we talk about infrastructure the role of infrastructure to Chinese consumer tech industry versus for the region outside of China.
I think let’s start from the e commerce company. You know, we all know e commerce relies on two factors, one is logistic, the other is actually the payment, but if you look deeper, so logistic relies on, first relies on highway, second relies on trucks and drivers, right?
So, do you know when the highways?
In China, what kind of built in, I mean, available of, widely available. It’s actually in 2000, it’s 25 years ago, the accumulated distance of Chinese highways already only second to the U. S. That’s 25 years ago, and all the delivery, all the express logistic companies such as SF. Express, you know, were founded also around that time. And later on, in 2003, Taobao, Started and in 2005 jd.com launched. So the consequence of China’s evolution is basically, first you have highway built by government. Second, you have private sector built the logistic. Company, then you have e commerce company, but when I come to singapore when I Come to realize the southeast asian, ecosystem I realized the consequences there actually are opposite.
[00:21:26] Sabrina: Yes, the e commerce most of the e commerce players Started
[00:21:30] Freeman: Yeah, for them. I noticed the grab and the gojek they were founded in 2010 or 2012, right?
But then you have , J&T express founded in 2015. And even now, present day, if you go to Indonesia, go to, you know Philippine, maybe You don’t find many highways there yet. So highways are still not available to many developing countries as of now. So the consequences actually are opposite.
[00:21:59] Jianggan: Yeah, so actually to remember, I mean, if you look at the timeline, it’s actually quite interesting because Freeman mentioned that year 2000, when Expressway became a network. 2001 was when China joined the WTO and all the manufacturing came. By that time you already had the expressway network, at least in the coastal areas, you already had industrial parks being built.
So they could take in all this, demand for manufacturing very, very quickly. So that’s a challenge that when people talk about moving manufacturing to other places outside China either you have like this one piece of infrastructure lacking, whether it’s expressway, whether it’s industrial park, whether it’s labor or whatever.
I remember 2000, right? 2000 was when I went to Singapore for high school. That was the first time I drove from Nanjing , to my hometown using the expressway connecting Shanghai and Nanjing. It was a breeze, right? It was like, you can go easily like 120 kilometers per hour. Well, as before that for me to reach Shanghai from my hometown when I was a kid, it’s, lemme see. Nine hours? By boat.
[00:22:59] Sabrina: Boat?
[00:23:00] Jianggan: By boat. No, it’s not free shipping. Then the road improves a little bit. Then it’s like five hours because you need to, you know, Because the boat
[00:23:11] Sabrina: faster.
[00:23:12] Jianggan: It’s the other side of Yangtze, right? So you need to stop at the riverside, wait for the ferry and take the ferry.
[00:23:17] Freeman: Yeah.
[00:23:17] Jianggan: Then the bridge was, was built. Now it became like three hours. Then another bridge was built. Then it became two hours. And now the express high speed railway. That’s like an hour and a half.
[00:23:28] Sabrina: Faster.
[00:23:29] Jianggan: Even faster,
[00:23:29] Sabrina: yeah. So actually the infrastructure, or at least the development of the infrastructure, has been very important in kind of pushing the growth of e commerce in China, right?
Yes. How about in terms of local services? How do you think the infrastructure in China has developed? Because obviously, I would think, Say, when you look at food delivery in China, as compared to food delivery outside of China, it’s very different,
so how do you think the infrastructure in China has allowed for that? Or do you think there are other reasons that kind of drive the penetration of food delivery in China?
[00:23:56] Freeman: If we talk about infrastructure for food delivery, I would say the labor force also could be regarded as infrastructure.
I mean, China has a huge supply of food. So called blue collar labor force which I mean they actually, they can be the food delivery guy. They can be the waitress in the Restaurant or they can do all the construction work in big cities, but regarding the Labor force. I noticed for example in singapore I noticed in singapore’s ride hailing services such as grab If you want to be a grab driver in singapore, you have to be a singapore citizen or think of a pr singapore has a very small country has a very strict regulation regarding foreign laborers working in Singapore.
I mean, that’s because Singapore is very small, but China is a huge country. China has kind of unlimited supply of labor force. So I think that’s a huge factor, actually, to a lot of labor intensive industry. Especially including food delivery.
[00:25:01] Jianggan: Yeah, so the whole country serves as a massive hinderland, right?
So you have the labor moving to the cities and people, moving from country to cities to help build, help deliver food, help with manufacturing. And then, they earn money and they save the money. And the money was used by bankers as capital to invest. So
so this is how the whole economy sort of rose, right?
[00:25:26] Sabrina: So besides like the huge labor force, what do you think are some other reasons for the penetration of food delivery in China? Because I feel like from a foreigner’s perspective, I think food delivery in china is really very different compared to food delivery anywhere else One it’s a lot cheaper Obviously, but also because I come from singapore Sometimes my food delivery is like nine dollars, which is more than what I want to buy.
[00:25:45] Jianggan: You mean the delivery fee, right?
[00:25:46] Sabrina: Yeah, the delivery fee is nine dollars, but maybe the bowl of noodles I want to buy is like six dollars, right? But also in terms of speed, I feel like here food delivery is very fast You don’t have to wait so long even though it’s a big city. So what are some of the reasons that you think it’s why food delivery is so big in china
[00:26:04] Freeman: I think that’s there has to come to back to the very fierce battle between, different companies which were backed by venture capitalist.
I mean it’s actually around more than 10 years ago in 2010 to 2015. So basically a investor invest , huge money to this food delivery company. And they competed with each other and they spend a lot on the consumer side as a subsidy So that’s also why from the consumer point food delivery becomes a very cheap very affordable things and also Meanwhile, I think there’s a trend that you know People, all, all the urban professional level worker becomes more and more busy.
[00:26:55] Sabrina: Lazy,
[00:26:55] Freeman: so called lazy, right? So back to the office of workers want to save time by order food delivery instead of going out basically supply and demand, they, complement each other. The battle is not just about food delivery. And actually that battle is really about four fronts battle. Food delivery is just one of them. The other three is called group buying movie tickets. And hotel booking. at that time Meituan as a startup, Meituan was fighting on these four fronts.
[00:27:35] Jianggan: So doing four things at the same time?
[00:27:37] Freeman: Yes, roughly during the five years from 2010 to 2015? Yeah. Meituan was founded in 2010. . And in 2015, Meituan was merged with Dianping
mm-hmm.
So those five years and one of the forefronts group buy. Midtown was competing, competing with Damping at that time.
By the way, damping was founded way, way earlier. damping was founded in 2000, 2003. That’s almost, yeah, more than 20 years ago. . So DPing started as an, user generated content website for install dining. Dianping was often called Yelp in China, but actually Dianping was founded even earlier
[00:28:19] Sabrina: so it’s kind of like people would dine in at a restaurant and then they would leave their reviews.
[00:28:23] Freeman: So Dianping was the first kind of consumer review website in China, and also it’s founded earlier than Yelp. So it’s actually was the first that kind of web website for the whole world.
During the early days, from January from 2003 to 2009 within that six year, Dianping already become profitable as a whole company in around 2009. And Deping planned to do IPO even in 2009. By the way, deping was the first investment case for Sequoia Capital in China.
[00:28:57] Jianggan: Oh, okay.
[00:28:57] Freeman: The first investment Sequoia did. was to invest into Siri A, a financing of Dianping, I think in 2005, anyway, so Dianping’s business is a search engine for in store dining And because of that, Dianping essentially is a user driven information community. And it’s make money by making advertising fee from merchants.
Like the ranking of the search result. So the machines can pay for that.
[00:29:31] Sabrina: For a higher ranking.
[00:29:32] Freeman: Yeah, for a higher, higher ranking, or for some specific keyword ranking.
So it’s a search engine, right? And it’s a media basically, it’s an advertising business model media. And please note that under the timeline, as I said, Dianping became profitable in 2009. It’s the starting time of so called mobile internet. The first generation of iPhone was released in 2007, the first Android phone was released in 2008,
[00:30:03] Jianggan: Oh, you still remember
[00:30:05] Freeman: Yeah. At that time, actually the biggest story in tech is, is not this, is actually groupon.
Groupon was founded in Chicago in US I think around 2008. And in, I think in 2012, Groupon went to IPO.
It becomes the biggest IPO since Google went to IPO in 2004. So you can imagine at that time around the 2010. The entrepreneurs in China, they were like crazy about the idea of group buying. Yeah.
[00:30:41] Sabrina: Meituan also used to do group buy.
Yeah. There was this thing in 2000 and I can’t remember when, but essentially they call it the war of a thousand group buys. Yeah. So they were like hundreds of group buys companies in China because it’s kind of an industry where I would say the barrier of entry is a little lower. So once Groupon came in, a bunch of companies like Meituan also started doing it.
And I guess Dianping as well started doing group buy.
[00:31:03] Freeman: Yes, Dianping started, actually Dianping was almost the latest one into that world. Let me explain if you do a group buy, if you want to open a new city, You only have to convince one merchant To list your group buying order on your website, then you can claim I can open this new city, right?
But for Dianping as a user review website If you want to open a new city, basically you have to accumulate enough user reviews. So it takes a lot of time for Dianping to open a new city. So actually by 2009, Dianping was only available in six cities in China. Dianping’s target user were like kind of middle to high level consumers in the most, in the topmost city and also in the most city centric, city center area, which is very different to Google. Group buying behavior. So that’s why, group buying company can spread out the whole China, very quickly.
But Dianping was kind of a slow company because it can only very slowly open a new city one by one. Anyway DAMing also went into the group business in 2010. And the, so-called bat Daja and, you know, a thousand Company, a thousand War of a thousand Group ended up eventually become the only two between DING and the Met.
Dianping and Meituan were competing fiercely on the group buying front. For food delivery, the first food delivery tech company is Elema. Elema was founded in Shanghai in 2009 at that time, Meituan was not in that business at all. Meituan started at group buying, but started to do food delivery.
After four years in two thousand in two thousand and thirteen. So actually Dianping invested, invested into Erleman in 2014. Dianping’s strategy at that time was I don’t do food delivery by myself. So I invested into the number one food delivery company then, which was Elema.
Meituan’s food delivery was a far leg behind.
[00:33:25] Jianggan: Yeah, I remember by that time there was also Baidu,
[00:33:28] Freeman: was doing delivery as well. Baidu acquired another company called
[00:33:33] Jianggan: Yeah,
[00:33:35] Freeman: Normie becomes, becomes Baidu Wanmai at the time and also there are many other food delivery too But , Erlema was the first one, and Erlema was the biggest one so Erlema becomes Dianping’s investment portfolio at the time And as I mentioned, there were also other two fronts war, which was movie tickets and hotel booking.
Dianping was not directly involved into these two business. Because, those all very capital intensive. War,
And Maan get into movie ticket selling business also at that time. And that one becomes later on is what we know as Moen Dean Moen ticket Mo now, and also regarding hotel booking.
Midtown was competing with both state trip and another company called nar. The difference is Citrip and Trinar were mostly in their tier one or tier two cities. Started from so called lower cities.
[00:34:37] Jianggan: So this is something interesting, right?
Because now if you see companies like Pinduoduo, Temo, right? And this company, I mean, Shopee, whatever coming out, going to different regions.
[00:34:46] Freeman: Yeah.
[00:34:46] Jianggan: And we look at the incumbent e commerce platforms like MercadoLibre in Latin America, Allegro in Poland, and Bo in like Netherlands, et cetera.
So all these companies are founded around 1999. And for a long time, their philosophy is that, okay, we want to serve the customers with a higher value, right? We want to increase the average order size, average basket, whatever. But now if you look at the Chinese tech companies coming out they take a different strategy, right?
They go with the masses first. I mean, look at Taobao, et cetera. They go with the mass market. Very low margin, but huge scale. With the scale, they try to segment the premium customers. But from what you told us just now it seems that initially like Dianping and many companies in Shanghai, they also started serving the more affluent customers.
. Yeah. But then, then now the philosophy becomes you start with the masses, then you move to premium, which is a different, which is a different methodology, right?
[00:35:39] Freeman: I would say two different segments. As I said, Meituan started from the mass but I mean by mass market mass market is not it’s not, it’s different with the region wide, with region selection.
Yeah. Okay. Let
me, as I said, even Shanghai and Beijing are so large. If you only look at the affluent user base are mostly in the city centers, city center area. But the city center area is only like maybe 10 percent of the size of the whole city. So if you go to the suburban area of Shanghai, it’s also regarded as like it’s almost like a kind of a lower city population wise, or user behavior So it’s quite I would say it’s quite mixed, quite different.
You have tier one, tier two cities, but you have city centric area of the cities, and you have a suburb area of the cities. Then you have even lower cities. So I would say just Meituan adopted a different strategy with other cities. Or, I would say Meituan and Pinduoduo, both Meituan and Pinduoduo kind of started from their mass market. Yeah, so I think, Meituan and Pinduoduo probably are the, both of them started from the so called mass market user segment. And all the other internet companies in China kind of started with not really more effort or, you know, I would say urban residents in the top tier cities.
Yes. And it’s, especially, Dianping’s user base has been and always been that one. So if you look at Dianping’s user base, even now, I mean, after more than 20 years, it has only, I think Dianping’s daily active user base right now is only about a little bit more than 10 million, I think.
I’ll tell you to fit 15 million.
[00:37:29] Jianggan: Okay. I mean, Monthly is about 250 million
[00:37:33] Freeman: I think it’s about at least 300 or 400 million.
[00:37:39] Jianggan: Yeah.
[00:37:40] Sabrina: But now we got Technically, they are the same app, right? No, no, no, no. They are still separate apps.
[00:37:45] Jianggan: Even Meituan itself is not the same.
[00:37:47] Freeman: Separate apps. That’s actually also an important factor to Meituan Dianping. Mega merge. Even the merged by the consumer facing part remains two separate consumer brands. So, actually that’s different with all the other so called mega merge. For example DD and the QI merge together.
Yeah. And Qi just disappears, Yuku and merge together and Au as a consumer brand just disappears.
[00:38:17] Sabrina: So it’s more of an acquisition.
[00:38:20] Freeman: Yeah, it’s More like an acquisition. Than a merger. But Dianping and Meiteng are different because their user base are still different, even today. I mean, Dianping focuses on, as I said, more affluent users. user in the city centric area, the mechanism for the more mass market, even currently. I remember that after the merger in 2015, I worked for Dianping. After the merger, we did internal, data checking and we found out that the overlapping user base between Meituan and Dianping are only
[00:38:52] Sabrina: 8%. That’s very small.
[00:38:53] Freeman: Very small. Interesting. So the user base is actually quite, quite different.
[00:38:58] Sabrina: You can access Meituan from Dianping’s app, right?
[00:39:02] Freeman: No, there are still two separate apps, but the merger has basically keep all the merchant data together. So basically on Meituan, you can read the reviews from not only Meituan, but also Dianping.
If you order a food delivery on Meituan app, you can read the user review from delivery from users on Meituan which ordered their food delivery. But you can also read user review for the in store dining part from Dianping’s user review.
[00:39:37] Sabrina: Actually, I think maybe we can talk a little bit more about Tianping because I think Tianping is something maybe the viewers outside of China are not as familiar with.
[00:39:44] Freeman: Yeah.
[00:39:44] Sabrina: So obviously my initial thought of Tianping is just that it’s kind of like Yelp, like you said, it’s a review platform, right? But I spent a lot of time with Elodie these few days and I learned that you can do a lot of other different things on Tianping. So Tianping, obviously, it’s not just reviews.
There are a lot of local services that you can find on Dianping as well, right? And there are also like Coupons that you can buy on Dianping for example if you’re at a mall you can search like near this mall What coupons are there and then you can visit the store to eat if you see the coupon on Dianping.
Yes, the people in China use Dianping very often when they are finding places to eat or
[00:40:17] Freeman: Anything if even if you want to get Married and you want to take wedding photos, yeah? So you want to find a good wedding photo studio.
Then you try to search this on Dianping.
Oh, which actually, on this part I want to talk about a concept of the, you know, in local Services is kind of high frequency versus low frequency That’s from the consumer Perspective so basically means the frequency of the you know, how frequent you will use that local services So you basically you you can regard the whole local service as very wide So on the one side, for example, for, food delivery is probably the most frequent high frequency user behavior.
You order food delivery maybe every day. Then you come to in store dining. So you still eat but you go to a specific in store dining maybe every a few other day. Anyway, so then you move the spectrum to other verticals such as beauty Beauty is salon.
So you cut your air, you know, every month maybe. Right. Or maybe cut
[00:41:27] Sabrina: my hair once a year. .
[00:41:28] Freeman: You just reminded me. I need to do every three weeks
[00:41:32] Sabrina: example
[00:41:32] Freeman: massaging, you know?
[00:41:33] Sabrina: So yeah,
[00:41:34] Freeman: you do massage maybe every few weeks or every few months. So then you come to the other end of the. Spectrum which we called, you know, for example, wedding.
[00:41:45] Sabrina: Hopefully you only do it once. Yeah
You know,
[00:41:47] Freeman: but you know what You know what for wedding photo Even, okay, even say, stately speaking, so you’re divorced, then you come to with your new wife, you will not go to the same fashion, right?
So what does that mean for merchants? For a wedding photo studio, that means it has no retaining customer at all. It has to acquire new customers. Because there’s no old customer, no retaining customer. So there’s no such thing as a CRM in your customer relationship management for waiting for because that’s the just a one time customer
[00:42:27] Sabrina: That’s true.
You cannot expect repeat that client
[00:42:30] Freeman: So so the similar logic could actually apply to for example home decoration industry That’s why it’s a very low frequency user behavior for consumer But also for merchants, It means if you are a home decoration consulting company, you have to acquire your new customer.
There’s almost no retaining customer. There is a customer referral, right? You refer your friend, but there’s no retaining customers. This is very interesting. For the very high frequency user behavior sector, such as food delivery, but for the merchants, the margin are very low.
But at the other end for, you know, wedding, home decoration, even like a education and training company, they are low frequency for user, for consumer behavior, but for merchants The margins are very high, so this means as an internet platform, such as Dianping or Meituan, you have to adopt a different business model, a different revenue stream for these different sectors.
So for food delivery, You can do commission. You basically you can take commission from each delivery order because it’s low margin but it’s high frequency for consumers. But for wedding photo Studio, you cannot take commission. Why? Because the margin is so high and the price per order is also very high, right?
So the merchant will not be willing to share commission with platform. The merchant would rather like give a discount to consumer.
[00:44:13] Sabrina: So the merchant will give the consumers a discount directly.
[00:44:17] Freeman: For example, a young couple come to a wedding photo studio through Dianping, and then come to the install of studio.
The wedding photo studio will tell the young couple. Young Kapa don’t say you come from DPing, you search from DPing. I will give you 10% discount because if I don’t give you 10% discount, I have to give that 10% discount as a referral fee as well advertisement fee to the platform.
I would rather give that discount to consumer instead of to pay, the internet platform. So basically that means. For those low frequency but high margin vertical. The internet platform, it’s very hard to do commission, to do transaction commission model.
You can almost only do advertising business model.
[00:45:05] Sabrina: So you earn through advertising.
[00:45:07] Jianggan: Yeah, because I think about that.
I mean, if you want to decide on let’s say you are getting married. If you want to, take the wedding photos, it’s a huge package, right? You will not, scroll on the platform and choose one and make the payment, right? You would actually go to meet the person and decide, I mean, the person will show you the examples, whether it’s good enough.
So, in this case, the platform helps you connect, but It’s very rare for the transaction to be made without the two parties meeting each other. When the two parties meet each other, of course, there’s an incentive to say that, okay, I don’t want to pay the platform on commission.
You are the transactor.
[00:45:38] Freeman: Yes. So as I said, that’s the two end of the spectrum, but there are a lot of verticals in between. So the platform has to adopt a kind of a mixed BIS model to different verticals. So it’s kind of a mixed for transaction commission and advertising fee, but the mix is also, you know, how mixed, like how many percentages.
So it’s a different vertical by vertical. So that kind of mindset is a key matter to understand the local services tech industry. in China, and especially specifically to the methamphetamine company.
[00:46:16] Jianggan: How does that mindset get built, right? I mean, initially, when people are trying, I mean, they probably didn’t think about high frequency, low frequency. How did people discover this framework?
[00:46:25] Freeman: I don’t know, but if you look at the Meituan Dianping merger, if you look at just the food delivery versus install dining, it’s actually also high precise versus low precise, right?
So the food delivery part is more a high precise part, or the high volume, or high traffic part, and the install dining part is more a lower precise part. So the merger. So food delivery business was down by Meituan and install that dining part was, you know, for the Dianping part.
So basically, we can say the Meituan food delivery app bring a lot of traffic to Dianping’s app too.
[00:47:07] Sabrina: That’s also
[00:47:08] Freeman: kind of a high frequency and low frequency part.
[00:47:10] Sabrina: Whereas Dianping brings in advertising money.
[00:47:13] Freeman: As well as you know, quality user reviews.
Reviews and all. User reviews, from bringing the quality content back to the food
delivery part.
Yeah, the money is definitely, I mean, , Dianping is very profitable, and financially. It is very important to the Meta as a group.
[00:47:34] Jianggan: So as you can see when we talk to executives for Internet from China, there are the concepts, right, that the traffic, the frequency, and and the operations, right?
These are the three important like, concepts that you don’t really hear from executives. In other markets, right? But, but here is that everyone talks about it, right? I mean, how do you acquire customers? I mean, but essentially if you think about a CAC versus LTV, it’s the same, right? How do you acquire customers at a low cost?
How do you like get the lifetime value of the customers? Essentially, it’s the same thing, right?
[00:48:06] Freeman: But I think back to the big picture of the whole development of China, the whole development of so called middle class in China, I think, , all Chinese consumer tech industry, Especially this local services segment definitely benefits from that
[00:48:26] Sabrina: do you think Meituan is a super app? . So the reason why I’m asking this is cause obviously I would say as you have explained to me, super app is a pretty big term outside of China, right?
And of course, when they talk about super apps, they look at China a lot, right? So obviously WeChat is one app that they look at. You can do almost everything on WeChat. Very efficient. Would you think Meituan counts as a super app?
[00:48:46] Freeman: Okay, super f as a, as a buzzword. Was invented by a tech community outside China. And also was a popular concept there. But I guess I would have to say, I mean inside the China tech industry super right was as a concept that was talked of in the very less
we don’t talk about that. Honestly speaking, I think The only super app in China is WeChat.
[00:49:10] Sabrina: What makes WeChat a super app?
[00:49:12] Freeman: WeChat , started as an instant messenger as a social network. More precisely, it started as an instant messenger.
Then it added the so called Pengyouquan, the moments functionality that become a social network. Then later on, it added an important feature called Xiaochengxun, mini apps. And it actually enabled a lot of companies to build a mini app inside of WeChat, instead of you doing your native iOS or Android app.
That’s a huge, huge innovation for Chinese tech industry. And Of course, right now, you can use WeChat to do anything that’s why I say WeChat is the super app in China. But as you ask, Meituan or even other popular app in China, for example, Alipay or Douyin I also heard some other people call them super app, too.
But in my personal , opinion. They are not super AP because they are still just very strong in some certain area. As I said, the meituan is just very strong in local service area. Doing just for video or short video. Although doin has a rising. E commerce business, but it’s still not that comparable to, to other, you know, e commerce giant. So in that sense, I don’t call them super app. So for me, the only super app is WeChat.
[00:50:40] Sabrina: But it’s interesting because obviously overseas a lot of people talk about like the concept of super apps, right? And then they look to China. But of course, I think some Chinese. Super apps have tried to go overseas as well, but they didn’t manage to succeed.
[00:50:52] Jianggan: But one thing interesting is that nobody here talks about the concept of super app, right?
Yeah, and nobody in China talks about super app. No.
[00:50:58] Sabrina: Is it just because you’re used to it? It doesn’t feel very super to you? Of course this app must be able to do everything. Okay,
[00:51:03] Freeman: I guess, because china is still huge, so every top 10 or even top 30 apps, if you look at the user base, for any other countries already a mega huge app, right? But because of that, then nobody talks about super app because everyone is still talking about the specific business or specific user segment you want to target.
It’s not really about the sheer number of the daily active user, which are, yeah, it’s already very large. very large for foreigners, but for Chinese, yeah, we have a bunch of, of already have like a, like a, the
[00:51:52] Jianggan: 100 million Sort of lesson for corporate decision makers, when your managers come to you and pitch to you about Super app, ask very specific questions like, you know, what use cases you want to have, what’s the frequency, how much traffic you have?
I mean, what’s the highest frequency or lowest frequency? How do you intend to operate that? Rather, oh, I wanna build a super app without everything.
[00:52:13] Sabrina: Just throwing a bunch of features into the app and then calling it a super app.
[00:52:16] Jianggan: Yeah. I think it has to have a clear logic, right?
[00:52:18] Freeman: And also every popular app in China, they started from a very specific, or even very niche, specific use case, as I said, which had started as an instant messenger. So you started from a very specific use cases, then you expand, and then you build yourself as a platform, for example, as a mini app platform for others to build application on top of that.
I don’t think in the early days of WeChat. They say, okay, we want to build a super ad inside of Tencent, you know, I don’t think they ever think of that.
[00:52:55] Sabrina: So it was more of a natural progression. Like they started as instant messaging and then as they grow and like compete with other players, they just think of what other features we want to add into our app. And from that, then they become the super app.
[00:53:06] Jianggan: I think same for Alipay, right? I mean, for how Alibaba went to Alipay, went to all these products. It’s, I mean, now, if you look back, it’s, oh yeah, it’s an amazing strategy, but we talked to people involved.
I said, , so we discovered, okay, once we build the spaces, we reached this bottleneck in order to solve this. We build another.
[00:53:23] Sabrina: But for this company, let’s say in China, they already have, built so many products like WeChat, Alipay, they have all these mini programs, right?
So when they go out of China, are these strategies that they can bring with them or do they have to, start from scratch again? Can you just bring the whole WeChat out of China and use it as a super app in other countries? Or do you have to redo the product sequencing based on the countries that you enter?
[00:53:45] Jianggan: Yeah. So you know, early days, which I tried to promote in different countries And I spoke with the person in charge of that in India and he said a very specific issue He said people don’t know how to add friends. Because with what’s up automatically your contacts become your contacts on whatsapp for which you have to add friends.
That’s something specific with the Chinese setting. Right? I mean, don’t want to be spammed with random people, right? I mean, there’s also scam as well.
[00:54:10] Freeman: Actually, we chatted that did not start from scratch because before we chat Tencent already has a very popular app called QQ. QQ was the most popular instant messenger app in China.
[00:54:27] Sabrina: So, on qq, do you add people by numbers or they have like a QQ id?
[00:54:31] Freeman: Yeah. You have a QQ id, which is number best. But in the early days of WeChat, WeChat allow you, or even encourage you. To log in through your QQ credentials Then they can automatically import your QQ friends become your WeChat friends
[00:54:49] Jianggan: So in a way is that I mean for instance How do you create the initial critical mass so people can actually use it because we need to have enough friends On it, right.
So whatsapp took an approach. They take everyone from your phone book as a friend And then
[00:55:01] Sabrina: they just add it into your
[00:55:03] Jianggan: which I took a different approach. So for India specifically, people got used, got adopted to WhatsApp very easily. And when we had came in and we have that many features, but you need to, you know, add, you need to take a few steps to add friends.
And sometimes it’s just like small product designs in a fast competitive environment, which makes you sort of fall behind your competitors because they reach critical mass much faster than you do.
[00:55:27] Freeman: But in the earlier days of WeChat, I remember WeChat also allow you import your phone phone book for friends, definitely, still.
[00:55:36] Jianggan: And WhatsApp, you don’t even need to do that. Once you install the app automatically, you don’t need to, you may need to import.
[00:55:41] Sabrina: It’s just automatic.
[00:55:42] Jianggan: Yeah.
[00:55:42] Sabrina: I guess the good thing about WeChat is you don’t have to use your phone number, right?
[00:55:45] Jianggan: I think there are lots of things which are designed to protect your privacy. You need to approve a friend and whatever you share, you can select who you can view and only your friends and certain parts of your friend base can view yourself. I mean, that, I think that addressed lots of people’s concerns back then.
[00:56:02] Sabrina: So what do you think about other Chinese internet tech companies going overseas? Obviously WeChat is instant messaging. They tried to go overseas. They’re not really. That popular overseas, right?
[00:56:12] Freeman: No, I guess only popular in Chinese people overseas,
[00:56:16] Sabrina: how about Meituan? So Meituan has also kind of started their overseas expansion, right?
[00:56:20] Freeman: Arabia,
[00:56:20] Sabrina: yeah, and then Hong Kong as well.
[00:56:22] Freeman: Yeah, because after all, it’s a food delivery business. So it has a lot of work to with the local regulation, local labor force, as mentioned, do you have enough local labor force to do that?
Oh, by the way, I think they also started to do drones, right? Drone delivery. Regarding Chinese tech company going overseas, we already have TikTok Timo. The sheen, right? Let’s see next week how
[00:56:49] Sabrina: TikToks Whether or not there will still be a bunch of TikTok refugees on Xiaohongshu
So I think that’s all for today’s episode. Thank you Freeman for joining us in Shanghai. Hope you guys enjoyed this episode. If you did, do like our video as well as subscribe to our YouTube channel to stay tuned for more videos
thank you and bye bye.
[00:57:08] Freeman: Bye bye.
[00:57:09] Sabrina: Bye
bye.
