China Tech vs. the World

With the US and China locked in a “Tech Cold War”, I try to stack up Chinese Tech titans against their Silicon Valley counterparts. TLDR Summary: They are far ahead in many markets, and more indicative of the future end-state.

Pinduoduo vs No one

One of Pinduoduo’s core features is basically serving as an “Uber for Farmers”. And PDD’s really  my pick of-the-lot for Chinese Tech firms as they are in effect a next-generation commodity exchange. Agriculture is ripe for digitization in  many developing countries and the PDD model could have far reaching consequences. As of now around 12 million farmers selling their produce through the Pinduoduo App. It’s worth noting that despite the company aggressively billing itself as an Agri-business company, it’s still only around 15% of their GMV with the rest of the value coming in from standard e-commerce fare.

What drove PDD’s success was them being one of the pioneers in “group buying”. On the PDD App, users can form shopping teams and collectively buy in bulk – or a community champion can buy in bulk and distribute to other people. Bulk-buying in some cases allows producers to cut prices far beyond what they normally could and sometimes even eliminate middle-men distributors. Doubtful that this takes off in the west, but is tailormade for a country with abundant small-scale entrepreneurs and cost-conscious consumers.

PDD numbers are as impressive as they come. In China as a platform, it now second only to Alibaba. It can boast of 643mm MAUs (~2x Twitter) with > 5mn Active merchants. It’s GMV of $214Bn is nearly two-thirds of amazon already. There is no clear non-Chinese equivalent to PDD to the best of my knowledge.

Meituan vs the World

China usually gets a lot of flak for producing knock-offs. But surveying China Tech, I feel they have a lot of ingenuity when it comes to distribution and execution models. Alibaba is the foremost representative of this approach having built a whole ecommerce and finance  ecosystem around a B2B marketplace. And Meituan Dianping exemplifies this trend just as well. This app bills itself as “the Amazon of services” and is basically Airbnb, Expedia, Deliveroo and Yelp all rolled up into one. And the numbers speak for themselves. “Transacting Users” are ~450mn per year with over 6.3 mn merchants registered.

In terms of business mix, it’s pretty heavy on food delivery still and far surpasses global rivals like DoorDash and Deliveroo. Q3 Gross Order Value clocked in at $23 Bn far above DoorDash’s $7.3 bn. Gross Margins are surprisingly comparable with

Meituan doesn’t break out other services distinctly but lumps them into Instore, Hotel and Travel. Most of it can assumed to be travel and while the still impressive not earthshaking given their focus on domestic travel. Pre-pandemic Meituan recognized 111 Mn room nights vs Booking.com’s 845 Mn room night in 2019. Annual Revenues for that segment also landed in at 3.5bn far lower than Booking.com’s $15 Bn.

Personally I feel platform-consolidation is a long-term inevitability. One potential reason for Uber’s failure to break-even has been their inability to pivot their user base into more profitable and higher margin areas. It’s Asian clones Meituan, Grab and Gojek seem to have internalized this lesson well.

BEKE vs Zillow

BEKE is another promising company. BEKE is basically an online Real Estate Brokerage platform, and started out life as a well-reputed offline brokerage company “Lianje”. They still maintain a significant offline presence. Critical to their success is a proprietary “Agent Cooperation Network” where agents and brokerages cooperate and can take responsibilities for different roles within the transaction process (similar to Multiple Listing Systems elsewhere). The Scale of their of network is formidable with 200mn homes in directory and nearly half a million registered agents.

I’m not sure if the comparison to Zillow is apt though as going by the number BEKE is far ahead. The two don’t have comparable metrics but Zillow sold a total of 5000 houses and registered 200mn unique visits on it’s app/website. BEKE had $301 Bn of Gross Transaction Value. For comparison that comes to approximately 13% of China’s $2.3 Trillion of Real estate Sales.

Online Real Estate brokerage hasn’t really taken off elsewhere but given that it’s crystallizing in the world’s largest real estate market, BEKE is likely a forerunner.

Sina Weibo vs Facebook & Twitter

Social Media is a much dissected topic so I won’t get into too much detail. Weibo’s platform is mix of twitter and Facebook and has been described as “microblogging” platform. It’s not quite as dominant even in China itself as partly because the ubiquitous WeChat app has social media features as well.

BiliBili Vs YouTube

The market for online video in china is quite fragmented (check out this guy’s YouTube video for a cool overview – and frankly where I plagiarized a few interesting snippets). At the outset there were multiple players in this field who shuttered. And several also shifted away from User-generated Content to Producer-Generated Content ala Netflix, Disney + etc.  Apparently the bulk of the content on early User-upload websites largely consisted of pirated videos of original content, and when China started cracking down on piracy – the move to producer-driver platforms was sort of a natural step. The closest cognate to YouTube is now BiliBili. It originally started as a website for fans of Hatsune Miku (a Japanese virtual karaoke pop idol – yeah it’s weird), and still retains a towards anime & manga subcultures. It is a largely a YouTube clone with a few distinct features including a comment system which thrusts your text onto the Video itself!

Tencent, Youku & IQIYI vs Netflix

On the surface of it these are largely regional clones. But they do a fairly healthy dose of content creation as well. iQiYi is the lead here with 119mn Subscribers and 630mn MAUs (for it’s free content). Tencent Video is not too far behind with 112mn Subscribers and 528mn MAUs. I couldn’t find exact YouKu figures but it likely has > 500mn MAUs.

There were rumors regarding an iQiYi-Tencent merger but they didn’t pan out. Tencent certainly has the muscle and I would say they are definite leader in terms of producing original content ala Netflix. They were In general, Tencent is a very very savvy media company. Their “Tencent Pictures” arm was involved in producing Wonder Woman, Venom and the Top Gun sequel. In addition, they have a veritable Softbank-like cache of greenfield investments in various tech companies so long-term they are very likely to be shaking up the media sector.

For some representative examples of Chinese original content, check out Wolf Warrior 2 and  The Wandering Earth (based off the phenomenal Cixin Liu novel). Neither are critically acclaimed but IMO very much on par with Hollywood popcorn fare.

TikTok / Douyin

This is where the Market for online video starts diverging. Much has been said about TikTok already, and not sure what value I can add here. I’d highly recommend the Book “The Attention Factory” which is an excellent read into TikTok’s founding, organizational structure and the wider impact it’s had. They have recently set it’s sights on breaking the WeChat / AliPay duopoly with the launch of Douyin Pay Mobile Service.

ByteDance also has other significant but lesser well-known platforms up their sleeve. One up and comer is is TouTiao. TouTiao is on the face of it, just another newsfeed app, sort of like a Chinese BuzzFeed. It’s backed by an algorithm for personalizing recommendations.  And while that premise sounds simple, the consensus is the algorithm Is actually pretty powerful and the app ends up being fairly addictive.

E-Sports / Live-Streaming

One thing that struck me upon my move to Hong Kong was that Asians really love their Gaming. Billboards and Bus Panels peddled the latest Monster Hunter, Honor, and even what I assumed would be the low-rent One-Punch Man mobile game. And the numbers from Huya (173 mn MAUs) and Douyu (194mn MAUs) show just how massive the business of e-sports has become.

Twitch numbers aren’t well disclosed though but businessofapps.com claims ~ 140 Mn MAUs. Twitch does claim “concurrent viewership” greater than MSNBC and FOX News. I can’t say I’m a personal fan here but with those numbers, Social Broadcasting looks to be the future of media.

Baidu vs Google

For a tech standard bearer, Baidu’s otherwise impressive market cap of ~$110bn is decidedly less lofty. And while it remains the dominant search engine, it’s offering of services is decidedly sparser. Google Chrome and Android continue to thrive in China. And Baidu Maps splits the market with Alibaba-backed Gaode Maps. The free e-mail market is cornered by NetEase, QQ, Sina and Sohu instead. Baidu’s core revenues stem from it’s search and it’s equivalent of Adwords (Baidu PPC). Like Google the company is making forays into AI and Autonomous Driving. It’s AV division Apollo has launched Robotaxis in a few Chinese cities (safety driver included!). For it’s worth, earlier in the year it was reported that Baidu’s AV Vehicles did marginally better than Waymo on disengagements per mile (basically when a human driver needs to step in).

JD.com / Tmall vs Amazon

Amazon’s post-pandemic GMV clocked in at $490 bn putting it in line with Alibaba’s Tmall ($495bn GMV). JD takes third place with $323 Mn

WeChat and AliPay vs Whatsapp / Square / Venmo

Online Payments is perhaps the area where really has a leg up. While WhatsApp boasts 2 Bn MAUs (vs WeChat’s 1.2 Bn and AliPay’s 0.7 Bn) it is primarily a communications platform. WeChat / AliPay are used not just for exchanging money but all manner for transactions. WeChat in particulars boasts a panoply of Mini-Programs, and MAUs for their Mini-Programs are close to 900mn suggesting how strong they have been at commercializing their product. WhatsApp in contrasts largely earns money through it’s API, and by selling your data to businesses (!).

Square and Venmo look to be the players closest to replicating the success of WeChat / AliPay but at 52mn MAUs and 30mn MAUs have a long way to go.

TaoBao.com vs Ebay

This is a well-known story and Jack Ma’s hagiographers have had much to say about TaoBao’s early successes against eBay China.  Right now Taobao’s GMV surpasses eBay’s global GMV by a factor of 5 ($524 Bn vs $90 Bn).

Xiaohonshu vs Instagram / Pinterest

Xiaohonshu is the closest approximate to Instagram. It sports a Pinterest-like feed and is more commercially oriented in that it is very easy to make a purchase. Their hashtags and links ultimately directly lead you to the product website where you can hit the “buy” button. Instagram I believe is also augmenting it’s ecommerce features but Xiaohonshu is just inherently much more product focused with fewer personal stories out there. Like Pinterest their demographic is overwhelmingly  female. They are also relatively small with 85mn MAUs vs Instagram’s behemoth user base of a billion MAUs, and Pinterest’s half a billion MAUs.