(Chinese Version)

During August and September in 2015, investors were having heated discussions in their own secret venues. Meanwhile, the media had been having mass coverage on the Meituan-Dianping merger while Dianping was trying to replace groupons with Shanhui, a revolutionary function that allows user to pay the check with discount by scanning or just tapping on the phone.

At that time, Meituan was steps ahead of Dianping in terms of market share, but plagued by critics of the public as Dianping and Baidu’s Nuomi continued to progressed and took its market share. Meituan was losing edge in many sectors and its revenue gradually declined and eventually became loss.

In addition to that, Meituan also faced many competitive rivals in sectors like groupon, hotel, takeout and movie ticket service etc. Its harsh management style made its clients, the businesses, felt not being respected. There were even cases in which the platform’s agents got into a fight with the business runner.

One year has passed and many changes have taken places in the world. However, Meituan-Dianping still face the same problems like nothing has changed. There’s no solution to problems has been brought about and no progress after the merger either.

Without a doubt, this year the market has witnessed incredible changes. In September last year Koubei literally poured out a fund which was a couple hundred RMB per user to amass new users to enter the O2O competition. In October, Meituan merged with Dianping. These two companies different in corporate culture but were thought highly of for their complementary genes to each other. For that the investors even invested another $3.3 billion as a present. On October 25th, Qunar, who had been fighting with Meituan on hotel service line, merged with Ctrip.

During the last 12 months, Meituan-Dianping had been undergoing complicated integration process. Its staff were exhausted by the pressure, generating incredible negative influence on the new company. Since Meituan-Dianping has signed a Employee Improvement Project with many employees, which states the 15% employees in the bottom in first, second and third-tier cities and 20% in fourth and fifth-tier cities will be on the warning list and will be relieved if fail to meet the performance bar for two consecutive months.

According to the staff, the company has set a 30% comparative growth on moving base as target, which was not able to achieve in the initial booming period, let alone now. It’s quite obvious that the company is using tricks to fire some unnecessary staff.

The business world is cruel and companies are cold-blooded. Such approach is definitely from the hands of Meituan, which carries a wolf-pack corporate culture, instead of Dianping who’s soft at core. Complaints from the staff won’t cause much of an impact on Meituan. Form staff like the pregnant lady who quit the company a few years ago and uncle Han etc. eventually settled with Meituan after years of lawsuit. This kind of dispute shows just how the company operates, which also projects anxiety. If everything is going smooth for the company, then such things wouldn’t happen.

In one year, Meituan and Dianping became Meituan-Dianping, attracting new investment respectively as well as the $3.3 billion together. Apart from that, it seems there isn’t any change. The obstacles in scale and revenue, as well as O2O technologies and personnel still exist. The company is still being hold back by unnecessary staff and faces fierce competition pressure from its rivals and enemies. Besides that, its clients, the businesses, are also holding it agasint Meituan-Dianping.

Here comes the question: what had Meituan-Dianping been doing in the last 12 months? 58LIFE merged with Ganji, and DIDI and Kuaidi merged too, building a stronger business line and expanding further. In contrast to that, Meituan-Dianping sold its Maoyan. Recently, Meituan-Dianping’s director Wang Xing released the company’s performance statistics of the first half of the year to the public in the internal meeting.

The long tail data have doubled, but partners remain

According to statistics from Meituan-Dianping, by June 30th 2016, the number of active businesses on Meituan-Dianping reaches 220 million and the number of monthly active users of its APPs hit 180 million. Meanwhile, after Meituan and Dianping’s platform for businesses became connected, the POI information on the platform has grown to 20 million, among which 4.32 million are partners with Meituan-Dianping, covering almost all cities in China.

The data have doubled compared with the former year, but it doesn’t necessarily mean anything glorious since the businesses in the long tail can’t translate into actual sales, which is the foundation for revenue. In the groupon era, it has been proven that the 20% businesses in the head contribute over 80% of the transaction.

In this sense, Baidu’s Nuomi who ranks the second in the industry is able to hold on to its current market share and enjoy the dividend brought by the expansion of the industry as it enjoys many of the head businesses. Even Koubei who just entered the sector less than one year ago also holds many head businesses and had a boom in the Double 12 Activity after literally paying one million businesses to stay on its platform.

Meituan has been fight so hard for years and has never succeeded in getting rid of these two rivals. The only change is Dianping has become a partner and Koubei has risen.

Obstacles remain in scale and revenue

Obstacles in scale and obstacle are the limits that hold Meituan-Dianping back. O2O’s two ultimate weapons----subsidy and on-field promotion----will expand as the company grows in scale. However, they eventually become a huge burden. If the company keeps burning money then its rivals can use less money to keep up with the pace. If the company aims to profit by scale, then rivals who are willing to burn money will take away its market share. The rule is this simple and harsh. The video industry and tourism industry etc. all came through this way.

Pressured by the capital, Meituan-Dianping increases the commission on the businesses, drawing a certain percentage of the revenue in a few sectors. Before the merger the commission was 1%-6%, and now it’s 10%-15%. Some sectors’ commission is even as high as 15%-18% while the original commission was 12%-15%. Baidu’s Nuomi subsequently launched its commission-free campaign, which has indeed helped businesses thrive and drawn attention and traffic.

Aside from the obstacles mentioned above, there are also dangers presented by Meituan-Dianping’s enemies. After selling Maoyan, the company was lifted from a burden and had a better looking fiscal report. However, Maoyan, the once shining star product, is now the line of another company. Meituan-Dianping is also fighting with Eleme and Baidu Takeout in the takeout business, exhausting both its rivals and itself. The result is the lowering of subsidy, delivery staff, breakfast subsidy and the increase of outsourcing. Worse still, Meituan Takeout doesn’t have a leading advantage in the market and Eleme has gained the support of Alibaba.

The hotel business was once a glorious line. In earlier years Meituan was able to penetrate the middle and low-end market by mobilizing on-field promoters before Ctrip realized the threat. But after Qunar merged with Ctrip, their business lines now include business hotels, express inns, and hostels. This battler, without a doubt, is going south for Meituan-Dianping. Luckily, the hotel business is lucrative enough to provide drive for Meituan-Dianping though the scale has gained traction.

As the long tail grows longer, it has become impossible to have a massive increase. To profit, the company can only try out on the businesses. Still if the company pushes too hard the businesses will fight back, but if the company pushes too soft then it will fail to meet the demand of the investors. Such dilemma will last for a long time for Meituan-Dianping.

The confusing second half

In Wang Xing’s description, the first half of the game was all about accumulating users, businesses and starting on marketing and transaction. “Now the game has moved forward to the second half and new blood is needed. We haven’t had much of accumulation before but only a few explorations, such as movie reservation, hotel reservation etc.

We are also having a few attempts in some specific sectors such as the delivery service in the takeout sector. But overall such attempts don’t have enough power the drive our businesses as a whole forward,” Wang said. “So far we don’t have the ability to penetrate deeper into an industry. Of course this is a great challenge for us. But with challenge comes opportunity, since most internet companies don’t have this capability either.”

In other words, the rules of the second half of the game have changed but nobody knows the rules. Meituan-Dianping has actually made a few attempts before.

However, Dianping had brought forth the O2O 2.0 strategy in 2015, which is quite similar to the idea from scale to deep service. It’s very hard to come up with a killer service like Groupon that slays all areas. It inevitably makes people start to wonder if the Internet industry that’s supposed to rely on innovations and concepts has entered a trap.

In the Internet industry, you either move forward or get turned over. A good story can bring you the capital, efficient execution can bring the next story and capital. But nothing has changed during the last 12 months. For the ever-changing Internet industry, it’s something can’t not bear. The problem is, we know all the issues on the table but are powerless to fix them.

Perhaps Meituan-Dianping will find itself at a win-or-nothing path. Mass reduction on the staff, the increase of commission and terminating the partnership with businesses that are not willing to have deep cooperation might bring the company an increase on revenue, but the reality will come crushing down on the company once the capital no longer favors a good story but believes in actual income.

In short, everyone is still trying to find a path in the second half of the game in O2O life service. The experienced fighters of companies become the collateral damage in this game. Of course, we can always blame it on the capital winter.

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[The article is published and edited with authorization from the author @JUGELIZI, please note source and hyperlink when reproduce.]

Translated by Garrett Lee (Senior Translator at PAGE TO PAGE), working for TMTpost.