Entertainment mogul: Starting his business with the internet

Chapter 423 Boss Song's Disdain

September 16th is an auspicious day.

Suitable for weddings, travel, and transactions. None to avoid.

At 9:00 a.m. local time, Song Ci and Liu Shishi returned from Moscow.

At this moment, Beiping City had just experienced a torrential downpour, and a magnificent rainbow was hanging in the sky.

Inside Meituan, an important meeting concerning the future is underway.

In the conference room, Meituan's key figure, founder and CEO Wang Xing, looked solemn and got straight to the point: "Everyone, after careful consideration, I have decided to promote the company's strategic transformation and officially enter the food delivery industry."

Seeing the hesitation on the faces of several senior executives, who seemed to have objections, Wang Xing raised his hand to signal them to calm down.

The firm tone stated: "The matter of the company's transformation has been discussed in several meetings before, and will not be discussed again today."

The growth bottlenecks and model flaws in Meituan's group-buying business are obvious to all. Without a rapid transformation, Meituan faces certain death!

"Now, as the company's CEO, I am making this decision. All you need to do is fully cooperate and resolutely execute the orders."

Wang Xing felt helpless. If it weren't for the life or death of the company, why would he want Meituan to confront Tengda Group head-on?

However, the group-buying model relies on merchants offering long-term discounts and generally requires paying the platform a commission of around 5%, leading many merchants into a dilemma of "no sales without promotions," making business growth extremely difficult.

More importantly, group buying lacks a unified service standard. From movie tickets to weddings and food, thousands of products require thousands of different solutions, resulting in high management costs and making it impossible to scale up and replicate.

For Meituan to survive, transformation is imperative.

“I support Mr. Wang’s decision.” COO Gan Jiawei was the first to express his opinion, “Food delivery and group buying are completely different in that they are low-frequency and non-essential.”

"Being lazy and gluttonous is human nature, and food delivery has the characteristics of high frequency and essential demand, so the daily order volume will far exceed that of group buying."

Further analysis: "Moreover, the entire process of picking up, delivering, and terminating food is easy to standardize, which facilitates large-scale scheduling by the platform."

As a key contributor to Meituan's victory in the "Thousand Group War," Gan Jiawei's insightful remarks succinctly pointed out the scale difference between group buying and food delivery businesses, earning frequent nods of agreement from the audience.

Seeing that the company's management was becoming more and more convinced of their beliefs, Wang Xingchao gave a wink to his capable assistant and vice president, Wang Huiwen.

Wang Huiwen understood immediately and turned on the electronic screen in the conference room to display an investigation report.

Once everyone's attention was focused, he said loudly, "Everyone, since we've decided to enter the food delivery market, we must first recognize our competitors!"

"Currently, there are three companies in China involved in food delivery." Wang Huiwen paused, clicked on the first page of the PPT, and introduced in a deep voice, "The first one is Ele.me."

This company started early but has grown slowly. However, as far as I know, Alibaba Group is currently in contact with Ele.me and intends to acquire it, but the specific progress is still unclear.

The second company is Baidu Waimai. Baidu just decided to enter the food delivery market this month, and it's still in its early stages, basically on the same starting line as the company itself.

After introducing the first two companies on the homepage PPT, Wang Huiwen solemnly switched to the next page.

The atmosphere in the meeting room instantly became tense. Everyone knew that the real formidable enemy in the food delivery battlefield was on this very page.

"The last one is the current leader in the food delivery market, Today's Choice, which is a subsidiary of Tengda Group."

Formerly known as the group-buying platform Nuomi.com, they had already ventured into the food delivery sector in the second half of last year, a full year ahead of us.

As soon as he finished speaking, a heavy pressure descended upon everyone's hearts.

As a global internet giant, Tenda Group is already a force to be reckoned with, and its first-mover advantage of one year makes its competitors even more fearful.

Wang Huiwen clicked the mouse to turn to the next slide, where a map of China was clearly marked with major cities:

"Currently, CBDs, university towns, and science parks in first-tier cities across China have been firmly occupied by Today's Choice."

If we want to enter and compete for these markets at this point, we would have to pay at least five times the cost.

Therefore, the company decided to avoid direct confrontation and focus on second-tier cities where Today's Choice has not yet fully penetrated, thus deepening its presence in the lower-tier market.

Discussions immediately broke out in the conference room, and Wang Xing also fell into deep thought.

Today's Choice is a strong and first-mover advantage, making it almost impossible to defeat unless the Tengda Group's internet empire collapses.

Therefore, his plan is to first target Ele.me and Baidu Waimai, defeat these two companies, and finally form a two-way split with Today's Choice.

The food delivery market is large enough to accommodate two companies. If a company can capture 30% of the market share, it will be enough to create a new industry giant.

After everyone had digested this information, Wang Huiwen continued, "Everyone, I just introduced the main competitors in the food delivery market and formulated a strategy of differentiated competition."

In the short term, we won't directly compete with Today's Choice; we'll focus on expanding into untapped cities first. However, our research revealed a few issues that we need to discuss together.

"The first issue is the delivery system, which is the core of the food delivery business! Currently, Ele.me uses an outsourced delivery model, while Today's Choice uses its own rider team."

After a moment's thought, Gan Jiawei asked, "President Wang, what are the advantages and disadvantages of these two models respectively?"

Wang Huiwen's investigation report was very detailed: "Building your own team can ensure controllable service quality, but the cost is extremely high."

Today's Choice equips each rider with an electric delivery bike, with a single bike costing as much as 3000 yuan. If we estimate 10 riders, the investment in transportation alone would reach 3 million yuan.

Everyone gasped upon hearing this.

Meituan is not as financially powerful as Tenda Group. Such a large-scale investment could easily drag the company down.

“Ele.me’s outsourcing model has obvious advantages: low cost, and the saved funds can be used to subsidize users.” After the introduction, Wang Huiwen looked at Wang Xing, who would make the final decision.

Wang Xing was also weighing the pros and cons. Everyone understood that building their own team was definitely better, but the numbers couldn't be calculated that way.

Not every company has the same strong financial resources as Tenda; it must consider the company's operating costs.

"Let me think about it some more, let's discuss the next issue first." Concerning the company's future, Wang Xing was extremely cautious and dared not be hasty. He decided to put the delivery model aside for now, after all, haste makes waste.

Wang Huiwen replied, "The second issue is user subsidies. Cultivating user habits inevitably requires subsidies, a point already proven in our previous group-buying business." A senior executive, somewhat puzzled, interjected, "Mr. Wang, if others are subsidizing, we should just follow suit. You can't catch a wolf without risking your cub; as long as we can retain customers, a little subsidy is worthwhile."

"Please be patient and let me finish!" Wang Huiwen shook his head. "The subsidies from the company and Ele.me are only for food delivery users. But Tengda's subsidies are initiated from WeChat Pay, covering the entire closed loop of WeChat, online payment, and food delivery ecosystem."

Others can reap three benefits with a single subsidy. Baidu launched Baidu Pay, following the same subsidy strategy as Tencent. But we have no plans to enter the online payment market. What should we do?

Wang Xing frowned, realizing for the first time how terrifying the closed-loop internet ecosystem of Tengda Group was.

After a moment's thought, he said in a deep voice, "Online payment is too expensive. You won't see any results without investing tens of billions. Only Tenda, Alibaba, and Baidu can afford to do this!"
Since Tenda and Baidu are competitors, we have no choice but to cooperate with Alibaba.

After he finished speaking, a thought suddenly flashed through his mind: Wasn't Alibaba Group planning to acquire Ele.me?

If handled properly, Meituan might be able to acquire Ele.me through Alibaba, at which point it could become the second-largest food delivery company in the market.

"Mr. Gan, you used to be the Vice President of Sales at Alibaba Group, so you must have some connections. Why don't you contact them first and sound them out? If Meituan is willing to integrate with Alipay, could the two sides cooperate?"

Gan Jiawei nodded in response: "Okay, Mr. Wang, I'll handle this."

Seeing that Wang Xing had quickly arranged the matter, Wang Huiwen asked one last question: "To improve delivery efficiency, we must establish an advanced dispatch system to achieve automatic order dispatch."

Today's Choice relies on Tenda's world-leading big data algorithm, which makes its automatic order dispatch efficiency 50% higher than Ele.me's, while reducing costs by 20%.

The company team calculated that, relying on this system, Today's Choice saw a 10% increase in gross profit margin by just 1% in increasing the commission rate. The algorithm's impact on efficiency is truly remarkable.

Wang Xing instantly understood Wang Huiwen's unspoken meaning: with Meituan's current technological capabilities, it was absolutely impossible for them to develop a delivery system comparable to Today's Choice in the short term.

He sighed softly, "It seems that cooperation with Alibaba is imperative. Otherwise, if we miss the window of opportunity to develop second-tier cities, once Jinri Youxuan has absorbed the market in first-tier cities, they will turn around and compete with us. So we must seize this golden opportunity."

"Mr. Gan, could you please communicate with Alibaba? I'd like to speak with Mr. Ma in person. Tenda is currently very powerful; cooperation would be mutually beneficial!"

The following morning, Song Ci returned to the Tengda Group office.

Upon arriving at the office, Shen Boyang, the president of Today's Choice, who had been scheduled in advance, rushed over to report on his work.

"Chairman Song, while you were in Moscow for the meeting, Baidu officially entered the food delivery market. President Li announced that he would invest 200 billion yuan to support the development of the food delivery business. It will definitely be a formidable competitor to the group, and we must be wary of it."

Seeing her subordinate's serious expression, Song Ci chuckled and comforted him: "From its inception to now, Today's Choice has taken steady and solid steps. As long as we proceed step by step, Baidu has no chance of surpassing us."

Shen Boyang remained worried, clearly shocked by Baidu's determination to invest heavily in the market, while Song Ci seemed completely unconcerned.

Baidu has long relied on search advertising as its "cash cow," with core advertising revenue accounting for more than 68% of the company's total revenue.

This path dependence has led to Baidu's consistently insufficient investment in new businesses such as mobile payment and O2O. Coupled with the short-sightedness of its core leadership, who prioritize monetization above all else, how can Baidu compete with Tenda?

"Alright, don't panic!" Song Ci waved her hand.

"I know Li Yanhong quite well. His professional manager-style decision-making is conservative. When it comes to a critical moment of life and death, he will inevitably back down. This is determined by his personality."

Take Baidu Wallet, for example. It was launched almost simultaneously with WeChat Pay, but Baidu was always reluctant to offer large-scale subsidies. Now it's been crushed by WeChat Pay and Alipay, demonstrating Baidu's shortsightedness.

Shen Boyang didn't dare to speak. Although Baidu was belittled by the chairman to the point of being worthless, it was still an internet giant with a market value of 450 billion US dollars.

Mr. Li is one of the top ten richest people, and it is by no means something that a high-level employee like him can presume to comment on.

To calm his subordinates' anxiety, Song Ci further analyzed: "Baidu lacks a super mobile portal, and Baidu Wallet does not have high-frequency usage scenarios, so it cannot work together with WeChat Pay's subsidies for Today's Choice to achieve the same synergistic effect."

Simply throwing money at the food delivery market like this will likely lead to Baidu backing out if the results fall short of expectations.

Hearing the chairman's clear analysis, Shen Boyang felt somewhat relieved.

"I have never considered Baidu as a competitor. This company lacks long-term strategic focus and always wavers between making quick money and developing technology."

If an organization adopts a centralized culture that stifles innovation, it will lead to a massive brain drain and eventually deplete its technological foundation.

Commercially, it has failed to find a second growth curve besides search advertising, resulting in insufficient revenue generation. Furthermore, it underestimates the disruptive potential of cross-industry ecosystems.

With these four points, it's destined to be no match for Tenda. If it cannot transform from a traffic-generating entity in the PC era into a value creator, it will ultimately be eliminated by the times.

Shen Boyang was quite surprised, not expecting the chairman to be so pessimistic about Baidu, and couldn't help but scratch his head.

A doubt crept into my mind: Baidu is, after all, the second-largest internet company in China after Tenda. Is it really that bad?

“I’m not worried about Baidu, but you should keep an eye on Alibaba and Meituan. If these two companies join forces, it will cause a lot of trouble for Today’s Choice,” Song Ci solemnly advised.

With Ma Jieke's vision combined with Wang Xing's execution ability, if the two were to form an alliance, even with their first-mover advantage, Today's Choice would have to go through a lot of trouble to capture the food delivery market.

Shen Boyang quickly reported: "President Song, I have been keeping an eye on Alibaba. They do intend to acquire Ele.me, but I have never received any news about Alibaba and Meituan cooperating."

"Just keep a close eye on it. Once the first-tier cities have finished digesting the market, immediately shift to the second-tier cities. Opportunities don't wait for anyone."

After giving his instructions, Song Ci waved for Shen Boyang to leave. He had been in Moscow for several days and had a lot of work piled up that needed to be dealt with.

After Shen Boyang got up to take his leave, Song Ci dialed the internal short number: "Jian Ning, send those two documents over."

A moment later, Secretary Jian Ning came to the office and handed over two documents: "Chairman Song, we're just waiting for your signature!"

Song Ci nodded slightly, and saw that the two documents were covered with the signatures of the group's senior executives.

The first document is a business segment splitting plan, which proposes to separate some of the group's businesses into independent subsidiaries.

In this way, Tengda Group will have a total of 12 subsidiaries, including Tengda Culture, Southern Cinema, Tiangong Special Effects, Toutiao Video, Today's Choice, Mtime, Qianqian Music, Gaode Map, Reading Group, TT Voice, Huya Live, and the crucial Yifutong.

The second document concerns the group's management reform. Following the implementation of president rotation in the entertainment division, Tenda will officially begin implementing a president rotation system across the entire group starting in 2013.

After a quick glance, Song Ci picked up his pen and signed his name: "Hand it over to the Group Office and issue a notice to the entire Group and overseas operation centers and branches."

(End of this chapter)