Tencent’s $1B Bet On On-Demand Services

Tencent Holdings, the Chinese Internet company, will invest as much as $1 billion in the country’s largest online on-demand services provider in a deal that values the latter at $20 billion, The Wall Street Journal reported Monday (Nov. 2).

The information came through a number of unnamed sources, said WSJ. The Internet giant will look to lead the investment round in the company, which was formed through the merger of Meituan, a provider of group buying services, and Dianping Holdings, a restaurant review site. That merger came as a result of price competition in the online app space that connects users with physical stores. As noted by WSJ, such tie-ups between rivals promote higher scale and lower costs. With such a sizable investment from Tencent, the joint company would ostensibly be able to embrace both strategies.

Tencent is already a Dianping investor, and this would be one of Tencent’s biggest investments ever.

All told, with the Tencent investment, the funding could top $3 billion, which WSJ noted would be akin to one of the biggest tallies raised by a startup. As had been noted earlier this year, ride-hailing company Didi Kuaidi raised $3 billion.

[bctt tweet=”All told, with the Tencent investment, the startup’s funding could top $3 billion.”]

Strategically speaking, Tencent’s goal continues to be bringing partnerships to bear with other tech companies through the Tencent QQ and WeChat social platforms. The strategy has been seen with other Tencent investments, such as JD.com and 58.com.

Other Meituan investors include Alibaba Group Holding, so this is the latest in collaborations between the pair after Didi Dache (Tencent-backed) and Kuaidi Dache (Alibaba-backed) merged.

Alibaba, along with a consortium of other investors, said it would invest $1 billion in Koubei, an online food ordering platform, and Baidu has targeted $3.2 billion for on-demand apps through 2018.

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