China’s food delivery giant Meituan exploring gaming business

January 15, 2019 15:16
Food delivery service platform Meituan is reportedly planning to enter the gaming business in a bid to improve profitability. Photo: Reuters

China’s food delivery-to-ticketing services platform Meituan-Dianping (03690.HK) is set to enter the gaming business.

Tencent-backed (00700.HK) Meituan recently posted new gaming-related job offerings on its corporate website, Chinese media reported. It is looking for a senior front-end engineer (gaming), gaming planner, visual designer, and a specialist in gaming operations, among other Beijing-based positions.

According to the post, the new personnel will be responsible for the development and maintenance of the company's "mobile games,” a sign that Meituan is likely to choose mobile games as its entry point for the new business.

The on-demand services platform is expected to focus its efforts on developing casual games, role-playing games, and business simulation games, according to market observers, with features allowing gamers to earn points, which can be redeemed for spending on real-life products or coupons for food delivery services.

Commenting on the company's reported plans to move into the gaming space, Wang Hui-wen, Meituan’s executive director and senior vice president, reportedly said in private post on WeChat: “I just want to try [to explore the new business], don’t think too much, guys.” 

With its in-house delivery fleet running across more than 2,800 cities and counties in China, Meituan offers customers a wide range of services ranging from food delivery and hospitality booking to spa vouchers and movie ticket selling.

At the same time, it has continued to explore new service offerings. Meituan started ride-hailing operations in Shanghai and Nanjing in early 2018, with plans to expand to at least five more cities in the country to take on industry leader Didi Chuxing.

It also entered the bike-sharing space by acquiring Chinese sector giant Mobike for US$2.7 billion in April last year.

However, the company announced in September that it would halt further expansion into the ride-hailing market after an evaluation of the “synergistic value car-hailing services could bring to our platform.”

Mobike also started to downsize its fleet to “avoid an oversupply” in a cooling bike-sharing market.

Controlling about 60 percent of the food delivery market, Meituan has battled for market share against Alibaba-backed through generous subsidies and incentives to merchants.

Meituan posted a loss of 28.8 billion yuan (US$4.1 billion) in the first half of 2018, according to its stock exchange filings. Its loss reached 83.3 billion yuan in the third quarter of 2018.

Analysts said Meituan's move to enter the gaming business may be driven by its desire to improve profitability, considering the gaming sector's huge monetization capability.

As of the third quarter of 2018, gross profit margin for Meituan’s core food delivery business was only 16.6 percent.

In the face of China’s economic slowdown, Caixin reported in December that the company shed staff from its content operations and research and development.

Meituan sought to downplay the report, saying the job cuts only amounted to less than 0.5 percent of its total headcount, or around 250 people. It stressed that the staff changes were just part of “normal operational restructuring.”

The company generated US$4.9 billion in its initial public offering in Hong Kong last September. But the shares have plunged from its listing price of HK$69 and are trading at HK$43.5 as of Tuesday noon.

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