Tencent set to buy stake in dianping.com: reports

Market volumes of China's local service-oriented O2O (billion yuan)

Leading Chinese Internet company Tencent Inc will purchase a 20 percent stake in dianping.com, media reports said Sunday.

Tencent will buy $400 million worth of shares in Shanghai-based -dianping.com, a Chinese version of Yelp, and have the right to buy a further 5 percent stake in the website if dianping.com gets listed, Bloomberg Businessweek reported on its Weibo account Sunday.

Lu Zhenwang, CEO of Shanghai Wanqing Commerce Consulting, said on his Sina Weibo account Sunday that -dianping.com would release the news this week.

However, a PR staff member of Tencent, who asked to be anonymous, told the Global Times Sunday that the company has no comments about what she said was a market rumor.

Zhang Tao, founder and CEO of dianping.com, was quoted by media reports last year as saying that dianping.com would launch an IPO in five years.

Dianping.com could not be reached for comment by press time.

Dianping.com was founded in Shanghai in 2003, providing services including consumer service rating, merchant information, group-buying, online restaurant reservations and other types of online to offline (O2O) services.

The cooperation between Tencent and dianping.com will lead to a win-win result, Lu told the Global Times Sunday.

Tencent is making great efforts in promoting the online payment service of WeChat, so it needs markets in which people frequently spent money, such as hailing taxis, which is why Tencent invested in Didi, a domestic leading taxi-hailing app, according to Lu.

Compared with the taxi business, the catering industry generates bigger revenue, has more active consumers and is also closely linked with the location-based service, which can be provided by Tencent's map service, Lu said.

In addition to the investment from Tencent, dianping.com would also benefit from the large number of new users it can reach if it is connected with WeChat, said Lu.

WeChat, a popular instant messaging mobile app developed by Tencent, has gained about 600 million users by the end of 2013.

As of the fourth quarter of 2013, dianping.com had more than 3.5 billion page views monthly from its website and mobile app, with over 75 percent of the views coming from mobile users, according to its official website.

Tencent's investment in dianping.com shows that the competition between the three Chinese Internet giants - Baidu Inc, Alibaba Group and Tencent - has became fiercer in the local service-oriented O2O sector.

Baidu purchased a group-buying site nuomi.com last year, but the user scale of nuomi.com is smaller than its major rivals - meituan.com and dianping.com, Lu said.

Alibaba Group had a 10 percent stake in meituan.com, a website similar to dianping.com that also features restaurant ratings, reviews and group-buying, but the shareholding is not large enough for Alibaba to control the company and develop effective cooperation, according to Lu.

Similar to the investment relationship between Alibaba and meituan.com, holding a 25 percent stake in dianping.com does not ensure Tencent to freely manage cooperation with the website, Wang Liyang, a Hangzhou-based independent analyst, told the Global Times Sunday.

"As a leader in catering ratings and review, dianping.com is also attractive to other giants," said Wang, noting that Tencent's investment is just aimed at getting a piece of dianping.com before the other two giants do.

He suggested that it is still too early to predict the influence of Tencent's tie-up with dianping.com.

Last year, there was a market rumor that Baidu planned to purchase dianping.com for $2 billion but the two companies did not reach an agreement.

Alibaba was also reportedly interested in taking over dianping.com.

As of the fourth quarter of 2013, -dianping.com had more than 90 million monthly active users and more than 8 million local businesses covering nearly 2,300 cities across the Chinese mainland.