Three years and another three years.

Meituan recently renewed a strategic cooperation agreement with Kuaishou, upgrading their cooperation in the local lifestyle business. According to the agreement, the scope of cooperation between Kuaishou and Meituan will expand to "hundreds of cities and tens of thousands of stores" nationwide in the next three years, with more fundamental and systematic product development in production and research.

Before this, Meituan and Kuaishou had already cooperated for three years, but it was still at the stage of product introduction. This time, both sides have shown their utmost sincerity and formed a deeper bond around "new customers" and "large supply." As mentioned in the official announcement, Kuaishou's 700 million users will help Meituan merchants gain new growth, while Meituan's "large supply" will also provide more diverse consumption options for Kuaishou users.

Cheng Yixiao embraces "Meituan" in the battle against Douyin?

The reason why Meituan and Kuaishou are cooperating so happily is that, on the one hand, the cooperation data shows good performance, and both sides have "tasted the sweetness." According to official data, in June this year, the sales volume (GMV) of Meituan merchants on Kuaishou increased by more than 38 times, and the order volume increased by more than 10 times year-on-year. Since the beginning of this year, the monthly order conversion rate of Meituan products in Kuaishou live broadcasts has increased by 5 percentage points from the previous month.

Correspondingly, the user experience of Kuaishou's local life services is also improving. In the second quarter as a whole, the proportion of Kuaishou users encountering problems such as "troublesome purchase process" and "hard to find orders" decreased by more than 10 percentage points year-on-year.

On the other hand, the user overlap rate between Meituan and Kuaishou platforms is not high, allowing each side to maximize their respective interests. Data shows that the overlap rate of high-frequency users between Kuaishou and Douyin has further declined to 19.6%, less than 20%. In addition, as of April 2023, the overlap of users between Kuaishou and Meituan was about 139 million, accounting for 35.3% of Meituan's user base, far lower than the 81% overlap between Douyin and Meituan. This has removed the "psychological barrier" for cooperation between the two sides.

A common interpretation is that this is a win-win cooperation, with Meituan and Kuaishou each having their own goals based on their strengths and weaknesses: Meituan values Kuaishou's new users and short video content traffic, while Kuaishou values Meituan's merchant product resources and offline fulfillment capabilities. In addition, they share a common enemy: Douyin.

This view is not inappropriate and is the key to their continued cooperation. But from another perspective, looking at their respective industry environments, Meituan's need for Kuaishou is far greater than Kuaishou's need for Meituan. In other words, Meituan and Kuaishou have chosen a "shortcut" to tap into the local lifestyle market. But for Kuaishou, Meituan is an icing on the cake; for Meituan, Kuaishou is a lifesaver, a refreshing shower in a drought.

The deeper reason behind this is the mismatch in content capabilities between Meituan and Kuaishou. Creating content and capturing user attention have become key factors in the competition among local lifestyle, instant retail, and e-commerce platforms. Top platforms like Taobao, Tmall, Pinduoduo, and JD.com are constantly increasing their investments and tapping into the potential of content.

This is because high-quality content supply can increase user stickiness, and platforms can improve user retention and usage frequency by providing services closely related to users' daily lives, thereby achieving higher consumption conversion rates. Financial report data shows that in the fourth quarter of last year, the daily average number of paying users of Kuaishou's local life business increased by more than 40% month-on-month.

Today, with the peak of traffic dividends, this growth rate is nothing short of an enticing pie. However, the dilemma faced by Meituan is that the moat it built during the "transactional" business era is gradually being breached by new traffic forms that promote consumption through content.

The most intuitive manifestation is the drastic change in the local lifestyle market landscape, with the rise of content platforms like Douyin and Kuaishou. Data shows that by 2025, Douyin's total in-store transaction volume may reach 300 billion yuan. Although this figure is only half of Meituan's, it's worth noting that Douyin's local life segment was only launched in October 2022. In that year alone, Douyin's local life market generated approximately 77 billion yuan in transactions.

By 2023, Douyin's total transaction volume on its lifestyle service platform increased by 256%, covering more than 370 cities. Compared to the previous year, short video transaction volume on the platform increased by 83%, and live streaming transaction volume increased by 5.7 times, showing a strong growth momentum.

It is worth mentioning that Kuaishou's local life performance is also remarkable. 2023 marked the true beginning of Kuaishou's local life business, with many "from 0 to 1" breakthroughs achieved. Data shows that in 2023, Kuaishou's local life GMV increased by 25 times, the number of buyers increased by 23 times, and the user base in new-tier cities grew by 545%. The average monthly shopping amount per active user who places orders on the Kuaishou platform exceeds 1,000 yuan, and the average daily active user spends more than 2 hours on the platform.

In addition, players like Tencent Video and Xiaohongshu are gradually joining the melee of local life services by leveraging their content advantages. Xiaohongshu and Douyin's offensive against the defensive Meituan is an asymmetric war. To some extent, it can be judged that Meituan is experiencing a "total war" with content platforms led by Douyin. Meituan is both envious and fearful of their growth rates, and the faster they grow, the greater the shock to Wang Xing's heart.

Among these players, the biggest threat to Meituan is undoubtedly Douyin. In addition to continuously eroding Meituan's market share, the high user overlap rate poses an even greater impact on Meituan. According to QuestMobile data, in April 2023, the number of overlapping users between Meituan and Douyin exceeded 300 million, accounting for 81.0% of Meituan's total user base, while the overlapping user ratio between Ele.me and Meituan accounted for less than 20% of Meituan's total user base. This means that once Douyin's local life infrastructure is perfected and user consumption habits are formed, Douyin will become the best "Meituan alternative platform" for these overlapping users.

If you can't beat them, join them. Some media have mentioned that Meituan has also approached Douyin, but the latter hopes to build its own local life service system and instead reached a cooperation with Kuaishou. This ultimately formed the market landscape of "Douyin + Ele.me" and "Meituan + Kuaishou".

Wang Xing should learn from Tencent and take a bigger step

For Meituan, teaming up with Kuaishou to battle Douyin is only a temporary solution, and its own content transformation has become a necessity. This can also be understood as teaming up with Kuaishou not just to defend against Douyin.

In the past two years, Meituan has continuously increased its investments in live streaming, short videos, short dramas, and other businesses to alleviate pressure from content platforms like Douyin. For example, since the beginning of this year, Meituan has introduced merchant self-broadcasting, upgraded short video content types, launched free short dramas, and sought cooperation with MCN companies.

These initiatives have achieved certain results, but they are still insufficient compared to short video platforms like Douyin and Kuaishou. Data shows that in 2022, the average daily active user usage time of Douyin was 125 minutes, Kuaishou was 133 minutes, while Meituan was only 16 minutes.

In fact, while most people are focused on the moves of the Meituan App, they overlook a fact: Meituan's starting point in content is not inferior to short video platforms like Douyin and Kuaishou. Wang Xing already has a product closest to content platforms: Dianping. Douyin, Kuaishou, Xiaohongshu, and others have successively built their local life content seeding systems by emulating Dianping.

Launched in 2003, Dianping predates Meituan by seven years and Xiaohongshu and Douyin by more than a decade. It is China's earliest third-party consumer review website and was once the most successful UGC platform in the local lifestyle field. However, after being merged by Meituan in 2015, Wang Xing has been "de-Dianping-izing," and Dianping has been gradually absorbed by Meituan. Five years later, in 2020, the name Dianping officially "disappeared" from Meituan. According to Meituan's strategy at the time, Dianping's traffic would eventually be transferred to Meituan.

This is Meituan's version of "either-or." Fortunately, Dianping has not completely disappeared and has maintained operations, but its importance within Meituan has not increased. It was not until the pressure from platforms like Douyin increased that Dianping was repeatedly mentioned within Meituan. For example, at the beginning of 2023, a Meituan employee posted a question on an internal forum: Is Dianping the "content seed" that Meituan missed?

The employee's meaning is clear: Dianping missed the opportunity to become a content platform. LatePost mentioned that Dianping has made several attempts at content transformation, undergoing several major redesigns. For example, in 2018, Dianping transformed the original restaurant directory on its homepage into a collection of user-generated graphic and text notes, displayed in a two-column information flow format.

Since then, Dianping has also introduced celebrities as a benchmark against Xiaohongshu, hoping to stimulate the emergence of more non-restaurant-related content. The most radical move was around 2020, when under the leadership of Wang Huiwen, Meituan's co-founder, Dianping even considered changing its name and product form more thoroughly.

However, these attempts eventually faded away without much success. To this day, only 15 million people open Dianping daily, not much different from before the merger, and its daily active user count is less than 2% of Douyin's and one-sixth of Xiaohongshu's.

LatePost commented that the reason Dianping failed in its content transformation is that it is too profitable. Dianping now generates over 10 billion yuan in revenue annually for Meituan. While Meituan's annual revenue is in the hundreds of billions, its most profitable segment is the on-site and hotel tourism business, with a meager profit margin in its takeout business. Nearly one-third of this revenue comes from Dianping.

At present, Dianping's content transformation is still in a very difficult stage: content supply is insufficient, the creator ecosystem is immature, and Meituan's investment in Dianping is not significant. If Dianping were to defend against the impact of content platforms like Douyin alone, it would be an impossible task in the short term. Wang Xing's greatest hope lies in the Meituan main app, which has over 100 million daily active users. This explains Meituan's aggressive but ineffective content strategy.

As such, Wang Xing faces a two-pronged battle: on the one hand, he needs to clarify Meituan's internal content strategy, focus on providing valuable and unique content to users to increase user stickiness, and balance the relationship between the Meituan app and the Dianping app to avoid internal friction. On the other hand, he needs to "unite and ally" within the existing local lifestyle landscape to maximize Meituan's ability to acquire new customers and retain users.

According to iMedia Consulting data, China's local lifestyle service market was worth 19.5 trillion yuan in 2020 and is expected to grow to 35.3 trillion yuan by 2025, with a compound annual growth rate of 12.6%. In such a trillion-yuan market, the current overall online penetration rate is only 12.7%, and it can maintain a growth rate of more than 20% in the next 3 to 4 years.

Under such circumstances, Wang Xing might as well take a bigger step: learn from Ma Huateng and bundle the businesses he insists on doing but is not good at, handing them over to professional partners. In the context of Meituan's cooperation with Kuaishou, this means that Wang Xing should break down to build up, bundling Dianping and injecting it into Kuaishou to gain greater control over Kuaishou's traffic.

For both sides, this may create a "1+1>2" chemical reaction: Kuaishou gains more local lifestyle content supply, while Meituan can focus more on refining its core business while broadening its customer acquisition channels.

Against the backdrop of Alibaba's adjustment of its local lifestyle business direction and Pinduoduo's suspension of its community group buying business, the "Meituan + Kuaishou" combination will be a "Three Gorges Dam" for local lifestyle services for players like Douyin and the aggressive Xiaohongshu. Crossing it will require tremendous costs and effort.