Tencent buys 20% stake in VC-backed Dianping

According to a regulatory filing, a Tencent subsidiary will subscribe to newly issued shares in Dianping, amounting to a 20% stake on a fully diluted basis. It also has the option to purchase additional shares in the company contingent on certain future events. Local media reported that Tencent may invest as much as $500 million in the company.

Speaking at a press conference in Shanghai, Zhang Tao, Dianping's founder and CEO, hailed Tencent as the best social-networking provider in China and alluded to the possibility of combining Dianping with QQ or WeChat.

While it is tempting to label Dianping a Yelp clone, following the all-too-familiar pattern of internet-based business models being transplanted from North America to China with mixed success, it was founded in 2003 and predates its US counterpart by about two years.

Sequoia Capital provided Dianping's Series A round worth $1 million in 2006, having found out about the company because Sequoia employees were using it. Google led a second round of funding in 2007, but the big pay-off came three years ago when TrustBridge Partners led a $100 million Series C round, which also featured Lightspeed Venture Partners, Qiming Venture Partners and Sequoia.

The Series C round reportedly valued the company at $1 billion.

As of year-end 2013, Dianping had more than 90 million monthly active users, over 30 million reviews, and more than 8 million local business listings covering approximately 2,300 cities across China. It also covers several overseas markets. More than three quarters of its 3.5 billion monthly page views are from mobile devices and Dianping mobile apps have 90 million accumulated unique users.

In addition to offering listings and independent restaurant reviews, the company provides group-buying, e-membership and restaurant reservation services, as well as several other online-to-offline services.

Investors previously told AVCJ that Dianping had been profitable since 2008, largely thanks to the traction it gets from word-of-mouth advertising. However, according to Bloomberg, Zhang said last October that the company could turn profitable in 2014.

Tencent's investments in private equity- and venture capital-backed businesses in 2014 indicate the breadth of its interest. Last week, it participated in a $82 million investment in online travel agency 17u.com, alongside Boyu Capital and Oriza Holdings. Last month, it paid $193 million for a 9.9% stake in PAG-backed logistics operator China South City Holdings, promising to collaborate on e-commerce.

The company's product offering now spans social networks, online gaming, content and e-commerce. Revenues reached RMB14.4 billion ($2.4 billion) for the three months ended June 2013, more than double the total for the parallel period in 2011, although online games still account for over 50% of sales.

Alibaba Group and Baidu, Tencent's principal domestic rivals, are also highly acquisitive. For example, since the start of the year, Alibaba has moved to fully acquire digital mapping service AutoNavi, invested New York-based e-commerce site 1stdibs and supported the acquisition of a majority stake in pharma data provider CITIC 21CN.

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• Topics
• Greater China
• Expansion
• Technology
• Consumer
• China
• Tencent
• Venture
• TMT
• Consumer
• Qiming Venture Partners
• Sequoia Capital
• Trustbridge
• Lightspeed Venture Partners