Bottom line: Reports that Tencent and Baidu have withdrawn from Wanda’s O2O e-commerce venture are probably true, and the service may be quietly retired over the next 12 month due to lack of progress.
Real estate giant Wanda Group may be zipping ahead with its diversification drive into entertainment, but its lower profile move into Internet services doesn’t seem to be gaining nearly as much traction. That’s my latest assessment, following new reports saying Internet giants Baidu (Nasdaq: BIDU) and Tencent (HKEx: 700) have quietly pulled out of Wanda’s high-profile foray into e-commerce announced more than a year ago. The reports are based on market talk citing some business filings that indirectly hint at such a withdrawal, which wouldn’t be too surprising.
Wanda founder Wang Jianlin announced his move into e-commerce at the beginning of 2015, naming both Baidu and Tencent as partners. Fast forward to the present, when that particular initiative centered on the ffan.com website seems to have fallen off the e-commerce map and is seldom mentioned in industry circles.
Both Baidu and Tencent have pursued other e-commerce initiatives far more actively over the last 2 years. Tencent has thrown its bets behind JD.com (Nasdaq: JD), the industry’s second largest player, through a major equity tie-up and integration of JD’s service into its popular WeChat platform. Baidu also launched its own online mall late last year, focused on cross-border e-commerce.
The latest reports cite unnamed sources saying that Baidu and Tencent decided to withdraw from ffan.com after the site failed to gain much traction in since its launch. (Chinese article) One report says that names of Baidu and Tencent officials that were once members of ffan.com’s board have disappeared from the latest list of directors. The report also says a filing last month shows that the company formally changed its previous status from joint venture to become a venture wholly owned by Wanda.
A visit to the ffan.com website hints at why Baidu and Tencent may have decided to exit the venture. The site doesn’t seem to offer much in terms of merchandise, and the home page is more interested in displaying various QR codes that allow buyers and merchants to download apps onto their smartphones. A look at the “about us” section of the site is also quite vague, and simply says that ffan.com combines online e-commerce with real-world brick-and-mortar stores.
Wanda’s e-commerce initiative always seemed a bit half-baked to me, and came at the height of a wave of interest in combining online services with traditional retailing, or online-to-offline (O2O) services. Wang was hoping to use his company’s vast connections with traditional retailers to anchor the project, since his Wanda Group first rose to fame as operator of one of China’s biggest and best-managed shopping mall operators.
But now the O2O trend seems to be moving in a different direction. The hottest area of that trend has been O2O take-out dining services, but other areas like group buying discounts and private car services are also popular. Baidu has been particularly aggressive in both take-out dining and group buying, and seems less interested in traditional e-commerce these days. Meantime, Tencent also seems content to let JD.com be its main e-commerce partner, while industry giant Meituan-Dianping is emerging as its main partner for O2O services like take-out dining and group buying.
Neither Baidu nor Tencent seems to have much need for ffan.com, which reportedly raised about 1 billion yuan ($150 million) at the time of its establishment, valuing it at about $3.2 billion. (previous post) Times were quite different back then, when any Internet company with an O2O angle and big-name backers could get that kind of sky-high valuation even if it had little or no operating history.
But things have changed and investors are becoming more selective and want to see new ventures quickly gain market share and become profitable. Wanda’s ffan.com probably doesn’t qualify in either of those categories, and the withdrawal of Tencent and Baidu from the venture could be an intermediary step before Wanda quietly retires the service over the next 12 months.
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