In our review #0000003 this week, we discussed the tussle of Alibaba & Didi over Ofo, a Silicon Valley venture capitalist on why the startups need to learn from China, and how South Korea’s potential ban of cryptocurrency exchanges might dent the bitcoin markets.
For the full newsletter, you can read it directly here with our host’s main commentary on why Tencent will beat Facebook in the long term where we examined Tencent’s competitive advantage against Facebook with multiple monetisation models and if you are new to our newsletter, you can subscribe here.
Here are the interesting news for the past week dated 15 Jan 2018:
Inside Alibaba & Didi’s tussle over a multi-billion startup (Ofo) by Juro Osawa & Yunan Zhang in The Information (requires subscription)
Summary: Alibaba wants Didi to relinquish Ofo financing veto.
My Perspective: Here’s an interesting data point which I have heard from investors & people operating startups in this space that bikesharing companies such as Ofo and Mobike has removed Didi’s dominance in traveling distances between 0-3 kilometers, i.e. Chinese customers prefer to ride a bicycle than take a short subsidised cab ride. If you are in Didi’s shoes, you invest to learn about the customer acquisition, and hence if they threaten you, you have no choice to set up your own bikesharing platform. Of course, if Ofo and Mobike consolidate like what happened to the ride hailing apps, then Didi can use its big war chest to buy them out. The moral of the story is that one should not use the lessons from the last war to fight this one. Another interesting coverage & worth a read by my friend Eva Xiao in Tech in Asia discussed how Meituan-Dianping of the TMD axis are now entering Didi’s space.
Silicon Valley would be wise to follow China’s lead by Mike Moritz, partner of Sequoia Capital in Financial Times (FT) (requires subscription)
Summary: The work ethic in Chinese tech companies far outpaces their US rivals.
My Perspective: In the 1980s, the same was said about how Japanese workers have worked long hours and beat the US automotive industries. Yet, by the 1990s, these long hours conversations have disappeared when US companies are dominant again. The narrative is that China’s 9-9-6 mentality is on the ascendance at the moment and to educate, it means in any China company, you work from 9 am to 9 pm and 6 days a week. This will become the prevailing narrative for corporations to impose on their workers. Remember, in Silicon Valley in 1990s to 2000s, we have the 9-9-7 mentality, and guess what, they have evolved to work-life balance now. Ultimately, working long hours has nothing to do with productivity but being smart with efficiency does.
China’s Netflix to seek at least US$8B in IPO by Lulu Yilun Chen from Bloomberg
Summary: IQiyi’s said to be targeting a valuation of up to $10 billion & note that it’s owned by Baidu.
My Perspective: With a partnership with Netflix and Baidu’s backing, it will be interesting to watch how IQiyi will evolve when it goes public. At the start of this year, we have heard Xiaomi, IQiyi and a string of Chinese companies rumored planning to go public (for example, Meituan-Dianping who denied that they are). With the looming trade war between US and China, the question is whether some of them might switch from NYSE to HKSE, subject to dual class shares being a consideration.
South Korea says planned ban on cryptocurrency not yet finalized in Reuters
Summary: South Korea said on Monday that its plans to ban virtual coin exchanges had not yet been finalised as government agencies were still in talks to decide how to regulate the market.
My Perspective: Recently, most major cryptocurrencies are suffering a major fall in prices. It is fuelled by China’s determined stance to ban ICOs and shut down cryptocurrency exchanges and subtle efforts to force the bitcoin miners to move out of China. It is important to understand why China and South Korea want to do this. Mainly the governments want to protect retail investors from being burnt in the process. The current prices of most cryptocurrencies are definitely shifting towards bubble territory. Full disclosure that I have traded in cryptocurrencies but I have an understanding to how the technology works. I won’t recommend anyone to trade cryptocurrencies if you do not know anything about the technology & philosophy behind them. My view is that the blockchain technologies powering the cryptocurrencies are the real deal in the long run. We are just at the beginning of the dot com boom with the URLs being snatched by traders and speculators at the moment.
Tencent, Alibaba take e-wallet wars to Southeast Asia in Nikkei Asia Review (requires subscription)
Summary: WeChat pay to launch Malaysian currency service, Alipay partners locals brands.
My Perspective: A great summary of the partnerships which both Tencent and Alibaba are engaging in the payments and e-wallets front in Southeast Asia, but strangely missed out Singapore where NETS used to be the partner for Alipay but that will change to Tencent. What is missing in the whole payment wars, is data so far. I have been checking around for data on payment transactions across the market for Alipay and Wechat pay but not much has popped up since.