How Much Is the Ten-year-old Dianping Worth?

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Recent rumors said say that Baidu was in talks with Dianping for a potential acquisition that values Dianping at about $2 billion. Zhang Tao, founder and , CEO of Dianping, denied it, saying the company planed to go public within five years at an estimated valuation of more than $10 billion.

Dianping turned ten in April this year and now is the most recognized brand in ratings and reviews in China. As of the third quarter of 2013, the service had more than 75 million monthly active users, 28 million reviews and 6 million merchants that in 2300 cities, disclosed by the company. Monthly pageviews was over 2.5 billion, with 70% from mobile. Mobile app users were over 80 million. Headquartered in Shanghai, Dianping has offices in more than 40 Chinese cities.

Dianping thinks it is more than a Yelp, preferred to be referred as China’s Yelp+Groupon, but it’s hard to say how much a market share in group-buying Dianping eventually will get for there are strong competitors like Meituan. So by now we can only count it as China’s Yelp. Yelp has 117 million unique visitors and 47.3 million cumulative reviews in Q3 2013 — seems more than Dianping’s. Yelp mobile app was used by an average of approximately 11.2 million unique mobile devices per month — much fewer than Dianping app usage. 62% of searches were from mobile — similar to Dianping’s mobile pageviews.

Looking at the user metrics alone, you may feel Dianping is no bigger than Yelp. Dianping hasn’t disclosed the revenues. It is estimated it hasn’t turned a profit since 2008. Yelp hasn’t turned a profit, either, with 2.3 million in net loss in Q3 2013 that doesn’t show any improvement from one year ago.

Yelp’s market cap is $4.4 billion as of this writing. Now you can get a sense here.

Monetization Still A Problem

Dianping’s first try on monetization was physical membership card, but it didn’t work out. For years promo coupons and advertising were the revenue sources with which Dianping managed to turn a profit in 2008. While revenues back then were good enough for a small business, it is another story when scale-up began.

In June 2010 Dianping Group-buy was launched as one of a wave of group-buying services in China. But Dianping saw it a good match, as a monetization approach. But so far the business hasn’t generate a profit for Dianping for the margin is too low. It is estimated that group-buying services in China make an average of 3% -5% in gross margin — it’s 7% in Meituan’s case, as its co-founder disclosed at our ChinaBang 2013 in early this year.

Other revenue streams, similar to those before 2008, include e-coupons and search adverting.

Wehther Dianping can grow to become a $10 billion company within five years? Dianping is so far the largest platform in terms of data about merchants — some players like group-buying service Meituan are catching up though. The data In early this year Dianping decided to open up data to third-party developers so that it could become a powerful platform. It takes another half a year for the company to release some useful APIs. Now third-party apps can show ratings, reviews and other information about a merchant from Dianping on their services. Apps who channel users to Dianping’s group-buying service can take transaction-based revenue shares.