Chinese tech giants burn cash and users are paying for it

The speed at which Chinese tech companies are burning cash is disturbing. In order to maintain its dominating position, China’s massive service platform Meituan has spent over $4 billion in the past seven years. But O2O is not the only field that witnessed a fierce land-grabbing battle. Similar subsidy-fueled wars are going on in virtually every emerging market from ride-hailing to bike rental.

The prevailing model for a startup to prosper in the Middle Kingdom is to snap up market shares as fast as possible, often luring customer by providing massive subsidies and extensive marketing campaigns. Once they build their brand and clear up major competitors, they will have a final say in monetizing its users.

Before reaching a critical mass, in Didi’s case over 95% of China’s ride-hailing market, these companies are largely funded by venture capital and private equity firms, along with larger internet companies like Tencent and Alibaba. The rise of a raft of emerging tech verticals draw capital in and billion dollars investments are constantly hitting the headlines of local media.

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