China’s social travel platform Mafengwo to lay off 40% of staff

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layoffs travel social app tencent
Screenshots of Mafengwo app (Image credit: TechNode)

Chinese travel platform Mafengwo may be laying off 40% of its employees, our sister site TechNode Chinese reported on Friday.

Why it matters: Tencent-backed Mafengwo, once a top travel site in China known for its user-generated reviews and other travel-based content, is losing out to larger rivals after a number of scandals this year battered its reputation among China’s consumers.

  • China’s online travel market was worth $44.7 billion in 2018, the world’s second-biggest after the US. However, data for this year’s week-long National Day holiday, peak holiday travel season beginning Oct.1, signaled that Chinese consumers are tightening their belts and spending less on travel.
  • The company faces stiff competition for its travel booking services from bigger rivals like Alibaba’s Fliggy and Ctrip.

Details: Discussion about Mafengwo’s layoffs have been circulating on the Chinese professional networking platform Maimai since the beginning of this week.

  • The company is going to fire around 40% of its employees, said a verified Mafengwo employee in a Maimai post on Wednesday, adding that the firm will begin discussions with staff on Thursday.
  • The cuts will affect departments throughout the company, the person said, but the deal-making division will suffer the most. The fired employees will be compensated based on the “N+2” model, meaning monthly salary equivalent to the number of years at the company plus two additional months.
  • Another Maimai user who identified himself as a Mafengwo employee confirmed the layoffs on Wednesday, with a number of other users who said they were employees confirming the job cuts in comments below his post.
  • Mafengwo did not immediately respond to requests for comment.

Mafengwo accused of faking 85% of all user-generated content

Context: Once a top player in China’s online travel agency industry, Mafengwo raised $503 million in five financing rounds, according to startup database Crunchbase.

  • The company’s image has taken a beating over the past year after it was accused in October 2018 of faking 85% of all user-generated content.
  • The company was then summoned by authorities in March for failing to comply with content regulations.
  • In August, the firm was accused of allowing sellers to fake orders and post fictional reviews to drive traffic.
  • The company in May received a $250 million investment led by Chinese tech giant Tencent with participation from a consortium consisting of General Atlantic, Qiming Ventures, and others.