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.

Emma Lee is Shanghai-based tech writer, covering startups and tech happenings in China and Asia in general. We are looking for stories related to tech and China. Reach her at More by Emma Lee

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