2003: Starting with Foreign Trade

Chapter 924 From BAT to OTA!

P.S.: I posted a summary, please vote with a monthly pass!
At the end of 2009, the Baidu Building, which officially opened in the HD District of Beijing, was the most desirable place for young people who had come to Beijing to pursue their dreams.

The following year, Google's withdrawal gave Baidu a golden opportunity, and its market share in the search market once reached more than 70%, making Baidu the undisputed leader of the domestic Internet industry.

BAT, B is undoubtedly number one.

Ten years later, Ali's revenue has increased from 20 billion yuan to over 350 billion yuan, while Tencent's revenue has increased from 285 billion yuan to 300 billion yuan. During the same period, Baidu's revenue barely increased from 145 billion yuan to the 100 billion yuan mark, lagging far behind Ali and Tencent.

Ten years have passed, and everything has changed.

As early as 2016, there were already discussions about replacing BAT (Baidu, Alibaba, Tencent) with OTA (Online Travel Agency), and by 2018, this call had grown louder and louder.

O stands for Ocean Engine, and also for OOTL (Orange Technology).

After the Tieba incident, Baidu's reputation plummeted. Although it did a lot of public relations crisis management afterward, its overall reputation was basically beyond repair. In fact, all of this was already destined as early as June 30, 2009.

Yu Jun, the "father of Baidu Tieba" who was known as "Zhang in the South and Yu in the North" alongside Zhang Xiaolong, has left Baidu. This legendary manager, who single-handedly streamlined the exploration and created Tieba, left behind a lot of advice before leaving.

The most important rule is "Don't give users what they don't want."

His 12 suggestions to Baidu were all from the user's perspective, but unfortunately Baidu did not adopt any of them. Instead, it outsourced each of its online forums one by one in a short-sighted way, until an irreparable public opinion crisis occurred.

By the way, Yu Jun now works at Orange. Lu Qi quickly recruited Yu Jun after taking office. This professional manager, who is user-centric, is very suitable for Tan Jincheng's user-oriented business approach.

When a company's reputation is beyond repair, even if its products or technology are excellent, it will be extremely difficult to promote them. Moreover, Baidu's decline actually began in 2012 with the advent of the mobile internet era.

The Tieba incident was merely the straw that broke the camel's back.

In the battle for Lu Qi's leadership, Baidu lost to Orange Group, and thus did not experience the kind of soaring market value seen in the previous life. Instead, under Lu Qi's leadership, Orange Group's market value rose day by day, forming a stark contrast with Baidu.

With comparable market capitalization, but with Orange surpassing Baidu in revenue after consolidation, Baidu seems to receive little recognition beyond its status as one of the world's top ten AI companies.

Both Orange Group and Baidu are committed to open AI service platforms and focus on R&D in the automotive sector. Although Orange Group started later than Baidu and is not as technologically advanced, the capital market is more optimistic about Orange Group.

When Baidu launched its self-driving car and Li Yanhong drove it on a highway in Beijing, consumers' first reaction was, "Will this thing require a membership to start? Will it limit your speed?"

Despite having advanced technology and being the undisputed leader in artificial intelligence in China, the consumer reaction is like this, making Orange, the follower, extremely happy.

This isn't some kind of "black PR" stunt by Orange; it's purely a spontaneous joke from netizens, demonstrating how deeply ingrained Baidu's labels and impressions are, making them almost impossible to change.

Currently, in China, BAT (Baidu, Alibaba, Tencent), Huawei, iFlytek, and Orange are among the top ten companies in AI and artificial intelligence research. Among them, Orange and Baidu are the two companies that focus on the automotive field.

In terms of technology, Orange is somewhat behind, but in terms of system, Orange's R&D is more advantageous than Baidu's; this is because, from software to hardware, Orange and Meizu's collaboration can form a complete closed loop.

As for being a little behind in technology, Orange Group doesn't feel ashamed about it at present. The development of artificial intelligence is not something that can be accomplished overnight, and we can catch up slowly in the future.

Besides automobiles and mobile phones, Orange's technology can also be applied to two-wheeled electric vehicles and even tested on elderly people's cars. This complete industrial chain system is something that other artificial intelligence companies do not have.

"Haha, I'm not one of you internet people. Don't try to trap me. I'm a screwdriver guy."

Little Ma knew perfectly well whether he was drunk or not; if he wasn't drunk himself, how could these people possibly be?

The call for BAT (Baidu, Alibaba, Tencent) to OTA (Online Travel Agency) has been growing louder this year, mainly because Tan Jincheng's various layouts through ByteDance's advertising platform have gradually become apparent, and this year has seen an explosive growth.

Xiaomi Group, the first company with a deep connection to ByteDance or Tan Jincheng, went public on July 9.

However, Xiaomi's performance after its IPO was not that good.

As of now, Xiaomi Group's stock price, which peaked at HK$22.2, has fallen to HK$18.3. The decline over the past six consecutive trading days has brought Xiaomi's stock price closer and closer to its IPO price of HK$17.

They are facing a break below serve again.

As a highly anticipated IPO in the global technology industry, Xiaomi's IPO has generated a great deal of discussion due to the controversy surrounding its innovative dual-class share structure, which is the first of its kind on the Hong Kong Stock Exchange, as well as the controversy surrounding Lei Jun and Xiaomi's senior management's demand for an excessively high valuation.

Even before its IPO, there were buzzwords like "the first stock for Mi Fans," and the reason for this kind of promotion is largely due to the helplessness Xiaomi faced during its financing process.

In fact, Xiaomi's IPO process was very difficult. Lei Jun valued Xiaomi at $1000 billion, but investment institutions did not agree with this valuation, and even did not agree with Xiaomi's positioning.

Although Lei Jun has always claimed that Xiaomi is an internet company, the capital market has always regarded Xiaomi as a hardware company, or even a hardware company with very low gross profit.

A month before its official listing, Xiaomi originally planned to issue CDRs to Chinese investors and had already published the CDR prospectus on the China Securities Regulatory Commission website. Based on the market value of over US$800 billion given by analysts from various institutions at the time, the CDR financing amount could exceed US$56 billion.

However, Xiaomi, which was poised to become the first company to issue CDRs, faced the most stringent inquiry from the China Securities Regulatory Commission (CSRC), ultimately leading to the cancellation of its CDR issuance and the failure of this financing round.

The CSRC's 84 questions were incredibly pointed, even making the usually confident Lei Jun back down.

The suspension of CDR issuance has led to significant doubts about Xiaomi's valuation. Faced with a barrage of questions from analysts and investors, Lei Jun defiantly declared that Xiaomi's valuation model is a combination of Apple and Tencent.

Everyone took this as a joke.

Ultimately, Xiaomi's IPO was only listed on the Hong Kong Stock Exchange, priced at HK$17, raising approximately HK$240 billion. On the first day of listing, it closed at HK$16.8, and its market value, converted to US dollars, was approximately US$484.7 billion.

The performance on the day of the IPO put Lei Jun and Lin Bing under tremendous pressure, and they even hid in the traffic tunnels for a time, afraid to face the media.

A market capitalization of less than $485 billion is clearly not enough to satisfy investors, especially financial investors. It's worth noting that Xiaomi's valuation reached $500 billion during its last round of financing in 2014.

Four years later, their performance after officially entering the capital market has been so poor that they have made almost no profit. As a result, Xiaomi has been under pressure to reduce its holdings since its listing.

Whenever the stock price rises even slightly, a group of shareholders rush to cash out.

Xiaomi's stock price has been under pressure under these circumstances, and some cornerstone investors have even started to reduce their holdings.

On the day of its listing, reporters from Zhidongxi conducted an in-depth analysis of Xiaomi from various dimensions, including revenue, profit, technology reserves, concerns about the ecosystem, stock price, and valuation, revealing six major hidden concerns beneath Xiaomi's layers of protection.

One of these is about the changes in the relationship between ByteDance, a cornerstone investor that currently holds a 17.2% stake in Xiaomi.

Tan Jincheng, whose main business is ByteDance's advertising platform, has gained increasing attention this year after a large number of internet companies went public and Douyin (TikTok) became a hit, forming a formal competition with Kuaishou (another short video platform). From the end of the PC era to the mobile internet era and now to the short video era, this legendary post-80s generation, who has always claimed to be a real person, has caught up with almost every major era.

Compared to Baidu's slow pace, this person has done exceptionally well in every transformation phase. He now boasts tens of millions of followers on Douyin and millions more on Weibo.

The estimated number of his fans across the entire internet is probably over 2000 million. Based on the comments and likes under each of his videos or posts, this 2000 million fan count is highly likely to be the actual number of his fans.

Unlike celebrities who frantically buy followers, like that female host on Hunan TV in April this year who claimed to be the first person on the entire internet to surpass 100 million Weibo followers, anyone with a discerning eye can see that the number of followers is ridiculously inflated.

From the venture capital rounds, Tan Jincheng has been Xiaomi's most steadfast investor. Apart from a few rounds where he diluted some of his shares for Xiaomi's development, Tan Jincheng and his ByteDance have always co-invested whenever Xiaomi needed it.

Even with the IPO flopping, Tan Jincheng still spent as much as $1.5 million to subscribe for Xiaomi shares, and he has always served as a director of Xiaomi.

Under immense pressure from Lei Jun and Lin Bing, Tan Jincheng, who was present at the listing ceremony, stepped forward to demonstrate his and his ByteDance's strong belief in Xiaomi's future. He also made an on-the-spot commitment to extend the lock-up period of his shares by another 12 months.

This young man, who has made huge profits, has really made a lot of efforts to stabilize Xiaomi's stock price.

However, it was all for naught. Unlike his Orange Group, which was favored by Hong Kong stock investors, investors in Hong Kong seemed to have little faith in Xiaomi.

Investors are pessimistic, and shareholders of all sizes are eager to reduce their holdings. Everyone knows that it's only a matter of time before Xiaomi's stock price falls below its IPO price again, or it may not even take long. Given the current trend and geopolitical reasons, it would be a miracle if Xiaomi's stock price could hold above its IPO price in the month of its listing.

Lei Jun has been in a real bind lately.

According to Zhidongxi's analysis, Xiaomi's system, together with Orange Group and Weilai, forms a very complete closed loop, from small home appliances to mobile phones, to e-commerce and automobiles.

Originally, these three companies had always been in a strategic partnership. Xiaomi had a weakness in mobile phone hardware that Weilai and Orange Group did not have, while Weilai could bring more application scenarios to Xiaomi's system.

The two sides have formed an industrial complementarity through capital, connections, and business, which can be described as a win-win-win situation and has always been one of the reasons why everyone is optimistic about Xiaomi.

To a certain extent, the reason why Xiaomi was able to claim a valuation of $1000 billion was largely due to the presence of Tan Jincheng. Although he delegated all his voting rights to Lei Jun, Tan Jincheng's position as a director was merely symbolic and did not interfere with Xiaomi's operations.

However, it must be said that the capital market craves this kind of imagination. All of this changed after Tan Jincheng's blitzkrieg acquisition of Meizu. Although he still maintains close cooperation with Xiaomi and has publicly supported Xiaomi on various occasions, the situation remains largely unchanged.

But everyone knew that Xiaomi's standing in Tan Jincheng's eyes had declined significantly. The Weilai brand mobile phone, which was originally commissioned to be designed by Xiaomi, was directly canceled, and the team was merged into Meizu.

Tan Jincheng himself has changed the phone he uses in public from Xiaomi to a new Meizu model from that year.

Meizu is indeed not as big as Xiaomi, but this size is more than enough for Meizu. Besides, Meizu has more offline stores than Xiaomi, which has always focused on e-commerce.

These two points alone fully meet Weilai's needs in the mobile phone industry chain. It has to be said that Boss Tan's blitzkrieg acquisition of Meizu really seized a very good time and made up for the shortcomings of Weilai's system in the mobile phone field.

It is an undeniable fact that Xiaomi has lost a huge supply chain partner. The capital market was not optimistic about their business model to begin with, and it is even less optimistic after losing a source of imagination, unless they can manufacture cars themselves.

"It's no use denying it. It's only a matter of time before Orange Group's market value surpasses Baidu's. However, the term OTA just sounds nicer. It will be quite difficult for you to surpass both of us."

Tan Jincheng rolled his eyes at him and said, "You're overthinking it. I never imagined that Orange's market value could surpass that of your two companies. It's possible that Wei Lai has such ambitions."

"I don't believe it. Back then you said Orange wanted to be small and beautiful, with a 300 billion dollar goal?"

Indeed, Tan Jincheng now controls two giant listed companies, one with a market value of 300 billion US dollars and the other with a market value of 400 billion US dollars. The combination of the Internet and the real economy has become a model for all enterprises in China.

During a time when online lending was universally condemned, RM Daily even publicly used Orange Group as a positive example, showing that internet companies don't need to engage in lending and can thrive by perfectly integrating with the real economy. This was a slap in the face to all internet bosses.

Tencent attaches great importance to Pinduoduo and provides it with a lot of traffic support. The combination of JD.com, Pinduoduo, and Orange Products is Pony Ma's e-commerce dream. These three companies have cross-shareholdings with Tencent.

Compared to Jingdong and Pinduoduo, the only thing Xiao Ma Ge wasn't sure about was Tan Jincheng's ambition, and he could take advantage of the fact that he had a few drinks to test him out.

Tan Jincheng shook his head: "The bubble is too big. This market value is inflated. I really don't think Orange deserves this market value."

Orange Group's revenue currently comes from four main sources: Orange Products, games, AutoNavi, and Dingding. The combined revenue from the latter two has a relatively small impact on the overall revenue of the group, with the main revenue coming from the first two.

Based on the financial reports of Q1 and Q2, analysts estimate that Orange Group's revenue in 2018 will be around 1300 billion yuan, higher than Baidu's prediction of 1000 billion yuan. However, Baidu's current market value is close to that of Xiaomi.

Baidu is also in a bad situation. With the listing of emerging economies one after another, the internet companies with the highest market value in China have been surpassed one by one by newcomers. In July, it was Xiaomi.

Before long, Pinduoduo and Meituan, which is about to go public, will surpass it one by one.

"Besides, you don't need to test me anymore. My focus will always be on Weilai. Internet companies are a supplement, but I prefer cars. My label will always be a real person."

"Our cooperation with Tencent will continue as always; of course, if you are not comfortable with this, Orange can seek funding directly from Tencent."

The so-called targeted financing is a type of financing. Simply put, Tan Jincheng lends his current shares to Orange Group, and Orange Group then transfers these shares to the targeted share issuance recipients.

Orange Group then returned these shares to Tan Jincheng by issuing new shares, thereby achieving its financing goal.

The advantage of doing this is that the process is short and the company can quickly obtain the funds it needs. Orange Group is not short of money at present, but Tan Jincheng does not mind making a financing at the current high level to increase the company's cash reserves.

We still have several tough years ahead, and besides, the investment in artificial intelligence is still quite large. Right now, this thing generates almost no revenue; it's all investment.

He understood Ma's probing all too well. It was simply that the demand for OTAs was growing louder and louder, and Tan Jincheng's industry was so unique that even someone as arrogant as Ma wouldn't dare to put on airs in front of him.

If a conflict were to arise between the two parties in the course of business, he would indeed have a headache given the importance this kid placed on him and his work style.

Take Pinduoduo as an example. Tencent is the second largest shareholder and has considerable influence, but Tan Jincheng and his Orange Group are also the third largest shareholder of Pinduoduo and also have a certain degree of influence.

Moreover, Sun Tongyu, a key investor behind Pinduoduo, is on Tan Jincheng's side, and he is someone who can influence Huang Zheng's decisions.

"Didn't you say that the current valuations are in a bubble? Why are you asking me for funding? Aren't you just trying to scam me?"

"You have so much money, what's wrong with letting me spend some?"

"Damn, how can you talk like that? What do you mean, 'I have more money, so I can give you some to spend'? Do you think I have more money than you?"

Although since June, the shares of Weilai, Shanchi, and Orange Group have all declined to varying degrees due to global geopolitical and political influences, the wealth of the bigwigs on the national rich list has shrunk significantly.

However, this does not include Tan Jincheng. From CATL in mid-June to Xiaomi and Pinduoduo this month, the listing of these three companies alone has brought Tan Jincheng a net worth of nearly 120 billion US dollars.

This is real market capitalization; you can sell and cash out when it expires, which is completely different from the valuation.

Of the three companies that went public, two performed perfectly, and although the other one wasn't great, he invested in it so early that he practically sold it without a second thought. This month, there are really few people who can match his wealth.

Stop pretending, just tell me if you want it or not.

Little Ma gave an awkward smile: "Yes, of course I want to. I'll send someone to talk to Juliang and Orange when I get back."

"That's right. We've been friends for so many years, why pretend? Although you often say I'm a bit of a jerk, I've always kept my word when it comes to important decisions, okay?"

He had already figured out what the old man was thinking when they were drinking. He simply wanted to get more shares in Orange Group, to increase his say in the company, and also to make a financial investment.

Rather than calling Tencent an internet company, it's more accurate to call it an investment company. Even if its main business collapses entirely from now on, selling shares in its investment companies would be enough to sustain Tencent for a long time.

It's like Nokia phones that couldn't keep up with demanding user experiences.

Tan Jincheng holds a high percentage of shares in Orange Group, but he never expected that this high percentage would continue indefinitely. The reason he initially held such a high percentage was simply because he felt confident in the face of the current situation.

To reiterate, artificial intelligence is a long-term investment project. From 2016 to 2018, Baidu invested as much as 300 billion yuan in artificial intelligence, while Ali invested approximately 200 billion yuan.

Orange Group invested billions of yuan in previous years, and in order to catch up with the leading players, it has been investing tens of billions of yuan every year.

This money definitely didn't come from him. Orange Group itself and the financing parties are the main contributors. By continuously diluting their shareholding, they can obtain more investment.

For someone like Pony Ma, money is just a number. He earns so much in a year, he might as well give some to Orange Group and contribute to technology.

"That's true; you're quite reliable when it comes to important matters; alright, it's settled then. Remember to tell your subordinates, so they don't not know when I send someone to coordinate."

Pony Ma (Ma Huateng) really doesn't care about bubbles or not; as long as he gets what he wants, that's enough. Some of Tencent's investments are financial, and some are strategic. The investment in Orange is a strategic one.

He had just asked, and Tan Jincheng was going to Zhangjiagang next, where their joint venture factory with BMW was about to be completed. The next step would be for the machines to be installed and debugged for production, with the goal of mass-producing the MINI Cooper in January 2019.

This is a big deal. Just as he said, he has no interest in raising funds for Orange; this is an internal company matter.

"Don't worry, I'm not drunk. I'm leaving now."

"Leaving already? Not staying in Shanghai for one night?"

"No, it's the same to sleep over there, it's not far anyway."

As Tan Jincheng got into the car, Little Ma, who was watching him leave, narrowed his eyes, stood for about half a minute, and then waved to a corner with a smile on his lips.

In Pony Ma's view, through the opportunity of Pinduoduo's listing, he and Tan Jincheng reached an agreement that both parties wanted, in which he invested money in Orange Group and obtained a certain number of shares.

Tan Jincheng also used this method of diluting shares to bring in a considerable amount of cash reserves for Orange Group, laying the foundation for better development of Orange Group.

Both parties take what they need.

However, when did the cooperative relationship between the two change from Orange belonging to the Tencent system to this equal relationship?

Although Orange Products still relies heavily on Tencent's traffic portal, it has already formed its own unique small system.

With Orange Products Club, Dingding, and Gaode Maps, plus a mobile phone hardware manufacturer with annual shipments of 1500 million to 2000 million units, not even considering the prospects of artificial intelligence, isn't this just a miniature version of Xiaomi Group?

"A bubble? I don't think so."

On the way back to the hotel, Little Ma whispered.

(End of this chapter)