3690 Friday’s stream didn’t have time to talk about Meituan in detail; I only mentioned the market was expecting a ¥14.8B loss. The actual result was even worse.Sometimes the Chinese word “involution” (內卷) is just too perfect, because this isn’t normal competition; this is the cruelest “involution hell” in internet history:
If you don’t subsidize, you die instantly.
If you stop subsidizing first, you die slowly.
Meituan has truly been pushed into a corner this time: in just one year, the cash-printing machine of food delivery turned into a money-burning black hole.
How brutal are the numbers? You’ll want to cry just looking at them:
2023 Q3: Core local commerce (food delivery + in-store) → profit ¥14.6B, operating margin +21%
2024 Q3: Same segment → loss ¥14.1B, operating margin –20.9%
→ A 42 percentage-point swing in one year. Textbook profit-to-loss carnage.
Delivery service revenue down 17.1% YoY (from ¥27.7B to ¥23B), yet order volume is still growing
Translation: They’re earning less per order and still have to pay users to place orders.
Rider costs as % of revenue exploded from 60.7% to 73.6%
If you don’t subsidize riders, they jump ship to Douyin or JD; no riders = system collapse.
Marketing expenses completely out of control: ¥34.3B, +90.9% YoY, now 35.9% of revenue
That’s ¥370M burned every single day on ads and subsidies; roughly the valuation of a small unicorn every three days.
Even worse than last quarter: Q2 core business barely made ¥3.7B profit; Q3 detonated into a ¥14.1B loss, with marketing spend up another 52% quarter-on-quarter.
Honestly, why does this level of involution only happen in Chinese internet?
Because the regulatory environment allows “super conglomerates” to invade each other’s turf without limits:
The US has the antitrust hammer. Super-apps basically can’t exist. Any attempt to bundle payment + social + delivery + ride-hailing + shopping in one app gets labeled “illegal tying” or “refusal to deal.” That’s where all the FAANG antitrust headlines and billion-dollar fines come from.
In China, Alibaba, JD, Douyin, Pinduoduo; whoever gets annoyed can just storm into your core business tomorrow.
The result? There’s always someone willing to burn cash to steal territory because:
Traffic is life. Steal users first, and the incumbent bleeds out slowly.
Once you secure market share, use profitable arms (payments, finance, advertising, cloud) to subsidize the loss-making ones.
Capital markets buy it: as long as you stay in the top tier, losing money is fine; someone will still fund you.
So consumers are living the dream: ¥8 for a meal that costs ¥30 to make, cheaper than walking downstairs. Short-term paradise, long-term the entire industry’s profit margin gets involuted into the floor.
Meituan’s current situation: surrounded on three sides, fighting for survival
Alibaba: Gaode Maps + Ele.me + Taobao Deals, three-pronged attack
JD: JD Home + Dada, leveraging logistics muscle
Douyin/Kuaishou: interest-based e-commerce + local deals, unbeatable traffic + young users
Meituan has no choice but to keep subsidizing like crazy. Lose even 1% market share and you may never recover. Wang Xing rarely speaks so heavily on earnings calls: “Competition remains overheated; core business and new initiatives will continue losing money in the short term.” So Q4… you know what’s coming.
When will this involution war end?
Only one of these scenarios:
Someone suddenly runs out of cash and collapses first (unlikely; everyone is loaded)
Regulators step in and restrict subsidies (there are already signs in lithium batteries and solar)
Private cease-fire agreements (tried many times before; someone always cheats)
Most likely outcome: keep bleeding until everyone hurts so bad they tacitly slow down at the same time.
Until then, Meituan has to keep running in this meat grinder.
3690