The EconomistNovember 23rd 2019 Business 612
A
merica’s technologyunicorns,as
privately held startups worth $1bn or
more are known, seem to lose their
magic as soon as they go public. The
market capitalisation of Uber is down by
almost half since it listed in May. Lyft has
shed a bit more even than its bigger
ride-hailing rival. Neither is remotely
profitable. Slack, a corporate-messaging
service, lost $360m in its first quarter as a
public company, over ten times more
than as a private one a year earlier. Its
share price has slid, too (see chart).
China also has its own tech duds.
Shares in Xiaomi, a maker of smart-
phones and gadgets, are worth half of
their offering price last July. But other
Chinese unicorns have managed to
retain some of their mojo.
Two in particular have been on a tear
in the past six months: Meituan-Dian-
ping, an online-services super-app that
trades in Hong Kong, and Pinduoduo, a
shopping app listed on New York’s Nas-
daq exchange. With a market capitalisa-
tion of $72bn, Meituan is now China’s
third-biggest listed internet firm, behind
Alibaba and Tencent. Pinduoduo’s $36bn
puts it fifth, behind Baidu.
Meituan burned through cash to fuelitsfood-deliveryandbike-rental busi-
nesses. Users were delighted; investors,
less so. But the strategy appears to have
paid off: the company reported its first
net profit, of 876m yuan ($128m), in the
second quarter. Sanford C. Bernstein, a
research firm, reckons that Meituan may
continue to make money, not least be-
cause its meal-toting rivals—including
Alibaba—are losing their appetite to fork
out much more.
Pinduoduo, for its part, has overtaken
jd.com as China’s second-largest e-
commerce site by number of annual
buyers (over 500m). It claims to be a
combination of Costco (cheap) and
Disneyland (thrills). Recruit friends to
join you in ordering a crate of 30 kiwis,
and their price falls.
Pinduoduo boomed early on in
underserved poor cities. But as it moves
into richer ones it will come up against
Alibaba, whose defences will be bol-
stered by the up to $12.9bn it plans to
raise in a secondary listing in Hong Kong
on November 26th. On November 20th
Pinduoduo reported a loss in the third
quarter that was wider than expected. Its
shares fell by 23%. No one said staying
magical would be easy.Groupbuy
Technology listingsSHANGHAI
China’s new tech darlings defy gravity—just aboutStocks rise in the EastSources:DatastreamfromRefinitiv;BloombergRevenues,$bnOperatingprofit,$bnShareprices,June20th2019=100Marketcapitalisation,November20th2019,$bn
Pinduoduo Meituan XiaomiPinduoduo Meituan Xiaomi2018 2019024682018 2019-1.5-1.0-0.500.51.0Jun Jul Aug Sep Oct Nov
20195075100125150175200225
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XiaomiUber
SlackMeituan-
Dianping Uber Pinduoduo Xiaomi Slack72.2 47.8 36.5 26.3 12.3neouslytoplayers’movesand vice versa.
Even with a rock-solid connection (which
most mobile ones are not) commands take
time to travel from the controller to the
data centre and back. This can introduce
annoying delays. And distributing games
the old way, via physical disks or down-
loads, is cheap, whereas providing high-
end, game-capable computing in the cloud
is not, notes Piers Harding-Rolls, an ana-
lyst at ihsMarkit, a research firm. A decade
ago early attempts at game streaming
flopped precisely because of high prices
and iffy technology.
All eyes are now on Google. Like Ama-
zon and Microsoft, it owns a worldwide
network of cloud-computing data centres,
which could help surmount technological
niggles. But unlike Microsoft or Sony, it
lacks deep roots in gaming. And in contrast
to Amazon, whose 100m Prime subscribers
could, Mr Patcher thinks, be offered games
as part of their membership, it must build a
customer base from scratch.
Stadia’s debut could have gone better.
Promised features have been delayed.
Prices remain high: early adopters must
pay $129 for a controller and $10 a month
for a subscription, and then fork out some
more for individual games. (A subscrip-
tion-free option, with less fancy graphics,
will launch in 2020.)
Most worrying, Google has struggled to
convince publishers to sign up. Just 22
games were available at Stadia’s launch.
The test version of Microsoft’s xCloud fea-
tures over 50. Sony’s PlayStation Now has
over 650 games (although some are over a
decade old and the service is available only
on pcs and the PlayStation). For all its heft
elsewhere, in gaming Google continues to
look like a bit player. 7Google, the gameslinger