When ByteDance enters a new market, it typically downplays its goals and conceals its ambitions for as long as possible. Tencent and Alibaba have both experienced this firsthand, and now it's Meituan's turn. In early 2023, media reported that Douyin's local life services annual GMV target was 150 billion yuan, roughly half of Meituan's 2021 in-store and hotel/travel GMV. Douyin had been experimenting with food, comprehensive in-store services, and hotel/travel for a year, so this target was not particularly aggressive—Douyin's local life GMV last year had already approached 90 billion yuan. According to LatePost, this is exactly the impression Douyin wants to give its competitors. The real situation is that Douyin's actual GMV target for local life this year is close to 400 billion yuan. Among this, the in-store and hotel/travel business target is 290 billion yuan, which is close to Meituan's 2021 level for related businesses; the food delivery target is 100 billion yuan. A Douyin Life Services representative said the above figures are inaccurate. To achieve this goal, Douyin recruited a large number of service providers in 2022 to attract offline merchants. Over the course of a year, Douyin first attracted users with subsidies and low prices, then gradually raised prices to achieve a virtuous cycle. According to estimates from multiple analysts, Douyin's in-store food sales in 2022 had already approached half of Meituan's. During this period, Douyin even piloted and completed tests for its self-operated food delivery business in multiple locations. Meituan, however, was slow to respond directly. A Douyin insider was also surprised at the smooth progress, saying, "We barely felt any counterattack from Meituan." After Douyin entered the local life market last year, there was external debate over whether it would create an incremental market or erode Meituan's business. Last year, Meituan's in-store and hotel/travel business was significantly affected by the pandemic, but it still grew by tens of percentage points. In January 2023, both Douyin local life and Meituan's GMV growth exceeded their respective expectations.

But Douyin's ambition is clear: it wants to fully enter the local life market, connecting consumers with merchants and taking on merchants' marketing needs. According to Douyin's public merchant recruitment materials, this platform with 700 million daily active users has benchmarked Meituan and opened up almost all industries except medical aesthetics and medical services. Meituan once used its advantage as a high-frequency consumer app to enter the hotel market, eroding Ctrip's market share. For over a decade, Meituan has expanded without boundaries, starting from a group-buying website and entering one new field after another, disrupting the landscape of food delivery, hotel/travel, and other markets. Now, it has finally met a competitor with comparable ambition and a willingness to invest massive human resources.

Unexpected Window Period In the first half of 2022, Meituan conducted a research round on Douyin's local life business. From the information they obtained, the threat from this new competitor was manageable—the majority of GMV for Douyin local life came from hotel/travel rather than in-store business; in food group-buying, milk tea and pre-made dishes were the main categories on Douyin. This all indicated that Meituan and Douyin were not in direct competition. There were also other details and data to support this. For example, the actual redemption rate of Douyin group-buying vouchers was much lower than Meituan's. From January of that year, Douyin's monthly local life GMV hovered around 3 billion yuan for five months, not performing prominently. The capital market was also confident in Meituan—in June 2022, Meituan's stock price briefly exceeded HK$200, up over 50% from the beginning of the year. At this time, Meituan, known for its outstanding business analysis system, had not yet established a strategic team specifically targeting Douyin. Meituan had recognized its shortcomings in short video and feed content, but progress was slow. It is understood that in 2022, Meituan's marketing budget for Dianping was less than 1 billion yuan. The turning point came mid-year, when Douyin local life's monthly GMV began to grow rapidly from July, jumping to around 7 billion yuan, and then gradually increasing each subsequent month. Domestic investors familiar with the local market were the first to notice the change in temperature. Many conducted their own research, focusing on the merchant side, and the results were somewhat surprising. One investor said that more and more merchants began to allocate their marketing budgets away from Meituan to platforms like Douyin and Kuaishou, forming a trend of multi-platform operations. "This sign is not right." Although Meituan had previously realized the threat from Douyin, this competitor was far more complex than imagined. According to LatePost, in Douyin local life, the food business has always been its largest source of GMV. In early February 2023, the GMV contributed by the food business in Douyin local life was already higher than the sum of hotel/travel and comprehensive in-store businesses. On the merchant side, Douyin has achieved almost full category coverage benchmarking Meituan. More and more leading brands like KFC and Pizza Hut have started to post content, livestream, and launch marketing products on Douyin. According to Douyin local life team's own analysis, these leading brands alone brought nearly 35% growth to Douyin's food GMV. Although the Douyin local life team internally requires "quietly entering the village, no gunfire," and business information is highly confidential within ByteDance, their real strategy is not hidden. First, low prices: they launch group-buying products that are cheaper and more differentiated than Meituan's. Second, on the merchant supply side, they focus on Meituan's strategic gaps—suburbs and towns of big cities, as well as third- and fourth-tier cities—to attract more ordinary merchants and achieve a "surprise encirclement." These are all visible actions. "Every time we take a new step, we think Meituan will immediately counterattack and follow up, but in the end, nothing happens," said a Douyin insider. An industry analyst said that when Douyin entered local life with a low-price strategy in early 2022, he thought Meituan could use a price war to block it. But at that time, Meituan's business focus was on community group buying. In October 2022, Meituan converted its original agency model to a direct sales model in some third- and fourth-tier cities to better cover local merchants. It is understood that at a meeting in early 2023, a Meituan executive compared Douyin to "nomads," flexible and mobile.

From Low-Price Entry to Moving Beyond Low Prices "Low price" has always been the most efficient means for most companies when starting local life business. For example, Lianlian Zhoubianyou, which managed to break through even after the group-buying industry landscape stabilized, its core business is selling low-price group-buying vouchers. In 2021, Douyin also started its expansion in the local life industry with a low-price strategy. It attracted many merchants by bringing in a large number of service providers and its self-built direct sales system, and then launched a batch of low-price group-buying vouchers to attract a large number of consumers. Two Douyin local life service provider insiders said that in the early days, Douyin officials emphasized to them that the packages placed on Douyin must be the "lowest discount price on the entire network." The low-price strategy not only rapidly increased Douyin local life sales but also cultivated a group of users who would actively search for restaurants and milk tea shops on the platform and place group-buying orders. LatePost learned that from the end of 2021 to March 2022, the proportion of local life sales converted from user searches on Douyin increased from 20% to over 30%. A Douyin Life Services representative said the figure is inaccurate. This was an unexpected bonus for Douyin. Previously, most users used Douyin like watching TV—passively receiving content and information pushed by the platform. The increase in searches indicates that many people are now using Douyin like Meituan or Dianping when looking for restaurants or booking hotels. After the brief surprise, the Douyin team found that users search on Douyin more for price comparison—unless the group-buying vouchers on Douyin are cheaper, most people still go back to Meituan and Dianping to purchase after searching. Once Douyin decides to stop emphasizing low prices, it will inevitably become a free traffic diversion channel for Meituan. The low-price strategy also means that merchants may not make much money, and over time, they will lose the willingness to operate stably on Douyin in the long term. And if merchants want to profit while subsidizing users, they must compress input costs to the limit, which will directly affect the service experience for consumers after they arrive at the store. For example, if a hairdresser or masseur receives a customer with a deep discount, their compensation for that service will also drop sharply. These could all affect service quality. The Douyin local life team set up a special group for this purpose, which would conduct irregular phone calls and random unannounced visits to partner restaurants, hair salons, beauty salons, etc., to spot-check merchant service quality, but the difficulty and cost of governance far exceeded expectations. After mid-2022, Douyin no longer overemphasized the low-price strategy but adjusted its platform algorithm recommendation mechanism to encourage merchants to create better video content to improve conversion rates. It is understood that Douyin cleaned out some service providers that only demanded big discounts from merchants but did not help them with content; at the same time, Douyin hired more in-house sales to connect with merchants and teach them how to make short videos and livestream; on the product supply side, Douyin focused on the differentiation and richness of products on the platform.

From Single-Point Competition to Comprehensive Competition Since the ceiling for in-store food group-buying is limited—Douyin's in-store food sales in 2022 had already approached half of Meituan's—its more important growth points in the future will be industries beyond food, including comprehensive in-store services, hotel/travel, and food delivery. This also means that in the local life field, Douyin and Meituan will move from partial competition centered on in-store food to comprehensive competition. 2023 is an excellent time to accelerate: the direct impacts of the pandemic will disappear in a short time, and domestic offline consumption is expected to recover. To seize this opportunity to increase market share, Douyin, benchmarking Meituan, has opened up almost all comprehensive in-store and hotel/travel industries (except some medical aesthetics categories), including relatively high-frequency services like hairdressing, nail salons, bathing and massage, to low-frequency services like wedding planning and moving services, from children's playgrounds in indoor shopping malls to long-distance cross-regional travel. Through more than a year of piloting, Douyin has also completed the construction of partial fulfillment capabilities for its food delivery business, including launching an order voice reminder function on the merchant side; a meal preparation and handover system between merchants and riders, and between the front and back of the house; Douyin also partnered with third-party partners such as SF City, Dada, and Ele.me to provide delivery services for merchants. By October 2022, Douyin internally judged that with third-party delivery, the food delivery operation was basically smooth. LatePost learned that Douyin's food delivery plan will first start with categories like cakes and desserts, and afternoon tea during non-regular meal times. On the one hand, these categories are more aligned with user preferences often influenced by short videos and livestreams; on the other hand, users' time requirements for these categories are not as high as for lunch and dinner. However, currently, the products offering food delivery services on Douyin are more oriented towards family packages for multiple people, rather than regular meals suitable for one person. A source revealed that the current average order value for Douyin food delivery exceeds 150 yuan. The consideration behind this is that Douyin currently uses third-party delivery, and the fulfillment cost is much higher than Meituan's self-built delivery system—at least 10 yuan per kilometer on average—so only orders with higher average order values can cover the corresponding costs. It is understood that Douyin is still in the final decision-making process on whether to truly build its own delivery capacity. Building a self-operated delivery system would be a massive and long-term investment, which is also a considerable challenge for ByteDance, which is currently in a cost-cutting and efficiency-improving mode. Multiple analysts speculate that only when the order density in each location is increased to a certain level can Douyin scale up its own delivery capacity, and only then can Douyin's food delivery cost-income model work. It is understood that cakes and desserts, afternoon tea, and late-night snacks are also one of the breakthrough points Meituan is looking for under the limited growth space of food delivery orders, that is, trying to increase order volume during non-lunch and non-dinner periods. Multiple Meituan insiders revealed that Meituan's in-store and food delivery businesses will not pursue profit growth this year, and will use more budget to compete with Ele.me and Douyin.

Douyin's Ambition: The Universal Entry Point In 2022, Douyin's heavy investment in local life business only contributed 4.5 billion yuan in advertising revenue to ByteDance, accounting for only 1.4% of the company's advertising revenue in China. A Douyin Life Services representative said the figure is inaccurate. To lay out life services, Douyin has assembled a team of about 4,000 to 5,000 people. As 2023 is the first year of offline consumption recovery after the pandemic adjustment, the Douyin local life team has set aggressive goals to seize market share, planning to complete the 2024 goals ahead of schedule in 2023, and even entering the deeply entrenched food delivery field. Meituan insiders interviewed by LatePost are mostly puzzled as to why Douyin is investing so heavily in local life business. According to their previous judgment, the revenue growth space that local life can bring to Douyin is limited, and Douyin would not invest so much energy in this "bending down to pick up coins" hard business. Multiple Douyin insiders analyzed that Douyin's move into local life is not only because of the incremental revenue it can bring, but more importantly, it is about what kind of Douyin Douyin wants to become. As early as the end of 2019, when Douyin was still in fierce competition with Kuaishou for user growth, the internal management team was reflecting that Douyin should not just be a "fun, trendy, entertainment product for killing time" in the public's impression; the management team believed it should return to the product's original positioning—seeing and connecting. Connection is not only about information and people, but also services. Zhang Yiming proposed that they should "go deep into food, shopping, and travel." In 2022, Zhang Nan, CEO of Douyin Group, again talked about her "ultimate imagination" for Douyin at an internal meeting—becoming the universal entry point on users' mobile devices, where users can not only open Douyin to browse content when bored, but also use it for shopping, choosing restaurants, planning trips, buying plane tickets, and booking hotels. "Ideally, Douyin's daily active users would be as high as its monthly active users, becoming an indispensable product in users' lives," Zhang Nan further described her understanding of this grand vision. Currently, Douyin's daily active users exceed 750 million; monthly active users approach 1.1 billion. E-commerce and local life are key steps for Douyin to realize its "ultimate imagination." Compared to entertainment, people's needs for eating, drinking, having fun, and shopping are more tangible and irreplaceable. According to Douyin's internal calculations, the e-commerce business can contribute more revenue space, so Douyin e-commerce was launched first; a year later, the life services team, which had been incubated in ByteDance's commercialization department for half a year, was merged into the Douyin business unit in 2021 and began rapid expansion. Compared to e-commerce, people's needs in the life services field are relatively higher frequency. If the mindset of "go to Douyin for eating, drinking, and having fun" is planted in users' minds, then users will also open Douyin when they are not bored. And food delivery is the highest frequency need among all life service categories, so if Douyin wants to achieve its "ultimate imagination," it will inevitably launch a food delivery business. LatePost learned that the priority of Douyin's various goals has also been adjusted because of this overall goal, such as indicators like "the frequency of users opening Douyin for non-entertainment needs" are increasingly valued, while "user usage time," which was once as important as daily active users, has been deprioritized.

On the road to becoming a "universal entry point," Douyin chooses businesses that have large expansion space, can bring certain revenue increments, and can encourage users to open Douyin frequently. Once selected, Douyin will invest unswervingly. This also means that its determination and investment intensity will be far greater than the outside world imagines.