GUANGZHOU -- Meituan Dianping's announcement on Wednesday that it will buy bike-sharing company Mobike, both of which are backed by internet titan Tencent Holdings, is the latest move in the battle between Tencent and Alibaba Group Holding to lure customers to their growing service ecosystems.
Tencent and Alibaba share the same strategy: investing in the most promising of the countless online and mobile services that come out of China. They initially limit themselves to a minority interest, but they monitor the growth of each investee and snap them up when the time is right.
Meituan and Mobike have both enjoyed rapid expansion over the last few years, fueled by capital from Tencent. Meituan, which runs a booking platform with location-based services such as restaurant listings and food delivery, gained traction in 2016 among consumers who appreciated its convenience. It now boasts 240 million annual users.
Mobike is a trailblazer in the bicycle-sharing market that took off around the fall of 2016. It is considered one of China's most valuable startups, with operations across China and overseas, including Japan, Italy and the U.S.
Mobike is in direct competition with Alibaba-backed bike-sharing service Ofo.
"Mobike is a China-grown brand with enormous value," Meituan CEO Wang Xing said in a message to employees on Wednesday. "Through the acquisition, it will blend well with us."
China's bike-sharing market began leveling off in the latter half of 2017. City streets were flooded with bikes as more businesses crowded into the industry. Foundering upstarts failed to refund users' security deposits, and a number of newer players went under. The government moved to tighten its grip on the industry, which -- combined with slowing growth -- has made it tougher for even big names like Mobike to attract capital.
Meituan saw this as an opportunity to add value by integrating its own services with Mobike. For example, friends could use the Meituan app to pick a restaurant to visit, then easily hop over to the Mobike app to rent bikes to get there.
Tencent is believed to have engineered the acquisition to generate such synergies. The deal offers clear benefits for the technology conglomerate, which uses the vast quantities of data generated by its own services -- particularly WeChat Pay -- and those of affiliated companies to develop more offerings.
The company's voracious appetite for new additions to its economic sphere is matched by that of Alibaba, which seeks to do the same with its rival services. The company said Monday it will buy the remaining shares in the operator of Ele.me, China's largest food delivery platform and Tencent-backed Meituan's biggest rival, for $5 billion.
Alibaba already owns 43% of Ele.me, whose name plays on a Chinese phrase for "hungry yet?" The deal would value the startup, officially known as Shanghai Lazhasi Information Technology, at $9.5 billion.
China's food delivery market has grown quickly with the spread of smartphone payments. The market expanded by 23% in 2017 to 204.6 billion yuan ($32.5 billion), Chinese research firm AskCI Consulting said.
Alibaba and Tencent, through Meituan, dominate China's food delivery industry.