Dianping.com, China’s largest website for location-based food and entertainment services, plans to sell shares in an initial public offering in five years and says it may be worth more than Yelp Inc. (YELP:US) or Groupon Inc. (GRPN:US)
The company prefers a U.S. listing, founder and chief executive officer Zhang Tao said in an interview this week at the company’s Shanghai office. Zhang, 40, estimates Dianping’s value at more than $10 billion.
Dianping, with 75 million monthly active users for services similar to those offered by Yelp and Groupon, is tapping into China’s surging middle class as consumers seek information on restaurants and entertainment. With more than 28 million reviews covering 2,300 cities, the platform has been a potential acquisition target for the nation’s biggest Internet companies Tencent Holdings Ltd. (700), Alibaba Group Holding Ltd. and Baidu Inc. (BIDU:US)
“Dianping is very strong in offline data and also on mobile, these are areas where the three big Internet companies fall short on,” said Cao Lei, a director at China e-Business Research Center in Hangzhou. “It could potentially become very big.”
Dianping, backed by Sequoia Capital Operations LLC and Lightspeed Venture Partners, was founded in 2003 in Shanghai and offers local business-search services that include consumer-generated reviews. Users can also buy coupons and enjoy group discounts. The company has collected data on more than 6 million local businesses across China.
Yelp had a market value of about $4.6 billion (YELP:US) and Groupon was worth $7.6 billion as of Oct. 16.
More than 70 percent of Dianping’s 2.5 billion monthly page views come from mobile users, according to the company’s website.
Management and staff own more than 50 percent of the company’s shares, while other investors such as Sequoia each own about 10 percent, said Zhang.
Dianping will lose money this year due to an investment in its group buying business. Zhang expects the company to turn a profit as soon as next year.
The company generates about half its revenue from fees for promoting businesses on its platform and the other half on income-generated from its group buying services. Revenue more than doubled last year, reaching hundreds of millions of dollars, said Zhang, who declined to provide exact figures.
Dianping plans to increase staff by about 20 percent to 30 percent within the next year from approximately 3,000 people.
Dianping is competing with sites including Alibaba-backed Meituan.com and Baidu’s Nuomi Holdings Inc. to become China’s top group-buying website.
E-commerce spending by Chinese consumers will reach 3.3 trillion yuan ($541 billion) by 2015, acccording to a Bain & Co. report in August. China has more than 591 million Web users.
China’s largest Internet companies are seeking more customers through acquisitions in the world’s biggest Internet market, which last year saw about 1.4 trillion yuan spent on e-commerce and online advertising.
Alibaba invested $586 million in Sina Corp. (SINA:US)’s Weibo unit, while Baidu agreed to pay $1.85 billion for 91 Wireless Websoft Ltd. to add China’s biggest third-party app store. Tencent last month paid $448 million for a stake in China’s No. 3 search engine.
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