ByteDance’s Interest in Acquiring and Why Alibaba Might Be Reluctant to Sell

Speculation about ByteDance potentially acquiring the Chinese food delivery platform resurfaced on Monday. Despite both Alibaba, the current owner of, and ByteDance denying any discussions regarding the deal, which could be worth around US$7 billion to US$8 billion, rumors continue to circulate.

ByteDance, viewing local life services as a key driver for its future growth, would likely be interested in purchasing if the price is right. However, it’s challenging to see why Alibaba would be inclined to sell this subsidiary.

According to Alibaba’s financial report for the second quarter of the 2024 fiscal year (ending September 30), the revenue of the so-called Local Life Services Group increased by 16% year-on-year to 15.564 billion yuan, driven by strong growth in and its Gaode Map’s businesses.

The losses at narrowed further, as the number of orders increased by nearly 20% year-on-year, and the adjusted EBITA lowered to a loss of 2.564 billion yuan.

Why is ByteDance Interested in Acquiring

For ByteDance, the company’s goal for 2023 is ‘focus’ and ‘pragmatism’, according to CEO Liang Rubo.

As such, ByteDance has implemented a contraction strategy by abandoning some of its less successful business ventures such as its virtual reality unit PICO and its gaming assets, while concentrating its efforts and resources on key business sectors.

One of such key business sectors is the local life services, that includes delivery services to either merchants or consumers. But as an important area of focus for the company, ByteDance’s expansion in the segment has not been smooth.

In 2023, ByteDance appeared undecided whether it would focus more on in-store services (with consumers purchasing Groupon-like deals online and then go to the store to receive services) or at-home services (with services and products delivered to consumers’ homes).

In June 2023, the team at Douyin, the Chinese counterpart of TikTok, dispelled rumors about launching a comprehensive food delivery service. Subsequently, it was disclosed that Douyin’s Local Services division would no longer pursue the ambitious target of 100 billion yuan in Gross Merchandise Value (GMV). Instead, the focus shifted towards optimizing business operations and concentrating on higher-priced meal sets.

Following a series of strategic adjustments, the local life services team at Douyin increasingly shifted its emphasis to in-store services. This strategic pivot likely highlights a gap in ByteDance’s portfolio, particularly in logistics and delivery capabilities, an area where its competitors have a more robust and advanced presence. There were even rumors that Douyin would give up its food delivery service.

The Competitive Dynamics in the Life Services Sector

Concurrently, Douyin faces increasing competition in this domain. Starting from the second quarter of 2023, there has been a fierce tug-of-war between Douyin’s local life services and Meituan, particularly in the in-store sector.

This intense rivalry has seen both parties adopt aggressive strategies. Douyin has ramped up its subsidies, while Meituan is placing its bets on live-streaming formats and is seeing positive outcomes.

Douyin’s subsidies and investments have also achieved certain results too. The number of merchants joining and the GMV have both increased significantly, and it is gradually encroaching on Meituan’s in-store services.

However, in the local life services sector, Douyin faces a formidable competitor. Meituan is battle-hardened and has outlasted many competitors. It has been deeply cultivating the local life services sector for many years with highly refined operations.

Douyin may take away some of Meituan’s in-store market share, but it is difficult to impact Meituan’s at-home business, which is the core of Meituan’s operations.

Therefore, an acquisition of something like would be positive for ByteDance as it could strengthen its logistics and delivery capacity. But such capacity is equally critical to Alibaba. Unless Alibaba decides to not focus on local life services, it is difficult to see why Alibaba would want to sell.

China’s Food Delivery Industry: A Turbulent Past

The Chinese food delivery industry has experienced many years of intense competition. It evolved from a three-way standoff between Meituan,, and Baidu Waimai, to the merger of Baidu Waimai and, and then to being acquired by Alibaba.

Currently, in the food delivery market, backed by Alibaba and Meituan with the support of Tencent are the two main competitors. In December 2021, Meituan reached a strategic cooperation for interconnectivity with Kuaishou, a competitor to Douyin.

In August 2023, and Douyin jointly announced a partnership. Both parties stated that they would work together to explore new ways for upgrading local life services in the era of video and live-streaming.

Under the partnership, will use Douyin’s open platform and mini-programs, and together with Douyin, through rich products and technical capabilities, help millions of merchants provide local life services from content, online ordering to instant delivery for 600 million daily active users on Douyin.

As early as in December, 2023, rumors surfaced that ByteDance is currently in talks with Alibaba to acquire Both companies denied such talks at the time.


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