Internet Business Thinking

Chapter 8 Giants lead the business model (5)
If we say that the establishment of Dongfang Iron and Steel E-Commerce Co., Ltd. in 2000 was Baosteel’s first attempt in the field of e-commerce when the Internet was on the rise, now Baosteel has begun to dig deep into this field. On May 2013, 5, Baosteel Group Shanghai Iron and Steel Trading Center was officially listed. This is an e-commerce platform for steel spot trading jointly established by Baosteel Group and a government investment and financing platform company in Baoshan District, Shanghai, with a registered capital of 31 million yuan.In Baosteel's latest blueprint of "one body with two wings" for future development, the e-commerce of this platform is one of the wings.

Shanghai Iron and Steel Trading Center is the first domestic trading platform set up by steel mills. The types of transactions undertaken by the platform include two categories: transaction and service.The former is mainly based on spot transactions of steel; the core of the latter is financial services based on supply chains.The former, as the front end of Baosteel’s Internet financial system, relies on e-commerce to obtain and sort out transaction data, and realizes connection with the Group’s existing financial service platform; the latter relies on a third-party payment platform to provide financial payment services, and serves as the back end of Baosteel’s Internet financial system. The two jointly realize Baosteel's layout in the field of Internet finance.

Shanghai Iron and Steel Trading Center provides transaction data for Baosteel's deployment of Internet finance. The center includes three transaction service platforms: first, "Baoshida". "Baoshida" was established in 2003 and is now an electronic trading platform for selling Baosteel Group's own products. Orders are issued in accordance with the "T+0" trading rules, and three payment options are available: deposit payment, full payment and bank financing. Way.The second is "Fanta City", an electronic trading platform that mainly sells products of other brands except Baosteel. According to the needs of customers, they can order brand products from member steel mills at a relatively lower price.The third is "Laikequan", which is an e-commerce platform for the steel industry under the matching transaction model, and its customers are mainly small and medium-sized users.

According to Baosteel's expectations, in the future, after opening up information, e-commerce and the accumulation of upstream and downstream resources, it can derive all-round services such as warehousing and logistics, forming an important source of profit.Baosteel's move is intended to create "Alibaba in the industrial field" by taking advantage of its industry advantages.

In fact, bulk commodities rely more on traditional channels, and the types of products are not as diverse as other commodities such as home appliances, which is convenient for online and offline segmentation.Therefore, how to deal with the relationship with distributors and how to distribute benefits will be the key point of future profitability of Baosteel e-commerce.

The giant steel hands hold up the dual platforms of Internet finance
In addition to providing transactions, the steel e-commerce platform will also provide financial services such as financing and wealth management for customers and suppliers.These services are realized through two third-party payment brands "Dongfangfutong" and "Baofutong" managed and operated by Baosteel Finance Company, and two fund business brands "Baorongtong" and "Baolitong".Financing and wealth management are also two major breakthroughs for Baosteel to deploy Internet finance.

"Dongfang Futong" is a third-party payment channel that provides large-amount payment services for Baosteel customers.Through the "instant payment" service, provide high-credit customers who have passed strict qualification review with large amounts of funds that match business flow and logistics, and support instant B2B online transactions, thereby improving transaction efficiency and capital circulation speed.

"Baofutong" is an online payment platform for Baosteel and upstream and downstream customers of Baosteel's industrial chain.Since Baosteel Finance Company has business relations with many banks, Baosteel Finance Company has a "universal joint" settlement channel for many banks.Based on the advantages of multiple interfaces between Baosteel Finance Company and various banks, Baosteel itself and its upstream and downstream customers can conveniently operate multiple bank accounts.Only relying on the "Baofutong" interface, it can connect multiple bank accounts on the one hand and multiple settlement methods on the other hand.

"Bao Rong Tong" aims to provide online supply chain financing services for upstream and downstream customers of Baosteel's industrial chain.Upstream and downstream customers of Baosteel’s industrial chain complete online credit extension, financing and repayment business through “Baorongtong”, and can obtain supply chain loans of up to 70% of the total transaction amount of the “Steel Sales Intent” signed with Baosteel.In addition, customers can also complete online bill discounting through "Bao Rong Tong" and obtain bill pledge loans, thereby realizing efficient management of cash flow.

"Polycom" is a financial platform that aims to provide customers with wealth management services through the capital market. The wealth management products provided by "Polycom" include funds, trusts and other models, which are channels for capital preservation and appreciation.When the steel industry transactions are not active, customers can choose to purchase wealth management products such as funds and trusts through the interface provided by "Polycom". When customers need to invest funds in steel transactions, they can also switch accounts conveniently.

Three sharp edges: data, capital, and platform

Baosteel's deployment of Internet finance has its unique advantages and internal logic.Data, capital, and platform are the three major conditions for its success.

First of all, Baosteel relies on the e-commerce platform to obtain a large amount of valid data to provide a credit evaluation system for the deployment of Internet finance.Since the trial operation of the Shanghai Iron and Steel Trading Center in early April 2013, a total of about 4 users have registered on the platform. Relying on this e-commerce platform, Baosteel has obtained a large amount of transaction data, which covers the upstream and downstream enterprises of Baosteel’s industrial chain. The transaction data, as well as the data of other steel-related enterprises based on "Fanta City" and "Laikequan", build a credit evaluation system through the collation and in-depth analysis of a large amount of data.

Secondly, relying on the cooperation with banks to obtain financing channels, Baosteel provides sources of funds for the deployment of Internet finance.Baosteel Group cooperated with Shenzhen Development Bank and Shanghai Pudong Development Bank to jointly provide supply chain financial services for the iron and steel industry. Through cooperation with banks, Baosteel was able to use bank funds to form leverage, thus providing a large-scale supply chain loan. possible.

Finally, relying on the financial business platform to connect customers and funds, Baosteel provides a channel for the deployment of Internet finance. On the one hand, through the e-commerce platform, it improves customer stickiness and customer quantity, and ensures the good credit of customers; on the other hand, it obtains funds through cooperation with banks. Support, the two together constitute the two ends of Baosteel's financial business, and at the same time control the risk. Financial business platforms such as "Dongfangfutong", "Baofutong", "Baorongtong" and "Baolitong" are the indispensable channels connecting the source of funds and the users of funds.

As a traditional industrial enterprise, Baosteel has completed the strategic transformation of Internet finance by making the e-commerce platform bigger and stronger, establishing in-depth cooperation with banks based on the supply chain, and building a financial business platform.In the era of Internet finance, traditional e-commerce has taken the first step, followed by Baosteel, but it does not follow the old pattern.Different from traditional e-commerce that mainly deals in fast-moving consumer goods, the Baosteel model has a demonstration effect on the development strategies of traditional industrial enterprises.

(Section [-]) After burning tens of billions of dollars and causing numerous casualties, should such a "Red Sea" be bought?

Youku.com passively acquired Tudou. Due to the high overlap of users of both parties, the number one position in the market will not be guaranteed; iQiyi’s acquisition of PPS has realized a high degree of complementarity between webpage + client, and has gradually surpassed Youku Tudou; as long as the acquisition of PPTV is successful, online video There must be a place for Sohu in the future.

An industry that has been in business for eight or nine years has burned more than 100 billion yuan, hundreds of websites have died, and four companies have been listed, but they have not even seen the dawn of profitability. This is also a very miraculous thing.But the most amazing thing is not here, but after ten years of fierce competition, this already red sea market has only entered an enhanced version of the reshuffle period, although the market structure is much clearer than it was a few years ago , but the position of No.1 in the industry began to become controversial in the summer of 2013.

This industry is China's online video industry.

Since Youku Tudou announced its merger in March 2012, everyone has realized that in the basically established video industry, mergers and acquisitions are the shortcut and almost the only way to change the landscape. In May 3, Baidu's video site iQiyi acquired PPS for US$2013 million, directly challenging Youku Tudou's position as the leader in the industry.iQiyi and PPS, Youku and Tudou, Sohu Video and PPTV—these three mergers and acquisitions will have a profound impact on China's video industry and determine the future pattern. The emergence of new forces has become a trend.

Most Failed M&A: Youku M&A Tudou

The merger of Youku and Tudou is arguably the most eye-catching, but also the most failed acquisition.Youku and Tudou have lost a large number of markets and users due to their natural close relatives.

This merger shocked the industry, and before the experts had time to pick up their broken glasses, the merger was already showing signs of decline.The traffic of Tudou.com declined, the company was in chaos, and various rumors continued one after another. The most deadly thing that could not be concealed by means of public relations was the loss of users and the shrinking market.Today, the conclusion that "Youku Tudou failed to merge" has increasingly become the consensus of the industry and observers.

Ultimately, the acquisition of Tudou is actually Youku's defensive strategy, which is a passive acquisition.

Tudou went public at a time when the U.S. stock market was sluggish, Chinese concept stock scandals were frequent, and the IPO was frozen. The financing was exhausted and there was no way out. Tudou chose to go public with blood, but the market value shrank severely. Soon, it fell into a financial crisis again and became the target of industry mergers and acquisitions. Baidu, Sina, Sohu, etc. have contacted.Once Tudou, the second-largest video company in the industry, is acquired by other video companies, Youku's No. [-] position in the industry will be lost immediately.Always emphasizing that "the strong are always strong and the Matthew effect", Youku CEO and COO Yongqiang Koo, who regards "industry first" as the core, can only choose to acquire Tudou.

Unsurprisingly, within a year of the two parties announcing the merger, Tudou fell into turmoil, and the rejection reaction became more and more serious.According to the financial report, Youku Tudou’s net losses in the fourth quarter of 2012 and the first quarter of 2013 (the two financial reports after the merger of Tudou.com) were 1.136 million yuan and 2.325 million yuan respectively, nearly doubling the loss.Youku Tudou does not have the stable cash flow of Baidu Search or Sohu Changyou. Facing the escalating market competition, Youku Tudou must expand its investment to maintain its market share.And in the face of profits without a timetable, guarding the 6 million US dollars collected through listing and additional issuance, it is inevitable that there will be doubts about sitting on the mountain.

The most complementary M&A: iQiyi M&A of PPS
Although iQiyi’s acquisition of PPS was a full year later than the merger of Youku Tudou, this merger is obviously more thoughtful: iQiyi and PPS are longer than the web and client respectively, and the user overlap rate is low.Compared with Youku Tudou’s 50% monthly user overlap, after iQiyi’s de-overlapping, the user coverage of the entire PC+mobile platform has surpassed Youku Tudou’s, ranking first in the industry, and at the same time has a greater advantage in mobile terminals: 2013 According to the data of iResearch in March, iQiyi and PPS’s mobile video monthly user coverage is 3% ahead of No.2 Youku Tudou; the monthly viewing time exceeds the second place by 67.5%, compared with the sum of the second and third place PPTV and Youku Tudou 106 million hours more.

After the merger, the size and market share of the new iQIYI company has surpassed Youku Tudou, and directly brought the Chinese video market from the era of "one super and many strong" into the "bipolar era".

In less than 30 days since the announcement of the merger, iQiyi and PPS have completed the merger at the personnel level. This is due to the strong complementarity between the two parties on the one hand, but on the other hand, it also shows the eagerness of iQiyi and Gong Yu.According to 2012 data, Youku Tudou’s total operating income in 2012 reached 18 billion yuan, while iQiyi and PPS together surpassed Youku Tudou in terms of share, but the total operating income was only 13 billion yuan, including PPS. Game revenue (Baidu did not acquire PPS’s game business).Whether the advantages in traffic and share can be transformed into income is a problem that the new iQiyi needs to face.Complementary traffic and user composition are extremely attractive to advertisers, which determines that "revenue surpassing Youku Tudou" has become a task that iQiyi must complete from 2013 to 2014.

(End of this chapter)