After making the strategic investment in eLong.com and LY.com, China’s Internet giant Tencent takes an ambitious step into the online travel market. On September 17th, Tencent invested with Morningside Venture Capital in outbound travel website Woqu.com. This B round financing is worth 20 million US$.
With the financing Woqu.com will put their energies into both mobile devices and the multi-destination leisure travel market. They will borrow heavily from lessons in this “single point breakthrough” in America’s DIY travel market for future expansion, replicating the model in markets such as Australia, New Zealand, and Europe.
From “Small but Beautiful” to a scalable model
Woqu.com started in April 2014, by former Mangocity.com president Ivan Huang. Even before this round of financing, Woqu.com had already received several million US$ in seed capital from Morningside Venture Capital in less than a year after establishment. Woqu.com offers thousands of DIY travel and semi-independent travel products for USA including: hotels, car rental, airport transfer, local tours and activities, visa, insurance, SIM card etc. The key to Woqu.com’s competitiveness is their underlying structure of direct supplier relationship, which removes exploitive middlemen, and the efficiency of their data system transactions. .
Ivan Huang explained Woqu’s strategy of stepping into US travel market, “The customer base is vast and there is plenty of room for growth”. Firstly, 1.4 million Chinese traveled to the US in 2012, while this number will be increasing to 2 million in 2014. By focusing on the niche services such as US DIY travel, startups like Woqu.com can avoid competition with other industry giants. Secondly, the US offers a variety of travel options and packages and a chance for startups to explore different models which can then be introduced to other regional markets. Woqu.com on one hand faces the challenge of industry giants. For example Ctrip has teamed up with Priceline and has made an investment in Tuniu.com, China’s leading player in online tour packaging. On the other hand under the “Tencent System” LY.com has become a strong industry player.
“The big players haven’t entered the outbound travel market yet, so the competition isn’t very serious”, says Ivan Huang “The customers still have many problems that are not being satisfied by the industry but this creates more business opportunities for a startup like us. Woqu.com’s business logic is to narrow down, specialize, and concentrate the destination to only one place, then from the viewpoint of the customer make the most specialized service. When this model has been perfected it can be scaled and replicated to open new markets. “ （Translated by David)