Mogu, a Tencent-backed service that offers fashion content and products to young women, has joined a string of Chinese tech companies pressing ahead to sell their shares through initial public offerings in the US before the year-end.
Mogu priced its sale at $14 per share on Wednesday, toward the lower end of a marketed range. That values the unprofitable company at $1.3 billion, a drop from the estimated valuation of $3 billion after Mogujie acquired its chief competitor Meili to form Mogu in 2016. The firm is poised to raise $66.5 million from the IPO, which will help it fund content and technological development to vie for a piece of China’s $390 billion online fashion market. While Alibaba has long dominated how people buy clothes online, a few smaller players including Pinduoduo and Mogu have managed to carve out a niche. According to a September report by mobile analytics firm QuestMobile, Mogu controlled an 8.1 percent penetration rate among ecommerce apps targeting women under 24 years old. Alibaba led the game at 98 percent. Now a formidable rival, Alibaba has played a key role in Mogu’s early day growth.Under the giant’s shadow
In 2009, Chen Qi, a former engineer and designer at Alibaba, founded Mogujie — which means “mushroom street” in Chinese — with the aim to create a digital magazine for young women. The firm’s initial incarnation was a Pinterest -type pinboard that let users share fashion items with links to third-party ecommerce platforms. Back then, a majority of the products on display came from Taobao, Alibaba’s marketplace for small and medium-sized merchants. “We have to recognize Taobao’s dominance in the retail space. It was inevitable that most of our products came from there,” Chen told TechCrunch.![mogu](https://i0.wp.com/techcrunch.com/wp-content/uploads/2018/12/Screen-Shot-2018-12-06-at-11.22.33-PM.png?resize=1024%2C604&ssl=1)
Chen Qi, co-founder and CEO of Mogu / Credit: Mogu
A new ally
The rejection soon followed by a ban from Taobao as Alibaba wanted full control of where its traffic came from. Meili, which made money by directing shoppers to Taobao as Mogujie did, also lost the ability to link to Alibaba. Both firms started building their own ecommerce platforms soon after breaking up with their main revenue driver. Before long, Mogujie got a new partner from its acquisition of Meili, which counted Tencent as an investor. Tencent does not directly manage any ecommerce businesses but has scooped up shares in a few prominent players, including Pinduoduo and JD.com, arming them with tools to take on Alibaba. Pinduoduo, for instance, has taken off on Tencent’s popular WeChat messenger by letting shoppers arrange group bargains among each other. Similarly, WeChat has fueled growth for Mogu in recent months. WeChat mini programs — a type of stripped down apps that run within larger platforms — contributed 31.1 percent of Mogu’s total sales for the six months ended September 30, up from 14.4 percent a year ago, according to a regulatory filing. Like Alibaba, Tencent strategically chooses what allies it lets into its turf. Links to its rival Alibaba have long been inaccessible on WeChat, which had more than 1 billion monthly active users as of September.![mogu](https://i0.wp.com/techcrunch.com/wp-content/uploads/2018/12/Screen-Shot-2018-12-06-at-11.21.47-PM.png?resize=1024%2C593&ssl=1)
Mogu has adopted a new live streaming strategy to grow ecommerce sales. / Credit: Mogu