Uber hitches a ride into na­tion with Baidu’s cash

US-based company charts plans to wrest mar­ket share fromChi­nese com­peti­tors, re­port­sMeng Jing.

China Daily (Canada) - - BUSINESS -

There­cord­show­sthat most of the over­seas In­ter­net gi­ants stum­ble in China no mat­ter how big their names are in their home mar­kets.

To in­crease the odds of suc­cess in China’s huge and rapidly grow­ing In­ter­net mar­ket, Uber Tech­nolo­gies Inc has teamed up with In­ter­net heavy­weight Baidu Inc in a strate­gic co­op­er­a­tion that would help theUnited States­based company gain ground in the coun­try’s highly com­pet­i­tive car-hail­ing business.

The Beijing-based Baidu signed an agree­ment to buy a stake in­Uber, which has a val­u­a­tion of $40 bil­lion. The ex­act amount of the in­vest­ment was not re­leased at the sign­ing cer­e­mony in Baidu’s head­quar­ters on Wed­nes­day. How­ever, pre­vi­ous me­dia re­ports have in­di­cated that it could be a cap­i­tal in­jec­tion of $600 mil­lion.

The deal be­tween Baidu and Uber, which of­fers ser­vices in 230 ci­ties world­wide but was not launched in China un­til Fe­bru­ary, is the lat­est mar­riage be­tween a Chi­nese In­ter­net gi­ant and a car-hail­ing ser­vice provider.

Both of Baidu’s ri­vals— Alibaba Group Hold­ing Ltd and Ten­cen­tHold­ings Ltd— have in­vested in the taxi-hail­ing business. Kuaidi Dache, which is backed by Alibaba, and Didi Dache, which is backed byTen­cent, have­dom­i­nated the Chi­nese mar­ket with a com­bined mar­ket share of­morethan99per­cent in the third quar­ter of the year, said a re­cent re­port from In­ter­net con­sul­tancy Analysys In­ter­na­tional.

De­spite the clear chal­lenge from well-es­tab­lished ri­vals, Robin Li, chief ex­ec­u­tive of­fi­cer of Baidu, said the In­ter­neten­abled trans­porta­tion mar­ket is still in a nascent stage in China.

“Baidu’s goal in the mo­bile In­ter­net era is to con­nect peo­ple with ser­vices. And Uber, which has re­shaped the tra­di­tional trans­porta­tion mar­ket in the West, can help us achieve that goal,” said Li, adding Baidu will team up with­Uberin tech­nol­ogy in­no­va­tion, on­line-to-off­line ex­pan­sion in China and global mar­ket ex­pan­sion.

The match­ing point be­tween Baidu and Uber in the car-hail­ing business lies in the mo­bile BaiduMap, a map ap­pli­ca­tion that has 70 per­cent of China’s mo­bile map mar­ket, said Li. Apart from in­te­grat­ing into Baidu Map, the co­op­er­a­tion is ex­pected to of­fer Uber some data gen­er­ated by the large user base of Baidu, the No 1 search en­gine in the coun­try.

Travis Kalan­ick, founder and chief ex­ec­u­tive of­fi­cer of Uber, is con­fi­dent about Uber’s fu­ture in China. He said that Chi­nese con­sumers are huge adopters of the lat­est In­ter­net trends, such as on­line-to-off­line business, which al­low peo­ple to pay on­line but have real life ex­pe­ri­ence off­line.

“Hun­dreds of mil­lions of peo­ple open BaiduMap ev­ery day to plan their next jour­ney. The co­op­er­a­tion brings our com­mit­ment to the China mar­ket to a whole new level,” he said.

Ac­cord­ing to Kalan­ick, the growth mo­men­tum of Uber’s business in China is faster than its over­all business growth world­wide. Uber of­fers ser­vices in nineChi­nese ci­ties and most of them are first-tier ci­ties in de­vel­oped re­gions, while its Chi­nese com­peti­tors Didi Dache and KuaidiDache­op­er­ate in­more than 300 ci­ties.

Both Baidu and Uber be­lieve they can achieve a win-win re­sult, but some an­a­lysts re­main doubt­ful on whether the tie-up would help Uber make a break­through in China’s highly com­pet­i­tive car-hail­ing sec­tor.

Yin Jingxue, an an­a­lyst with the Beijing-based Analysys In­ter­na­tional, said it is clear that Uber can ben­e­fit from the traf­fic gen­er­ated by the users of Baidu Map and Baidu, which lags be­hind its ri­vals in mo­bile pay­ment, can use Uber to help users form the spend­ing habit with BaiduMap.

“It isim­por­tant for Baidu to es­tab­lish its mo­bile map app as a place where peo­ple can shopand­pay­money. Car hail­ing is only one sec­tor. As peo­ple get used to mak­ing pay­ments with BaiduMap, it (Baidu) can an­tic­i­pate more business,” she said.

“For ex­am­ple, peo­ple can buy coupons on Baidu Map and dine at their lo­cal restau­rants,” Yin said, adding that the com­mer­cial­iza­tion of mo­bile maps is still at an early stage in China. The suc­cess of theUber­co­op­er­a­tion iskey for Baidu to turn its mo­bile map into a huge mag­net for business in the mo­bile arena.

How­ever, Uber, which has re­cently been hit by pub­lic re­la­tions de­ba­cles re­gard­ing its re­cruit­ment meth­ods, driver screen­ing and ar­guably sex­ist pro­mo­tions, may find it dif­fi­cult to re­shape the lo­cal mar­ket even with Baidu’s help, said Wang Xiaofeng, an an­a­lyst with multi­na­tional tech re­search firm For­rester Inc.

Cash-flush Ten­cent and Alibaba have in­vested a lot to help Didi and Kuaidi gain users. Since the be­gin­ning of this year, the two apps have of­fered a lot of re­bates to at­tract peo­ple to book rides through their smart­phones.

“Alibaba’s Ali­pay and Ten­cent’sWeChat, both of which have a huge user base and have es­tab­lished them­selves in China as mo­bile pay­ment sys­tems, have the edge to ex­pand into the car-hail­ing business,” said Wang, adding Baidu does not have a star ser­vice or prod­uct in the mo­bile arena.

The com­pe­ti­tion be­tween Uber and the lo­cal play­ers is ex­pected to be tough as Didi and Kuaidi, which started their taxi-hail­ing business re­cently, have climbed up the lad­der to of­fer higher-end chauf­feur ser­vice, just like Uber does.

For ex­am­ple, Didi, which drew a $700 mil­lion in­vest­ment from Ten­cent and other in­vestors ear­lier this month, has been ac­tively of­fer­ing coupons to en­cour­age peo­ple to use its higher-end chauf­feur ser­vice.

Kalan­ick also had to con­tend with queries on the higher costs for Uber ser­vices in China. But he said that Uber wants tomake sure that it can con­nect rid­ers with the high­est qual­ity and at the low­est cost. “Our of­fer­ings range from the Uber Black to Peo­ple Uber, and we have dif­fer­ent price points for cus­tomers to choose from,” he said. Con­tact the writer at mengjing@chi­nadaily.

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