Chinese Mobility Startups: Lesson for the West

The following article serves both as an introduction to the technology sector in China, specifically the mobility tech space, as well as an analysis of how the West can learn from China’s model for personal mobility.

What Mobility Looks Like in the West

Going up north? Train tickets on Trainline or National Rail, or bus tickets on National Express or Megabus. Directions to accommodation? Google Maps. Going out with friends and too far to walk? Uber, Gett, Lyft, local taxi or Google Maps to find public transport. Booking flights for summer? Skyscanner, Expedia, an airline’s website. Welcome to the UK; it’s a similar story in most other countries around the world.

The digitisation of personal mobility through having platforms for different services has significantly boosted efficiency, reduced costs and increased discovery of new travel opportunities. The mobility market has come out of the ground and exploded into one of the fastest growing sectors today, with almost infinite potential. It is only going to become more interesting as significant developments in self-driving vehicles come into fruition.

Despite the convenience with which people can now get from one place to another, one must realise massive disruption to this model is possible and, in fact, already happening somewhere in the world; China. The future of mobility doesn’t look like ten different apps on an iPhone home screen, or a browser full of tabs comparing flights or train tickets. It is using one app — ‘The Platform’ — to be the homepage of mobility. In China, just like in the West, there’s currently more than one platform looking to do this. The only difference is that in China there are only three players, and they’re all much further ahead.

A One-stop-shop

­WeChat is China’s Whatsapp. And Apple Pay, Uber, Skyscanner, Trainline, National Express, Megabus, BlaBlacar, Deliveroo and too many others to count. From WeChat one can chat to friends, post updates, follow celebrities and businesses, pay — restaurants, friends, the dentist, gas, water and electricity bills — for anything, book a taxi, flights and hotels, trains, buses, view and post reviews for restaurants and just about anything, invest in stocks, mutual funds, ETFs and commodities, get food delivered, order a cleaner, or get a massage at home. Many of those features come with WeChat as is, but the beauty of this app is that almost all other apps in China have a WeChat integration.

A whole article could be written about WeChat (and this will probably follow!), but it was necessary to outline that this is China’s ‘everything platform’, and to mention that Didi (introduced below) is also integrated into WeChat. However, when talking about the model of having one platform for personal mobility, Didi will be analysed as a standalone app.

Didi is the Uber of China. After receiving $1bn in investment from Apple and then acquiring Uber’s China operations last year, it is stronger than ever. Over $7.4bn of total Venture Capital Investment and Debt Financing have created a product whose offerings leave every single other mobility app in the world trailing behind.

Didi does everything Uber does but has also expanded into public transport timetabling and routing, chauffeuring and corporate services, and finally ‘social ride-sharing’ with their product Didi Hitch (顺风车) where a driver can pick up people heading in the same direction as them and receive a contribution to fuel costs in return. Didi owns China’s mobility space and ignoring the possibility of international expansion, its model’s success, relevance and necessity to be copied in the West is what will be examined in this article. Finally, Baidu is the Chinese Google. Not much elaboration needs to be made apart from mentioning that Baidu has a product called Baidu Maps (百度地图). No prizes for guessing what it does.

The Ideal Scenario

Need any of the services mentioned in the introduction? Simply open ‘The Platform’ and select the one desired. Complete any of the actions you need all within ‘The Platform’ without the necessity of leaving for another app. ‘The Platform’ owns personal mobility end-to-end; the most efficient way to do so. This strategy is simply assuming the following: a meta-search style platform is the most efficient way to organise a space where many different services exist as it brings them all together in one place.

Due to barriers to entry, it’s hard for a new player to simply create a platform from scratch, so existing players create extensions to their services to try and become the ‘go-to’ platform by eventually offering everything. This is starting to happen in the West, but China is much further ahead, and it is ultimately that kind of model that the West will end up adopting.

Learning from the West?

Familiar examples would be Google Maps on one side vs all of the ride-hailing apps on the other side. Google Maps was originally just a way to display different places, and how one may drive or walk from one place to another. Their offering was much better than something by the AA, or by internet companies similar to Google, so Google’s service became the go-to for driving directions. Over the next few years, the locations that users were looking to go to — hotels, restaurants, cinemas — became better integrated into Maps so they could be booked straight from Google Maps itself.

Likewise, public transport became integrated, digitising bus and train timetables. More recently Uber, Gett and many other taxi services’ taxis can be hailed through Google Maps. The pattern is now clear to see: different players are trying to steal users’ screen time from one another by offering the same services and failing that, integrating services into their platform in an effort to divert revenue to themselves. The one big issue is that Google can’t yet replace Uber’s service with its own offering meaning this element of Google’s platform will only ever be rewarded with commissions from Uber.

A Lesson From Didi

In China, the same competition exists between Baidu Maps and ride-hailing apps, but the difference here is that there’s just one ride-hailing app in China that’s making waves: Didi. So really, it’s just Didi vs. Baidu Maps. Didi’s offerings have previously been mentioned, and Baidu Maps ultimately does what Google Maps does, so Didi is far ahead and will ultimately win as they integrate more and more services. This full integration is likely to happen far before it will happen in the West, so what can the West learn from it?

Didi actually has the inventory — drivers who provide lifts for passengers — as well as an enormous user base; over 1.5 billion rides were completed in 2015. As mentioned, it has a lot of services which all of its users are engaged in and is continually expanding its offering. The most important part of this, however, is simply the fact that it ‘owns’ the market.

It is “The Platform” for ride-hailing and is going to expand into becoming the on-demand travel app when more public transport integrations are introduced. This means it can, without too much effort, also become the go-to platform for any other service it integrates, which is important for the future of the mobility industry as it’s not really known where this is going. Be it becoming the place to book a ride in a self-driving car, or something not quite as fancy, it is clear that this will be the platform in China to do so.

The Impact on Other Players

With such a large user base, it becomes easy to force other services to integrate as the opportunity cost for a smaller service of not surrendering to a titan like Didi is too grand. This is why in the West it seems the only real contenders for creating such a platform could be, as mentioned, a platform like Google Maps or Uber. The difficulty in forming a conclusion comes primarily from impending historic changes to the mobility industry such as self-driving cars.

A number of the ride-hailing apps who are struggling to turn a profit would be likely contenders to run out of money and lose in the wake of a platform like Google Maps, suggesting perhaps that the ‘Platform’ of the future would be made by Google, but this can be negated by the fact that self-driving cars defeat the barrier to success for these ride-hailing startups: drivers, more specifically having to pay drivers.

If cars drive themselves then there’s no driver to pay. The conclusion that can be made is something relevant until self-driving cars start to roll out; ultimately that to ‘win’ in the mobility sector, new players need to be aware that the industry leaders like Uber and Google are going to emulate China’s model of providing a platform that does everything, and these industry leaders need to understand that there can probably only be one platform.


Originally published at themarketmogul.com.

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