I don't know the financials, but I wonder if this is all good business sense in the end. This all sounds more like petty rivalries more than sound business sense. From the other article on Uber vs. Apple uploaded today on Hubski, Didi is losing billions battling Uber. From the other article: Recently, I was watching a really old video where Steve Jobs was introducing Bill Gates in his presentation because Bill Gates had just invested in Apple to help get them out of bankruptcy. The Apple crowd soundly booed him. Jobs noted that the culture at Apple was so competitive that their hatred didn't allow them to see how alliances could help them. I don't know anything about this deal or any of Apple's financial decisions, but from these two articles, I'm not seeing much in the way of strategy, only petty rivalries.And of course Apple is doing this in part to mess with Uber. Apple has already signaled it’s getting into the self-driving car game along with Google and Tesla. Unlike Tencent and Alibaba, Apple is a potential Uber competitor in and of itself. It has the same incentive Didi does in making sure Uber doesn’t get too dominant in the meantime. And Google-- while it’s sparred with Uber-- is also an investor in Uber. So this is as much about Apple versus Google as it is Didi versus Uber and Lyft versus Uber.
Though Didi Chuxing is valued at upwards of $20 billion, according to a person familiar with its ongoing funding round, the company has been losing billions in a costly battle with Uber for market share in China.
So a couple three things - 1) The other article was posted by me. 2) Uber, Lyft and Didi are dependent on network effects - ten Uber cars in a metropolis are much less than 10% as valuable as a hundred Uber cars in a metropolis, and a thousand Uber cars in a metropolis are more than ten times as valuable as a hundred. As such, when two thirds are Uber and one third is Lyft, Lyft is sucking down more than 33% of Uber's business and Uber is doing a lot more damage to Lyft's business such that eventually, Lyft will die. 3) This is what happened in China: Yes, Didi spent a lot of money beating Uber. But they ran Uber out on a rail. This is behind a paywall: 4) Effectively, Didi Chuxing has already creamed Uber in China. There are a number of reasons for that, but a principal one is that Uber are dicks. There's a fairly astonishing Wikipedia article that simply lists everywhere Uber has been banned. And not to put too fine a point on it, but all ridesharing services are de facto illegal. They violate the livery/hire ecosystem everywhere they go. Chances are good that laws will change to accommodate a more efficient system than traditional taxi services, but Uber is a prime-time thrower of elbows. Which, from a social darwinism standpoint doesn't much matter but when you're throwing billions of dollars around, it's best not to spend it on corporate cultures that refine for sociopathy. 5) I remember Steve Jobs introducing Bill Gates. It's the scene they chose to start Pirates of Silicon Valley with. Something people who weren't paying attention to tech press back then don't realize is that Microsoft invested in Apple in order to stave off monopoly concerns. The Justice Department was already circling around Microsoft, looking for a reason to break the company up. Microsoft had already purchased large swathes of land in order to build new campuses in preparation. The Apple gambit was effective - for $150m in non-voting stock, Microsoft managed to forestall the suit for four years. So you have some valid points, but the larger picture is all about the network effects. There's one Google. There's one Facebook. There's one Snapchat. You gotta be the one. In the US, it's Uber. But Apple feels like fucking that up.To wit: Chang asked Liu how Didi thinks about global expansion, and Liu had to politely remind Chang just how absurd of a question that is. In 2015, Didi did 40% more rides than Uber has done in its entire life. It’s now the second largest commerce platform in China. It is in 400 cities. And it’s penetrated the market by… just 1.1%. Just upping that to 5.5% would be some 60 million rides per day. It’s currently doing about 10 million a day. For perspective, 10 million rides per day is eight times the entire ridesharing market in North America.
I did realize that you posted both. I was trying to reference the posted article without naming you because I was trying to focus on the article, not who posted it. From your linked wiki: Why are you concluding that Uber's market share is pushing Lyft out faster? Lyft would also benefit from network effects, some of them from Uber. People will use rideshares when there are available rideshares. That requires the network effect. By itself, Lyft might be too small, but with Uber, if someone can't get a rideshare in their area from Lyft, they can get one from Uber. That makes the whole enterprise more viable. Most people that I've read that have used Uber have also used Lyft when Uber was unavailable or too expensive. There is also more than one taxi company in many areas. What's the mechanism that allows only one company in rideshares? If that's the case, then Didi is just as much illegal as Uber. If Didi were in the same countries as Uber, the same illegalities would apply to them. Why? There have been lots of businesses based on unsavory practices in the past that have been very successful. Steve Jobs and Apple have been criticized for some of their moral choices. Many have called Steve Jobs a sociopath. Is Apple now investing based on ethics? I do realize that there's a lot of Uber hate, particularly on Reddit. Are Didi's business practices so much better? From a business standpoint, it doesn't matter why Bill Gates invested in Apple. If it was financially beneficial for both of them, then it was a good decision on both their parts. It looks that way. But is it a wise business decision?1) The other article was posted by me.
2) Uber, Lyft and Didi are dependent on network effects - ten Uber cars in a metropolis are much less than 10% as valuable as a hundred Uber cars in a metropolis, and a thousand Uber cars in a metropolis are more than ten times as valuable as a hundred. As such, when two thirds are Uber and one third is Lyft, Lyft is sucking down more than 33% of Uber's business and Uber is doing a lot more damage to Lyft's business such that eventually, Lyft will die.
However, network effects need not lead to market dominance by one firm, when there are standards which allow multiple firms to interoperate, thus allowing the network externalities to benefit the entire market.
And not to put too fine a point on it, but all ridesharing services are de facto illegal.
when you're throwing billions of dollars around, it's best not to spend it on corporate cultures that refine for sociopathy.
Something people who weren't paying attention to tech press back then don't realize is that Microsoft invested in Apple in order to stave off monopoly concerns.
But Apple feels like fucking that up.
1) I'm not "concluding" that Uber is pushing out Lyft. I'm stating that from Pando's ceaseless coverage of all things Uber over the past 18 months. You're right- most drivers for Lyft also drive for Uber. However, these are two startups that aren't making profit and the bubble is about to pop. Only the strong will survive. It's not appropriate to model either as regular businesses considering that the fundamentals of both can be completely out of whack and still garner investment cash. 2) Didi is every bit as illegal as Uber, but the torch and pitchforks reserved for Uber rarely hit Lyft. The laws will change, the question is how they will change; when they're designed to act against a bad actor such as Uber, you end up with the company being banned from Austin. The cab companies actually tried the Uber thing with an app called "Taxi magic"; if it didn't suck so hard the only difference would be price. 3) It's a bad idea to form an alliance with a company that has demonstrated disloyalty and bad acting. There is no good press for Uber. Apple doesn't need any bad press right now. Uber, for its part, has demonstrated an ability to generate bad press on a weekly basis. 4) It matters why Microsoft invested in Apple because we're discussing business. The business reason for the Apple investment was related to legality and anti-trust. It is therefore not applicable in this case.
Not tryna get involved in this broader discussion because I'd be in way over my head, but worth nothing that this is kind of misleading: What happened in Austin was not banning Uber. The City implemented new regulations (among them requiring rideshare drivers to be fingerprinted) such that Uber and Lyft have said that they'd rather just not operate in the city. At least on the surface, the City is painting this as "for riders' safety," not anything to do with pushing out Uber or punishing bad business practices.when they're designed to act against a bad actor such as Uber, you end up with the company being banned from Austin.
I should have stated that more generally. Why are you concluding that only one company will survive in the rideshare industry. If the business model is not workable, then both companies would be affected by that. The bigger the company, the more exposure the company has to the deficiencies in the business model. It's possible that the bigger company will be more adversely affected. The reason Google dominates the market is because the more users who use Google, the better the search engine becomes, so more people use it. The reason Facebook dominates the market is because the platform that more people use is the platform that people will have to use to connect to those people. In the rideshare industry, the customer wants to get from point A to point B. The company's app that provides that is fungible. In the soft drink industry, both Coke and Pepsi can co-exist because both those products are fungible. The reason for one company dominating the rideshare industry is not clear. The reason for that might be that Uber is the pioneer and the most aggressive player in that market. The company that trail blazes the way will get more flak until the laws change and there is more acceptance. Or alternatively, the laws won't change and the whole concept will dissipate. How would Uber's bad press affect Apple? Google has invested in Uber without any noticeable effects. There's no reason to believe that Apple would be different in that. From the article: It's the business reason why Microsoft invested in Apple. From Apple's perspective, that doesn't have a bearing. Apple benefited from the investment Microsoft made in Apple regardless of Microsoft's motives for doing so. It's only applicable if in this case, as in that case, Apple is making decisions based on its rivalries rather than business sense. In the case of Microsoft, Steve Jobs had the foresight to accept the funding, regardless of the reason for the funding.1) I'm not "concluding" that Uber is pushing out Lyft. I'm stating that from Pando's ceaseless coverage of all things Uber over the past 18 months. You're right- most drivers for Lyft also drive for Uber. However, these are two startups that aren't making profit and the bubble is about to pop. Only the strong will survive. It's not appropriate to model either as regular businesses considering that the fundamentals of both can be completely out of whack and still garner investment cash.
2) Didi is every bit as illegal as Uber, but the torch and pitchforks reserved for Uber rarely hit Lyft.
3) It's a bad idea to form an alliance with a company that has demonstrated disloyalty and bad acting. There is no good press for Uber. Apple doesn't need any bad press right now. Uber, for its part, has demonstrated an ability to generate bad press on a weekly basis.
And Google-- while it’s sparred with Uber-- is also an investor in Uber.
4) It matters why Microsoft invested in Apple because we're discussing business. The business reason for the Apple investment was related to legality and anti-trust. It is therefore not applicable in this case.
The only thing I have to chime in with here is that it is not uncommon for business models to be ineffective on a small scale but effective on a larger scale. For instance, restaurant chains are able to expend money opening and maintaining nonprofitable single restaurants in certain 'desirable' areas with the hope that after 3-5 years, the nonprofitable establishment will become profitable as it becomes a familiar part of the local scenery, or whatever. In other words, I don't agree that the bigger the company, the more exposure that company is guaranteed to a certain business or operating model's deficiencies - quite the opposite, in fact. A big company will have separate arms, some of which will make profit, some of which maybe won't. The profitable arms cover the others. A small business cannot sustain the sort of expenditures needed to take risks and fund an establishment which may not become profitable for 5 years. The ride share company with the most backing will be able to expand faster, more easily, and further. If a company succeeds in that more quickly than all other companies, it will grow to dominate the market everywhere. People who always can rely on Lyft in their home city will automatically turn to it first when they are in other cities - so whatever company gets a foothold in the most major and transportation-deficient cities first will essentially then be able to propagate itself faster by dint of familiarity, trust and comfort in its user base. As for how one company's bad press might impact another company's reputation based on investments, it's a real thing called reputation risk and in US financial industries at least real people have real jobs where their duty is to look out for exactly such a thing. Google ain't a financial industry but I doubt they don't have people in exact such roles as well. Here's a hint, by the way - sometimes, the average consumer's opinion doesn't mean shit in terms of the "reputation risk" of a certain action. But in the eyes of legislatures, it sure as hell does. Companies aren't playing their reputation risk cards to consumers all the time, they're playing them to the gov't. just some thots
I agree with you as a general principle. Economies of scale and diversity can both make larger companies more risk tolerant. In this particular case, I was responding to this: If both companies are not making a profit and the fundamentals of both are "out of whack", then they're not benefiting from economies of scale or diversity since both are already geographically world wide. If investment cash is keeping both afloat, then infusions of cash are unlikely to last indefinitely. The larger the company, the more cash is likely being used quicker, so it has the bigger exposure. I don't know if any of this is actually happening. I was just responding to the quote. This is possible, but not necessarily true. It's also possible that more than one company can grow simultaneously and share the market. Google ain't a financial industry but I doubt they don't have people in exact such roles as well. I agree that reputation risk can be real. In this case, if there's a reputation risk from bad press about Uber, Google hasn't considered the reputation risk high enough to not invest in Uber. There hasn't been anything discussed so far that would raise that reputation risk for Apple. That may be true in general. In this case, considering that Apple just refused to respond to the government when the government was asking for Apple to crack the code on the iPhone, Apple's investment in a company in China doesn't look like posturing to the US legislature. If Apple is posturing to the Chinese government, there's no reason for that government to care about Uber's reputation, which is largely tarnished in other countries.In other words, I don't agree that the bigger the company, the more exposure that company is guaranteed to a certain business or operating model's deficiencies - quite the opposite,
However, these are two startups that aren't making profit and the bubble is about to pop. Only the strong will survive. It's not appropriate to model either as regular businesses considering that the fundamentals of both can be completely out of whack and still garner investment cash.
The ride share company with the most backing will be able to expand faster, more easily, and further. If a company succeeds in that more quickly than all other companies, it will grow to dominate the market everywhere.
As for how one company's bad press might impact another company's reputation based on investments, it's a real thing called reputation risk and in US financial industries at least real people have real jobs where their duty is to look out for exactly such a thing.
Here's a hint, by the way - sometimes, the average consumer's opinion doesn't mean shit in terms of the "reputation risk" of a certain action. But in the eyes of legislatures, it sure as hell does. Companies aren't playing their reputation risk cards to consumers all the time, they're playing them to the gov't.