Apr 18, 2016 · 7 minutes

Last week, a strange report surfaced in a little known Indian publication.

I didn’t see it picked up much in the US, and only saw it in my Twitter feed because… well, hundreds of drivers follow me as a result of our reporting on Uber and they share various reports with me from all over the world.

It cited anonymous sources saying that Uber was buying up all of investors’ stakes in Indian rival Ola that weren’t owned by Softbank.

The only thing that sounded plausible about the story was that perhaps Softbank would hold out. After all, Softbank has made a major bet on most of the non-Uber international ridesharing companies, and it’s not one to flip its stake in something when a market is still developing.

But nothing else about the story rang true. For one thing, Uber has been remarkable un-acquisitive compared to any other private company we’ve seen get to this size. Well before Facebook and Twitter went public they’d done scores of acqui-hires. There were wild crazy quilts of Facebook and Twitter stockholders thanks to various small acquisitions.

Uber in contrast has done just one small acquisition (that we know about at least) at an undisclosed price: deCarta.

So buying up stakes in a major international rival would be a dramatic shift in strategy-- like if Uber were suddenly run by the management of Groupon.

There were a few others reasons it didn’t ring true: Uber isn’t a company that readily admits defeat. Faced with widespread protests by the driver community, potential class action lawsuits and unionization drives, Uber has refused to budge even an inch on driver demands. It won’t even turn on tipping-- something that seemingly would throw drivers a bone, take away the only real differentiation and advantage Lyft has, and not hurt Uber’s bottom line one bit.

Uber is still spending $1 billion a year “competing” in China, a country that it has no hope of winning, as most of the business press has finally acknowledged.

So the idea that Uber would suddenly cry uncle in a more contested and more nascent market like India and buy up most of a rival? It’s more out of character than the company suddenly becoming acquisitive.

No sooner did the story surface than did Ola issue a strong and unequivocal denial to any Indian publication it could find, calling the rumor “false” and “malicious.” What’s more: Ola says it denied the story to the media outlet prior to publication. From one report:

BENGALURU: App-based taxi service provider Ola on Friday termed "false" and "malicious" a media report claiming that certain of their investors are planning to sell their stake to rival Uber, and

"ANI Technologies Private Limited, promoters of Ola, categorically denies the contents of a news article published by a Mumbai-based newspaper and its website, mentioning that certain investors in Ola plan to sell their stake to Uber," said Ola in a statement.

The cab aggregator said the news report attributed to an unnamed source is completely false, misleading, malicious and planted with an intention to harm the Ola brand.

"We are shocked and dismayed at the lack of journalistic ethics in carrying the story, despite our repeated denial to the reporter and the publication's editorial representatives," it said, adding the the report was published despite assurances it would not be carried by the newspaper as the company denied the speculation.

"We will initiate appropriate legal action and seek redressal and compensation for the damage caused to us by this irresponsible reporting from the newspaper," it said. 

Ah, now that makes sense.

To be clear: I have no evidence that Uber or any of its surrogates would be behind such a leak. But let’s look at what we do know:

  • The company has said it’s in a political campaign against rivals and needs to “throw mud.” It has hired political operatives, and then replaced them when they weren’t aggressive enough.
  • The company precisely threatened to go after me and my family by spreading made up stories about me to media outlets it a way that would never come back to Uber. “No one would know it was us,” were Uber exec Emil Michael’s words.
  • Other “anonymous sources” have a history of planting rumors about Uber’s funding in China. First reports surfaced in the Chinese press than Ping An and Hillhouse were backing last summer’s Uber China round. They were denied by the parties directly. Then the same rumors were reported by Reuters and other US outlets also credited to “anonymous sources.” They were, again, denied, this time in English. The two parties never invested in Uber China. They invested in Didi. And that Uber China round was only “oversubscribed” once Uber itself invested $500 million in it. Indeed, no institution other than Baidu invested in that round.

Did Uber do this? I can’t possibly know. Would they do something like this, by their own admission? Absolutely.

In general, Uber seems to be attempting to shift the narrative away from its battle with China to other markets. It’s pushed harder to get into Southeast Asia, launching its bike service, UberMoto. India is its other major bet-- another market where the company is reported to be spending $1 billion a year. And the battle seems closer than it does in China.

No one knows the truth of market share: Independent reports have put Uber’s market share at 25% in India; Softbank has claimed Ola has as much as 80% of the Indian market; Travis Kalanick has claimed Uber has as much as 40%. But even at the lowest number, 25% is far better than Uber is doing in China.

And Ola isn’t backed by the equivalent of Tencent and Alibaba. The two aren’t just cash-rich goliaths, Tencent’s WeChat is how these services communicate with users and Alipay is how the transactions are processed. Didi Kuaidi was the result of each of their entrants combining just as Uber set its sights on China. The combination has simply been unstoppable.

I don’t know the Indian ridesharing market nearly as well as I know the Chinese one, and I’ve never met with Ola’s execs. But of the four major Uber competitors in this tacit anti-Uber alliance, Ola seems the most on the outside.

Sure, Softbank is also an investor in Didi and Grab, but while Didi itself has invested directly in Lyft and Grab, and Alibaba has invested in Lyft, and Coatue has invested in all three, none of those parties have invested in Ola. When Ola was rumored to be raising money last year, I presumed that would be rectified, but it wasn’t. This isn’t to say Ola’s investors are slouches. In addition to Softbank, it has Tiger Global and Sequoia. But for whatever reason, it’s not quite as tight in the Lyft-Didi-Grab clique.

[Update: Didi reached out to say that, in fact, it has invested in Ola.]

Uber needs an international win, as the story it told investors when it raised funding at a $50 billion price was one of global domination. Didi has already well passed Uber as the largest ridesharing company in the world by rides. On that ambition, Uber simply failed.

Additionally, it’s been banned in most major markets in Europe, aside from the UK. It’s fighting a hopeless and expensive battle in China. While Southeast Asia is a large market in aggregate, it’s incredibly fragmented. And the real battle for the mass user in the largest South East Asian market-- as Uber has acknowledged through its actions-- is bikes.

Bike transactions are a smaller price in a harder to reach market, and one with almost no credit card penetration. GrabBike has some 50% of the Indonesian market, and has signed up most of those drivers through “GrabBike Kingdom” events held in stadiums, organized by local teams who speak the local language.

Beyond bikes, Grab has 95% market share in third party taxi-hailing in the region and more than 50% market share in the private car ridesharing market. Still, even with all that it has a comparative small 13 million app downloads, with less than 300,000 drivers.

South East Asia is a big potential market, but one that will require local, on the ground teams in multiple countries, speaking multiple languages. This has never been Uber’s playbook in International expansion, and the immediate numbers don’t seem to make that kind of local on the ground investment worthwhile, given the other battles the company is facing.

Put it all together and India seems from the outside to be Uber’s best shot at changing the narrative. Lucky for them an “anonymous source” had the same idea.