Apple v. Google; Apple v. Uber; Didi v. Uber; Lyft v. Uber: The $1 billion deal that just threw kerosene on four epic tech fights
Last Friday, I wrote that the only way Didi Chuxing could really hurt Uber was to find a way to help Lyft eat into the company's lead before it goes public.
Didi trouncing Uber in China isn’t a shock to most investors, because most everyone except Travis Kalanick sees it as all but inevitable.
But last night Didi lined up a new powerful Silicon Valley ally. Apple announced it has invested $1 billion in Didi -- the largest single investment in the Chinese ridesharing giant. In her first US press conference held last year, Didi’s president Jean Liu bragged that their backers-- which include Chinese giants Alibaba and Tencent-- had a combined market cap of some $2 trillion. Well, add another $500 billion onto that.
To understand the significance of the deal, you have to consider quite a few factors. Firstly, there are some 800 million urban Chinese. Of those who hail cars using their smartphones -- or may do so in the future-- a large percentage use iPhones. An even larger number use Tencent-owned WeChat, and/or pay with Alibaba (part-)owned Alipay.
Those ties, plus Apple’s interest in self-driving cars, and Apple’s existing make-or-break business interests in China, would be enough to explain the deal.
But there is of course a much bigger reason why Apple and Didi were so keen to join forces: The deal is an incredible “fuck you” to Uber, a company that neither Apple nor Didi want to get much more dominant in the US. Last week, Uber twisted the truth about a partnership with Alipay to create headlines showing it had new momentum in China. Didi just answered back with a bazooka.
The clues that this was not just an investment but a Statement were easy to spot: A billion dollars isn’t a random number -- it’s a headline-grabbing way to telegraph This Is A Big Deal. As is Didi president Jean Liu’s comment that the deal closed in little over a month. Then there was the way the deal was announced immediately prior to an 8pm (pacific time) press conference which the world’s tech reporters had to drop everything to be on (which they did, of course.) We expect that kind of thing from a Beyonce album launch, not a ridesharing investment announcement.
This deal, and the way it has been positioned, is huge for Didi’s global media and investor cred. A partnership of this size with Apple positions Didi as a major international player, not just Uber’s “Chinese competition.” It undercuts the argument that Didi has won in China simply because of its closeness with the protectionist Chinese government. It says we are a serious, and fierce player in its own right, on a world stage. A four-year old Chinese giant that is already the second largest commerce platform in China next to Alibaba and is going international way sooner than we’ve ever seen before.
The deal is also potentially game-changing for Lyft. Think again how many people around the world hail Uber’s using Apple devices. It only takes a subtle push by Apple to move a large number of them to Didi or, in America, their partners and friends and Lyft.
And lest you think Didi doesn’t prioritize helping Lyft consider what Liu said when I asked her on the call about why Didi is establishing such a strong international presence so early in its life, when it has still only penetrated 1% of its home market.
She noted only 1% of urban Chinese use ridesharing services, versus 15% of people in San Francisco, and that Didi’s partnerships with Lyft, Grab, and Ola help each of these companies share tactics, compare notes, and learn from one another to help grow and dominate their own markets.
“After our investment, Lyft’s market share almost doubled. [It grew to] 50% in San Francisco and in the US in general it’s close to 25%,” Liu said. “To have this open partnership definitely benefits every one of us.”
Wow. Last week when I wrote about why it was highly strategic to Didi’s long term future to bolster Lyft in the US in the present I was partially speculating based on conversations with sources close to the company. But it’s clearly articulated now. It was already impressive that Didi surpassed Uber in overall rides, and trounced it in what will be the largest ridesharing market. The company isn’t remotely content with that.
The mind boggles with everything this deal could mean, especially considering the vague words Liu used, like “support” and “the Didi family.” Asked repeatedly for specifics, Liu would only say benefits could include “product, technology, marketing and many other levels.” And later “In terms of product integration there’s a lot we can work on together,” and “a lot of things if you use your imagination.”
We don’t have to try too hard. Didi gets a $1 billion deal from the maker of the device most people around the world hail Ubers on. Didi acknowledges that these partnerships with global players is all about helping each of them grow and dominate their own markets more. Didi says its partnership has already helped Lyft gain market share against Uber in the US.
Apple, of course, denied any part in a fight between Didi and Uber, or Lyft and Uber. But even that denial telegraphed something sly is going on. Apple’s excuse was that they wanted to use their investment in Didi as a way to understand China better. As Bloomberg explains, that makes sense: Apple has been struggling in China recently after the government shut down its movie and book stores and with sales of iPhones starting to decline in the country. Still, Apple is hardly without presence or understanding of China: The company has been manufacturing its hardware in China for years and still has a huge existing userbase in the country. This isn’t a case of Apple “buying its way in” to the Chinese market.
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.
Really, though, it’s Didi not Apple’s motives and potential rewards that are the most interesting, and which the media in the US seems to be paying the least attention to. We’ve written before that Didi is increasingly acting as the backbone that Lyft refuses to have. Whatever Apple’s real motivation, you can bet Lyft executives are jumping with joy this morning, and more than a few walls are being punched at Uber.
And then there’s this…
In fact, given Didi's own investment portfolio, his girlfriend is an investor in Didi, Grab, Ola and... Lyft.