Investment “could help Apple gain greater insight into the behaviour of users beyond its own ecosystem”
The Chinese rival of Uber, Didi Chuxing, has announced it has received $1 billion investment from Apple in its latest fundraising round.
Among a group of prestigious Chinese and international institutions, Apple has invested in Didi to create the single largest investment the car-hailing company has ever received.
Through this investment, Apple becomes a strategic investor of Didi, joining Tencent, Alibaba and other key supporters to help further Didi’s mission of building a data-driven rideshare platform to serve hundreds of millions of Chinese drivers and passengers.
Didi works with over 14 million Chinese car owners and drivers, holding over 87% market share in private car hailing and over 99% market share in taxi-hailing [China National Network Information Center report 2015].
Jack Kent, director of operators and mobile media at IHS Technology, commented on why Apple has made the deal: “For Apple, the investment in Didi highlights the strategic importance of China and the services segment for Apple’s future strategy. The past quarter’s results show that Apple’s iPhone business is slowing and expansion in China had been one of its main growth drivers in recent years. As its hardware business has slowed, Apple has been keen to drive growth in its services revenues. This move shows how Apple is increasingly focused on services, such as Apple Pay, App Store, Apple Music, iTunes and iCloud.”
Kent added that, “Apple claims the deal will help further its understanding of the Chinese market, as well as providing a hoped for financial return on its investment”. He said: “Despite Apple’s strong presence in the Chinese market, Apple’s investment in Didi highlights the need to work with Chinese players for Apple to strengthen its position in China. As Didi operates across the Chinese market, not just on Apple devices, it could help Apple gain greater insight into the behaviour of users beyond its own ecosystem.”
Kent noted that, “taxi apps can also be a way into developing a wider automotive strategy and this investment is further evidence of Apple’s interest in transportation, and perhaps the automotive market, beyond its current Apple Maps software”.
IHS Technology’s monitoring of investment and M&A activity in the mobile industry demonstrates Apple is not typically an investor in other companies. Usually Apple acquires companies outright, unlike Google, which through its Google Venture arm has been an active investor for some time. “Apple, however, tends to prefer fully acquiring companies and then integrating them into its existing product strategy or creating new products based on those deals. Apple’s acquisition of Beats to launch Apple Music is the most notable example,” noted Kent.
In terms of global scale, Uber is by some distance the market leader, operating in more cities and with greater reach than its competitors, said Kent. However, as Didi’s operations in China show, there are significant local and regional players, such as Ola in India and Grab in Southeast Asia.
He said many of these apps have significant backing from global technology companies. Uber includes Google and Baidu as investors; Japan’s Softbank has invested in both Ola and Grab; and Apple joins Tencent and Alibaba as an investor in Didi.
Cheng Wei, founder and CEO of DiDi, said: “The endorsement from Apple is an enormous encouragement and inspiration for our four year old company. Didi will work hard with our drivers, riders and global partners, to make available to every citizen flexible and reliable mobility choices, and help cities solve transportation, environmental and employment challenges.”
Said Tim Cook, Apple’s CEO: “Didi exemplifies the innovation taking place in the iOS developer community in China. We are extremely impressed by the business they’ve built and their excellent leadership team, and we look forward to supporting them as they grow.”
Building on its data mining and analysis capabilities, Didi now completes over 11 million rides a day on its platform, serving close to 300 million users across over 400 Chinese cities with a diverse range of mobile technology-based transportation options.
Giving more insight into the allure of Didi for Apple, Kent stated: “Taxi apps provide a number of strategic opportunities for mobile ecosystems. Unlike many other mobile apps, taxi apps are able to quickly establish a billing relationship with their audience as they require an immediate transactional relationship with users. Ride-sharing is often only the first step. Once these apps have started charging users for the journeys they take, they can then use this payment information as a platform for a range of other services, such as deliveries and then wider mobile commerce services. These apps also capture a huge amount of valuable contextual user data.”