E-Business Strategy
hmp4life
lecture-mobileplatform.pptxMobile Platform
Suling Zhang
Didi vs. Kuaidi: A Battle of Burning Money between Taxi-booking Apps in China
Taxi Market in China
BAT invested $0.87 billion in US in 2014.
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Taxi Market in China
Cities notoriously congested
Poor public transit networks
Massive fleets of 1.2-1.3 million inexpensive taxis with 30-40 million rides per day
Taxi drivers pay taxi company to get license with their own car or rent taxi from the taxi company.
Taxi drivers pay a dozen of different fees
The dispatch companies tend to be ill-equipped to collect and process data.
People book taxi by telephone / wait at roadside.
Taxi drivers pick customers or refuse to take customers at peak hours
Long lines of waiting customers or long line of idle taxis at airport and railroad
A typical Beijing taxi driver drives 400 kilometers per day but with no passenger 40% of the time
Taxi Market in China
Problems with Taxi Industry
Heavily regulated
Local monopoly by taxi companies licensed by the state w/ exorbitant profit
Taxi company bid for license and quota
resell to smaller companies
Small companies resell to main taxi driver
Main driver subcontract to other drivers
Taxi drivers pay RMB5000-10000 to the taxi company per month.
A typical taxi drivers’ daily income:
Gross income: RMB500
Commission to the taxi company: 220
Fuel: 200
Net income: RMB80
Strict limit on the number of taxis
Ride fares determined by the meter and enforced by local laws in each city
Fare paid in cash
“Black cars and motorcycle ” rampant
Crimes
Traffic accidents
Frequent taxi driver strike: 17 in 2008
Passengers: hard to get taxi
Mobile Internet in China
By April, 2015:
1.23 billion cell phone users
850 million mobile Internet users
80% of the Internet users access Internet through cell phone
84.2% increase in mobile internet users from 2006 to 2012
Three biggest IT companies in China: Baidu, Alibaba, Tencent
More than 30 taxi apps, mostly regional players, in 2012
First app: Yaoyao Zhaoche
Taxi App Functions
Two Arch Rivals
Didi
2012.9: First debut in in Beijing
2013.10: 59.4% market share
2014.4: 300 cities, 1 million drivers,100 million registered users, 5.2 million bookings per day
Kuaidi:
2012.8: first debut in Hangzhou
2014.8: 60 million users, 1 million drivers
50% market share
Yuan-for-Yuan Subsidy Battle
(source: John Horwitz, 2014)
WeChat “Red Envelops”
WeChat Caifutong got 100 million in one moth during the 2014 spring festival through Didi “red envelops”.
About WeChat
WeChat: a mobile text and voice messaging communication service developed by Tencent in China in 2011
The largest standalone messaging app by monthly active users
As of August 2014, WeChat has 438 million active users; with 70 million outside of China
2014.11: WeChat blogged all “red envelop” from Kuaidi
Total Cash Burned
Didi:
By 2014.4: total cash reward of RMB 1.4 billion – about US $225 million.
Kuaidi: yet to release data
Venture Capital Funding
Didi
2012.12: $3 m
2013.4: $15 m
2014.1: $100 m billion
2014.12: $700 m
Main investor: Tencent
Kuaidi
2012.12: $3 m
2013.4: $15 m
2014.1: $100 m billion
2014.12: $700 m
Main investor: Alibaba
Limo Service Competition
20% existing app users are not sensitive to price.
2014.8: Didi started Didi Black
covers 16 primary cities and claims 150,000 bookings per day by 2014.12
2014.7: Kuaidi started Kuaidi One
covers 56 cities
Major competitors: Didi, Kuaidi and Yidao
Yidao: covers 74 cities with 5 millions users and 50,000 cars and allies with Haier
Four-party relationship: booking platform, labor service company, driver
Limo service market size grows in half year from 5000 bookings to 50000
20% rake from each transaction
Another subsidy battle started
Partnership
Didi:
2013: Baidu Map, Gaode Map
2013.12: Ctrip
2014.1: WeChat (20 million bookings per month)
Kuaidi:
2013.7: Baidu Map, Gaode Map
2013: Qunar
2013: Alipay, other e-Commerce merchants
Recent Competition on Building More Partnership
ISP: Better price for bandwidth, dedicated connection with ISP; shorter response time
Didi: China Telecom
Kuaidi – China Unicom
exchangeable reward points
O2O partners:
Didi- Sina Leju: free taxi service through one click in 40,000 Wechat Leju accounts
Kuaidi – Sohu Focus
Future Strategies
Grow into an online transportation platform including courier and delivery, mobile retail, and smart bus
Develop an online2offline cycle including transportation, shopping, dining and other local services.
Complexities
Government intervention:
Beijing: Didi Dache, Kuaidi Dache, 96106 (the ‘official’ taxi-hailing app for all of Beijing’s dispatch companies), and all other vehicle-hailing apps unify under a single platform and share data.
Adopted by Suzhou in 2013
2013.5: banned in Shenzhen, Sanya
2014.3: banned during driving, during 7:30-9:30am and 4:30-6:30pm in Shanghai, banned at airports and stations in Beijing, Shenyang and Qingdao
2014.11: taxi driver strike against Didi, Kuaidi limo service in Nanjing, Shenyang, Jinan, Changchun, etc.
2014.12: Didi, Kuaidi Limo service banned in shanghai, Nanjing and Shenyang
2015.1: catfish effect emerges:
ministry of transportation approves four-party limo service model and sends signal about taxi market reform
New players: Uber entered China in 2013 with $1.2 billion raised for Asia market
Who won?
Yet to tell
Most of drivers install both
Swinging customers
77.6% of users installed Kuaidi, 65.5% installed Didi
Taxi drivers: more rides, 20% income increase, less idle capacity, more efficient use of gas
Questions
Why the battle? What’s at stake?
What technological and social changes drove the development of online transportation platform (OTP) like Didi and Kuaidi?
What would you do in the shoes of Didi or Kuaidi?
How’s OTP different from other platform businesses, e.g. Amazon, Skype?
Mobile Compared to Traditional Web
More frequency of usage
Ubiquitous presence
More convenience
Smaller screen
Audio and visual-based instead of text-based
Faster adoption rate
Different user profile
Opportunities with Mobile Platform
New revenue model other than ad, game and goods-selling
Growth opportunities for vertical platform
Great O2O potential
Light asset to heavy asset
Smaller space to bigger space
Stage 1: connect online users with offline service/products
Stage 2: build offline capabilities to create differentiation for competitive advantage
Which traditional industries are susceptible to disruption?
Multiple pain points
Low efficiency
Big market
Long tail
Regulated market:
Traditional news media by Weibo
Bank system by paypal
Telecom by Wechat
Taxi by Didi & Kuaidi
Challenges with Mobile Platform
Dominant entry points for mobile traffic yet to emerge
Consumers’ mobile payment habit yet to be established
Intense competition and fleeting customer loyalty
Stand-alone or multiplatform?
Long Tail Theory
Longer tail: more varied and local merchants get exposure
because of local-aware mobile technology
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Six Themes of Long Tail (Chris Anderson, 2005)
1. far more niche goods than hits
2. costs of reaching niches is now falling dramatically
3. tools such as recommendation or rankings are drive demand to the tail
4. the curve flattens
5. collectively niche products comprise a market rivaling the hits
6. natural shape of demand reveals
Q: how does the long tail theory work in traditional Web vs. mobile Web?
Three Driving Forces (Anderson, 2005)
1. Democratize productions
2. Democratize distribution
3. Connect supply with demand; drive business fsrom hits to niches
Online Marketplaces
Physical goods
Digital goods
Advertising
Information
Communities
Online Marketplace Attributes
Metcalfe’s law
Q: does it work equally across different platforms?
Q: What’s the reverse side of Metcalfe’s law?
Online Marketplace Attributes (2)
Bandwagon effects:
Decreased marginal costs of producing and distributing services or products
Matthew Effects
The biggest one takes all or the rule of two
Multi-homing costs and switching costs
Q: Is it always applicable?
First mover advantage
Q: How does market structure or technology development affect the first mover advantage?
Q: how to sustain it?
Platform Strategy
Connection:
how easily others can plug into the platform to share and transaction
Open technology: early Macintosh to iPod
Gravity: how well the platform attracts and retains participants, both producers and consumers
Leverage social network
Design of incentives, reputation systems
Innovate pricing models:
Adobe: subsidized the more price sensitive side, and charged the side whose demand increased more strongly in response to growth on the other side.
Microsoft: subsidized value-adding developers
Flow: how well the platform fosters the exchange and co-creation of value
Matchmaking abilities
Q: how to dethrone a dominant platform?
(Bonchek & Choudary, 2013; )
Uber vs. Lyft
Uber made $26.4 million on 1.2 million rides in 2013, Lyft made $2.2 million on 170,000 rides
Uber is available in 46 countries, 127 cities in North America. Lyft is only available in 62 U.S. cities.
Car pool: Lyft Line, Uber Pool
Insured driver
Driver background check
Drivers and drivers adopt both
Uber raised $1.6 billion; Lyft $333 million
Competition: poach drivers, sabotaging, culture difference, subsidy, insurance,
http:// www.wsj.com/articles/two-tech-upstarts-plot-each-others-demise-1407800744
Risks with IT Innovation
Innovation is similar to surfing
Predict, time and catch the right wave
Technology risk
Project management risk
Financial risk
User acceptance risk
System risk
Readings for next week
Read about Apple
Learn about the success factors of Apple.
What contributed to Apple’s success? (macro environment, technology infrastructure, product, brand, marketing, distribution, etc.)
Some sources of information: TechCrunch, Forbes, BusinessWeek, Wired, HBR
