Why are Uber and Didi obsessed with platform strategy?

In news about animals, there is often a very humorous comment "Now added to KFC's luxury lunch". Netizens' jokes about foreign fast food have become an unintentional Internet hot word. In fact, for companies, integrating the existing supply chain to provide additional products or services is a common business strategy. For example, Uber has personalized services from express delivery to food delivery, and Didi has successively launched products such as express and ride-sharing after taxi and private car. Many people are puzzled as to why companies like Uber and Didi do not deepen their existing private car services and wait for the expected harvest, but instead rush into those market segments with uncertain prospects and rush to build an Internet travel platform? What kind of business considerations are behind these unreasonable choices?

Seize potential opportunities and curb blind capital movement

Robin Li once taught entrepreneurs: Always beware of Tencent, there is no future! And Tencent is also in awe of entrepreneurs. As innovation develops today, the destructiveness and subversion are becoming more and more obvious. The seemingly grand business empire may collapse in an instant. The rise of the sharing economy has continuously lowered the threshold of innovation. The Uber business myth is a specific and small example. Uber, which has recently reached a valuation of US$50 billion, is a twin star parallel to Xiaomi in the eyes of venture capitalists. Those once star companies have been left behind by it: Ctrip's market value is US$10.7 billion, Qunar's US$5.8 billion, eLong's less than US$700 million, and even Ctrip's shareholder, the US's number one online travel company Priceline, has a market value of only about US$6.1 billion.

In China, Uber's success was quickly replicated by Didi, but this market with two giants is obviously not peaceful:

Sharing is a double-edged sword. Idle private car resources can be used by Uber and Didi to solve the taxi dilemma, or to realize other people's ambitions. Here, only the winner takes all, and there is no so-called healthy competition. In the United States, Airbnb and Uber each dominate the market, and there is no rival to rival them. For Uber, the average daily orders have exceeded one million, and the profit is considerable if the commission is 20% of each order. However, Uber, which has a strong financial foundation, is still aggressive in the capital market. The planned new round of financing will reach 1.5 billion US dollars. Travis Kalanick is willing to take the risk of diluting the original equity, but he has no choice but to do so.

Because Uber must snipe at innovative companies like Lyft and Getaround, whose business models determine that once they obtain capital support, they are likely to use subsidy competition to disintegrate Uber's supply chain, even if they cannot make a profit. In response, the far-sighted Travis Kalanick took two countermeasures:

First, through continuous financing, the capital market and Uber have formed a community of interests, suppressing the financing space of Lyft and Getaround. So far, Lyft's F round valuation is only US$2.5 billion, Getaround and Relayrides are still insignificant. Uber also pays special attention to introducing strategic investors, such as its previous cooperation with Baidu, mainly to prevent competitors from suddenly obtaining powerful channel resources and posing a threat to Uber in specific markets. Alibaba's previous investment in Lyft is a signal;

The second is to maintain the continuous growth of order volume through the continuous expansion of product lines, maintain and enhance the stickiness and stability of the platform, which is of special significance for Uber, which is struggling in the whirlpool of public opinion.

In this regard, Cheng Wei can be regarded as a soulmate of Travis Kalanick. Didi launched express and ride-sharing businesses with similar demands as Uber. Some time ago, P2P car rental was in the limelight in the capital market, and then carpooling companies repeatedly won venture capital, but after the suppression from Uber and Didi, they all ceased operations. The cessation of operations of Aipinche is an example.

Using size to trade time, and contain policies, public opinion, and opponents

To some extent, Internet travel services are racing against time to become large, strong and powerful business giants that can control many public resources. This can be regarded as an effective way to wash away the original sin of innovation.

The unlimited extension of product lines can help Uber and Didi gather more social resources, promote the concept of shared innovation and green travel, maintain sufficient public relations heat, and influence future policy trends. Of course, opponents and vested interests always exist. While Uber and Didi gather more allies, they also create more enemies and have to fight hard on three fronts.

In terms of public opinion, Uber and Didi have been extremely successful. This is due to the fact that the post-80s generation has quickly grown into the backbone of society, and also to the fact that the idea of ​​promoting change from the bottom up has been deeply rooted in people's minds. Internet travel companies have won consumers by providing high-quality and low-cost services, while critics have been portrayed as stale conservatives. This is a double victory for marketing and public relations.

Recently, there have been frequent investigations and punishments of private cars in various places, and new regulations on taxi reform and private car management are also being prepared. At this critical time, the Internet travel companies that have attracted much attention urgently need to make a unified voice, so Uber and Didi quickly entered various market segments, relying on their own size to squeeze out or marginalize small startups from the market, reducing noise while also becoming the only object of government dialogue. This is the way to break the deadlock, otherwise dramas like broken windows in Beijing and blockades in Guangzhou will continue to be staged and will never end. The Shanghai Transportation Commission finally integrated taxi companies and Didi into a taxi information service platform after much hesitation, which can be said to be the result of such efforts.

Another factor is the giant competition between Uber and Didi. Both are based on private car resources, and the zero-sum game phenomenon is serious. What one gains must be lost by the other. Therefore, both Uber and Didi are desperately expanding and maintaining products, even those that are not profitable. This has become a hidden secondary line of competition.

An ecosystem that prioritizes scale over profitability

Internet travel is a big business, but whether and how to make money is still a complex question, and there are very different answers in China and the United States. In the United States, although Uber is permeated with the founder's fighting philosophy of "fighting against heaven and people, and having endless fun", its management still follows the traditional business logic, that is, the inviolable core principles in MBA courses. Uber relies more on technical means rather than price levers to adjust demand. The secret to supporting Travis Kalanick's grand vision is that Uber is still a profitable company.

But everything is different in China. The younger generation grew up eating free meals from the Internet. They expect to enjoy the best services at the lowest prices. They will carefully calculate the best use of coupons and discounts, and are happy to share and proud of it. Uber and Didi have to use low prices + subsidies to stimulate and brainwash them in turn to attract them to work together to improve this business model. This has given birth to an ecosystem that focuses on scale first and profitability second.

Judging from the current travel product lines, private cars are positioned higher than taxis. Due to fierce competition, drivers' profit margins have been diluted, and the addition of low-end products such as express cars has made things worse. However, they have to grit their teeth and persist, because prices are always based on the market rather than costs. Uber and Didi can only seek solutions through revenue management methods such as dynamic pricing. Carpooling does not have any profit prospects, because the average amount per order is too low, drivers only have a taste of new things and lack service awareness, and passengers' expectations are not high. The operation of the entire system depends entirely on subsidies. Carpooling has many market segments. Although there is a stable demand for commuter carpooling, there are many low-cost solutions in a society like China where relationships are important. The core purpose of Uber's launch of Uberpool and People's Uber is to win a wider range of users at low prices, stabilize the supply chain, and quickly create a cash flow of sufficient scale. When explaining the success of Amazon, e-commerce tycoon Jeff Bezos once said: "There are only two types of companies in the world, one that desperately wants to charge more money, and the other that tries hard to charge less. We are the latter." Uber was obviously deeply inspired by this.

Didi Hitch has a different ambition. Cheng Wei and Liu Qing certainly know that this product cannot be profitable, and it is a vicious cycle of more orders and more losses. However, Didi has strengthened its social attributes through guidance. "Meeting is a tacit understanding, fate is wonderful, I hope you sit in the passenger seat." Such text message language obviously tries to dilute the commercial color of the service and create an atmosphere of encounter. Zhou Hang of Yidao Car Rental once dreamed that the relationship between drivers and passengers should not be a cold service relationship, but a benign interaction. Drivers can be collected and then brought up from time to time like old friends. Didi is obviously practicing it.

The product attributes of Didi Express are relatively complex. Although it effectively hedges against Uber's low-price strategy, it also competes with Didi's other products. Another positioning of Express is as a substitute for traditional taxis, which shows that Didi has given up hope on integrating existing taxi resources and has begun to make arrangements in advance. However, the advertising copy emphasizing low prices and fiercely criticizing taxis seems out of place in the recent harsh environment, which directly led to an interview with the Beijing Municipal Transportation Commission.

Ultimately, whether Uber and Didi's efforts to "do their best and leave the rest to fate" will be effective will ultimately be determined by the new regulations on private cars that are being drafted. If these new regulations really insist on the two major thresholds of operating qualifications and banning private cars from entering as currently disclosed, then the Internet travel market may very well face a reshuffle.

As a winner of Toutiao's Qingyun Plan and Baijiahao's Bai+ Plan, the 2019 Baidu Digital Author of the Year, the Baijiahao's Most Popular Author in the Technology Field, the 2019 Sogou Technology and Culture Author, and the 2021 Baijiahao Quarterly Influential Creator, he has won many awards, including the 2013 Sohu Best Industry Media Person, the 2015 China New Media Entrepreneurship Competition Beijing Third Place, the 2015 Guangmang Experience Award, the 2015 China New Media Entrepreneurship Competition Finals Third Place, and the 2018 Baidu Dynamic Annual Powerful Celebrity.