
Uber and Under: China’s Hometown Advantage Claims Another Victim - steven
https://medium.com/backchannel/when-it-comes-to-china-googles-experience-still-says-it-all-bdc4eeedd32c#.tiz8d8qwn
======
_Codemonkeyism
Article works like this:

1\. First I start with my pet theory (China kills foreign competitors to local
companies)

2\. The headline case does not support my theory with facts

"Uber in the ride-sharing market; in fact, Uber felt it was treated fairly by
a government interested in transportation innovation. According to reports on
the ground, Didi used its local knowledge to act more nimbly in satisfying
Chinese customers."

3\. I draw stories from fantasy world

"But my guess is that if the American ride-sharing company had been more
successful, China would have put a Mao-sized thumb on the scales."

4\. I go on as if the facts (Uber being clobbered) support my pet theory.

5\. Page views + Expert!

(I'm not saying China doesn't protect it's companies)

~~~
muddyrivers
If an American company failed in China, it must be because it is treated
unfairly.

Wait, Walmart, MacDonald's, Procter & Gamble, etc are hugely successful in
China. Nah, they are not tech companies. Wait, Apple is successful in China.
Microsoft has a good run, too. Even Yahoo had a few good years there.

~~~
terasoans
Not to mention all the American fashion brands that are doing great in China,
like Levi's, Coach, Polo, etc.

Add in the makeup brands like Lancome, Estee Lauder, Clinique, etc.

~~~
vadym909
The Chinese public values hardware and tangible stuff. Plus its made in China,
so the Chinese Govt lets them live. Apple, VW, GM, Caterpillar, Fashion.

The Chinese public don't much value IP, software or services and so the
Chinese Govt doesn't need to let anyone get a foothold. Plus these companies
don't really help the Chinese economy with jobs, etc. so Google, Uber,
Software? Consulting? Banks?

~~~
merb
actually most IP is pretty misleading anyways.

sure there are good IP examples but since the 21th century the most stuff is
over patented.

especially design shapes. most development will lead to the "optimal" design
anyways maybe not "exactly" the same but the same as it would threaten
somebodies IP. software patents, too. so much stuff that is patented that you
will probably have a really hard way to come up with a new video codec without
violating "something".

patents should be invalidated based on "evolution" of triviality and state of
the art, but they will never be since somebody will pay a huge amount to just
keep this stuff.

and that just applies to IP in "our" world. In other stuff it's even worse.

------
habosa
I don't really see Uber as a "loser" or "victim" in this latest development.
They accomplished a lot here:

    
    
      * Stop losing $1B/yr in a non-premium market (low average fare)
      * Get a 20% stake in the new Didi/Uber hybrid company, which will grow over time without much active effort by Uber
      * Negate Lyft's efforts to run around Uber in China by empowering Didi to crush them
      * Align with Apple, who invested $1B in Didi
    

All of this just by giving up a failing Chinese taxi business. Uber claims
they're not just a taxi company and that they can be a worldwide logistics
network. If that's true they can fine-tune that technology elsewhere and re-
enter China in other businesses later.

~~~
erdevs
So weird to see people trying to put a positive spin on this for Uber.

Uber lost in China, flat out.

> Negate Lyft's efforts to run around Uber in China by empowering Didi to
> crush them

What? Didi and Lyft struck a deep partnership. Lyft doesn't have Chinese
operations. The pressure induced on Uber by Didi and Lyft working together is
part of what got Uber to admit they were losing the fight and didn't have a
reasonable path to victory.

As for framing their 20% stake (actually, it is 18%) as a win, consider this:

Uber burned _over_ $2B in cash in China. If simply owning a % of Didi was an
acceptable "win" state for Uber, they would've been _much_ smarter to simply
_invest_ that $2B into Didi. Just a year ago, Didi was valuated at only
$13B... even then, the $2B would've resulted in a ~13% ownership stake. Last
year, they were valuated under $10B. Tencent got a ~20% stake in Didi for just
$15M only 3 years ago.

In fact, Uber could've played a much stronger hand and ended up with _far_
more than 18% of Didi if they'd offered to invest $1-2B and agreed not to
enter China in the first place. Or, they could've made a credible threat by
growing rapidly (as they did) for a year, and _then_ offering a merger + an
investment from a position of strength. Instead, they played a suboptimal
strategy. They continued to operate in China and their growth slowed,
meanwhile they burned even more money, their investors started making noise
about backing out, and they gave Didi time to strike huge strategic
partnerships (Kuaidi and Lyft) and raise a bunch more money, all of which
strengthened their position relative to Uber even further.

The time to strike a combination with Didi was 1-2 years ago. They could've
got a much, much better deal while still spending only the same total amount
of money.

This was a loss for Uber, and it absolutely wasn't their intended outcome, nor
their best outcome.

Uber has absolutely dominated in other markets. So, it's not like they're
dummies or poor operators. They are amazing in terms of market domination. But
let's not put a sugar coating on this. Call a win a win and a loss a loss.

~~~
habosa
For what it's worth I am not trying to put a spin on it for Uber, I am
generally one to root against Uber (you can see this in my comment history).
But I do respect their ability to almost always get what they want.

You're right they could have done better, but they did a great job at
mitigating loss and backing out of China with a lot more than just money lost.
They'll get a piece of the pie going forward.

My comment about Lyft was that by partnering with Didi just like Lyft did,
Uber can now minimize the possibility that Lyft gets farther in China than
Uber does. Everyone is relying on Didi, so Lyft and Uber will both get some of
China but not the lions share and Uber will continue to beat Lyft in all other
markets.

------
erdevs
Ugh, this is a poorly written piece. Points are muddled, poor segues, poor
references/unbacked claims, and a meandering story. Not what I'd hope for from
Levy.

From the article:

> "..in fact, Uber felt it was treated fairly by a government interested in
> transportation innovation"

Anyone have a source on this?

Also, this seems to me like something you'd say even without believing it, if
you were afraid of disgruntling the government (either for Uber's operations,
or for your prospective future endeavors).

------
api
About the only thing I agree with Donald Trump about is that we should be more
aggressive with China. They're clearly protecting their domestic industries
very aggressively via tactics like the Great Firewall and subsidizing of
domestic companies, but any protectionism on our end would apparently be a
trade treaty violation. Very, very unfair. But nobody wants to challenge it
because too many American companies are still getting rich off cheap labor in
China.

~~~
adventured
Indeed, most of their big industries are heavily owned and controlled by the
government. It is interesting how the WTO has allowed China's eg heavily state
controlled and owned steel producers to endlessly dump below cost with zero
consequences. The same thing is going on in several other industries at the
moment.

------
tombone12
"This is not to say that Chinese government regulation drove Uber’s deal with
Didi, which was clobbering Uber in the ride-sharing market; in fact, Uber felt
it was treated fairly by a government interested in transportation
innovation." ... and then he follows up with a story about the Chinese
government treating google unfairly. Nice segue man.

------
gonvaled
A cursory search shows that the US is protectionist too:
[http://www.cnbc.com/2016/02/22/huawei-well-re-enter-us-
marke...](http://www.cnbc.com/2016/02/22/huawei-well-re-enter-us-market-if-
welcomed--mobile-world-congress.html)

~~~
linkregister
A cursory search will also find gun deaths in the UK and Australia. I guess
Somalia and Yemen don't have a problem at all!

I'm using this extreme example to demonstrate that the degree of protectionism
employed by the US (and your example isn't even definitive) pales in
comparison to that employed by China.

I'm not saying I agree with this article.

~~~
gonvaled
Don't forget Snowden's laws, in particular the Zero, First and Second laws:

Zero) Any US company _might_ be in bed with government.

First) Any US company _might_ be forced to deny involvement with the US
government.

Second) Any US company _can_ be tried in secret courts.

So, basically all US companies are potentially government branches.

This is _not_ tongue-in-cheek.

~~~
linkregister
Can you share the links to news sources describing companies or company
officers being tried in secret courts?

~~~
gonvaled
If I am right, we are talking about FISA / FISC [1]. This was widely reported
during the Snowden scandal, but I do not have the links.

Anyway, this is secret stuff, so by definition you won't find a lot of
information out there.

[1]:
[https://en.wikipedia.org/wiki/United_States_Foreign_Intellig...](https://en.wikipedia.org/wiki/United_States_Foreign_Intelligence_Surveillance_Court)

~~~
GauntletWizard
The classic standby; I don't have proof of the conspiracy, that's how far it
goes!

~~~
oldmanjay
Are you forgetting the the secret courts have been proven to exist? I try to
be charitable but your comment is either trolling or borne of sheer ignorance.

~~~
tedunangst
The existence of the "secret courts" was never a secret.

~~~
gonvaled
What they do is secret

------
Asetsuna
If Uber's goal is to dominate the Chinese market, it lost the war, of course.
But Uber as a business company, making profit is it's ultimate goal which is
actually accomplished in its deal with Didi. Also Uber can focus on all others
markets in other countries where it is more possible to be the dominant.

------
mmel
I find it interesting that major Chinese internet sites like qq.com,
weibo.com, baidu.com & taobao.com seemingly have no interest in becoming
globally recognised like western social media brands, and seem content with
their mandarin speaking audience (which is quite a big audience, mind you).

------
titomc
" Uber has become one more casualty in China’s other wall, a towering fortress
of restrictions, regulations and unfair play that keeps down American internet
companies. "

The government is protecting the home grown companies as any other good
government would do. So whats the problem ?

~~~
blahi
The problems are deep and broad and lead to the Napoleonic Wars and the United
States' independence among other things.

------
prasath5s
I'm wondering, how Coca-Cola being a US company is successful in China ? (OMG
did I just gave China a opportunity to restrict a US company??)

~~~
mikeash
Plenty of US companies are successful in China: McDonald's, KFC, and Apple
come to mind.

I think Uber failed to adapt to local conditions. I was in China about a year
ago and suggested Uber a couple of times, but we always ended up using Didi. A
major part of that was payments: Didi integrated with the mobile provider's
payment system making everything nice and transparent, while Uber wanted a
credit card.

~~~
adventured
All the companies you mention are having big problems in China right now.

Apple will lose at least 50% of its sales in China over the span of about two
years. They just lost a third of their sales there as of the latest quarter,
while their market share is plunging rapidly. Zero chance that situation will
turn around. In China, if you lose your position, you're toast.

Yum is desperately trying to figure out how to liquidate out of China as their
market share collapses rapidly. Yum is finding out that China is hard to
operate in to begin with, and much harder to operate in when the ground is
sinking out from under you. They'll be out of China entirely, holding a
minority position, within just a few years. McDonald's is in the same
increasingly struggling boat:

[http://www.bloomberg.com/news/articles/2016-08-03/china-
star...](http://www.bloomberg.com/news/articles/2016-08-03/china-starts-to-
loses-its-taste-for-mcdonald-s-and-kfc)

------
stevesun21
first of all, Uber China is not the first competitor DiDi killed, it is the
31th which means there are 30 China "uber" dead before. In another way, Uber
cannot even beat Lyft at hometown. What this story tell you?

------
thisisbad
It is not in their national interest to have activities of Chinese citizens
controlled by foreign companies. They can create their own services, which
will serve a huge domestic market, keep the wealth in the country and support
domestic economy.

------
omegaworks
>even to the point where its CEO has learned to speak Mandarin

Does this seek to create an undertone of fear that English might not be the
dominant business language of the next century?

Way to stoke the xenophobia, Steven Levy.

~~~
gcr
There are many reasons why one might want to speak Mandarin.

Because it's a cool language, for one.

Because one wishes to do business in a country where Mandarin is the primary
language, for another. In this light, learning that language is a strong
signal of respect, which is prized.

Because one might have personal friends?

When seen in this light, fear doesn't seem like a particularly strong
reason...

~~~
300bps
Also Zuckerberg is married to Priscilla Chan who is ethnic Chinese although
she grew up speakingk Cantonese.

[https://en.m.wikipedia.org/wiki/Priscilla_Chan_(philanthropi...](https://en.m.wikipedia.org/wiki/Priscilla_Chan_\(philanthropist\))

~~~
gcr
...Wait. Why is Zuckerberg learning Mandarin then?

~~~
yannyu
Because business isn't generally done in Cantonese. It's a common story that
families that historically spoke Cantonese are now teaching their Mandarin
alongside or instead of Cantonese because Mandarin is more useful in the
professional world.

