Earlier in May, Apple joined in the Sharing Economy with its US$1b investment in China’s largest ride-sharing service, Didi Chuxing. Ride-sharing marketplaces like Didi have been disrupting the traditional transportation economy, bringing the future of car ownership and public transport into question. What does Apple’s move mean for the Sharing Economy?
Apple, traditionally a smartphone provider, is slowly shifting towards being a services provider. Apple Pay, Music and CarPlay are some of the services it has started to offer since the turn of the decade. However, its investment in Didi marks its first foray into the On-demand economy, entering the company into unchartered waters. Apart from the increase in funding, we take a look at how the Sharing Economy will be affected.
Despite the global economic slump, Didi has been experiencing exceptional growth since its inception in February 2015 with its valuation soaring from $6 billion to $25 billion today. It dominates the ride-sharing market in China, beating out global giant Uber and completing 11 million rides daily (furthermore, this translates into 1% market penetration, leaving much room for expansion). Didi has been able to make use of a relative freedom in the Chinese market as China aims to shift its economic focus towards higher-value services such as the technology Didi operates with. On the contrary, Uber has been embroiled in regulatory and legal issues in its home country, most recently fleeing Austin to avoid regulations including fingerprint background checks on its drivers. China looks increasingly promising as the key driver for the sharing economy in the future.
With On-demand services like Didi and Uber, cars can be summoned with a mobile app instantly to your location. Ride-sharing services are able to answer the question “how many cars do we need if cars were to be shared” with such precision due to the vast amounts of data that they collect in the marketplace. It enabled Didi to scale with this creation of data, analysing it to solve customers’ needs. The data collected from its 1.43 billion rides in 2015 could even be used to anticipate traffic congestion and re-direct its drivers on the most efficient routes. Speaking in an interview, Apple CEO Tim Cook identified that the investment was “for a number of strategic reasons, including a chance to learn more about certain segments of the China market”. Apple’s investment in Didi enables it to leverage on its data to optimize store locations based on the data collected from 300 million users in more than 400 cities.
In essence, a marketplace is a platform that aggregates masses of buyers and sellers together. The success of a marketplace predicates on the scale that it builds and the resulting network effects that comes with it. Apple’s investment could allow it to latch onto these effects, allowing it to integrate its services such as CarPlay or iTunes into a larger audience. Marketplaces link the sharing economy together; serving as the meeting place for riders and drivers. With Apple’s investment, the benefits will only get better. Increased synchronization of Didi’s marketplace with the Apple ecosystem can improve the user experience, simplifying the ride-hailing process even further. This would further boost the iPhone’s 27% market share in the Chinese market. For drivers, this provides a new opportunity to utilize their idle assets, or even spare time in the summer to earn an extra side income, especially with the large subsidies that Didi reportedly offers for its drivers.
Somewhere in the (near) future, in China, a passenger asks Siri to hail an Apple-provided self-driving car via Didi Chuxing, taking him to the latest Apple store that opened in the city. With Apple’s latest investment, this scenario seems likelier than ever. People stand to gain from the increased precision of predictability gathered from deep data analyses. It could lead to increased efficiency in the transport industry. At the base of it all lies a marketplace, a platform that links riders and drivers, allowing people to breathe life into their idle assets and earn extra cash.
About: Christopher Woo is a Marketing Communications Specialist at Arcadier, a SaaS company that powers next generation marketplace ideas. You can follow Arcadier on Twitter, Facebook, and LinkedIn for the latest insights on the Sharing Economy.