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Alibaba, Baidu Invest in Chinese Taxi Apps

Shanghai taxi image via Shutterstock

Shanghai taxi image via Shutterstock

The rapid rise of location-based services (LBS) on the Internet is spawning a new generation of start-up companies, with taxi finders one of the latest to join the trend. Such apps use GPS technology to create services that rely on a person’s location, such as helping that person to find nearby restaurants or shops. Just this week a friend was telling me about one such new LBS to help frustrated consumers find taxis, and now we’re reading about two other companies that are moving onto the investor radar with their own new tie-ups. Neither company looks very big just yet, but either could potentially become a leader in the category for a service that will almost certainly find receptive audiences in big cities like Beijing and Shanghai where taxis are hard to find. Of course the big factor in this case will be execution, since it’s one thing to locate empty taxis and people looking for cabs, but bringing these two groups together in a timely manner will require a high level of skill.

All that said, let’s take a look at the latest news starting with a company called Kuadi Dache, which has just received relatively modest new funding to develop its service. The reports say that Kuadi received a “7-digit” amount of yuan in new funding, meaning the amount is most likely in the neighborhood of about $1 million. More significant is the fact that the investor behind the new funds is Internet giant Alibaba, though that level of funding is really just pocket change for China’s e-commerce leader.

The report says Kuadi now has more than 300,000 users and nearly 30,000 participating taxi drivers, and does some 20,000 transactions each day. Its base is in Alibaba’s hometown of Hangzhou, but it also operates in nearby Shanghai. It plans to roll out its service in Beijing later this year, where it will have to compete with homegrown rivals Didi Dache and Yaoyao Zhaoche.

That fact is a nice transition to the second news bit, which has Beijing-based Didi Dache in its own new tie-up with Internet search leader Baidu, which is also based in Beijing. That tie-up has seen Baidu integrate Didi’s taxi-finding service into the latest version of Baidu’s mapping app for use on Apple iPhones. The service is only available so far in Beijing.

This kind of taxi-finding service is just coming to China but is already present in other markets where people often take cabs. I got to see a similar service during a recent trip to Singapore, and was impressed that it could bring a cab to come pick up me and a friend within 15 minutes even though it was raining quite hard at the time.

Of course Singapore is a relatively simple market, and its advanced telecoms infrastructure means it’s probably quite easy to develop this kind of LBS. By comparison, China is a huge and very fragmented market, and many of the nation’s cabs are lower-end cars that often are quite low-tech models. Those factors could complicate development of a good taxi-finding service with presence in a wide range of cities.

Despite all those obstacles, I do expect that a few of the better-run players will survive and even thrive in this space, as it’s a service that will almost certainly be warmly welcomed by young consumers in major Chinese cities, where cabs are increasingly difficult to find. So we’ll have to wait and see not only who has the best technology, but also who can best market their service to quickly gain a big audience. If all goes smoothly, I wouldn’t be surprised to see Kuadi, Didi, or perhaps one or two other players get some major new funding in the next two years, and potentially make an IPO by 2016.

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