IHS Technology Analysis:
For Apple, the investment in Didi highlights the strategic importance of China and the services segment for Apple’s future strategy. The past quarter’s results show that Apple’s iPhone business is slowing and expansion in China had been one of its main growth drivers in recent years. As its hardware business has slowed, Apple has been keen to drive growth in its services revenues. This move shows how Apple is increasingly focused on services, such as Apple Pay, App Store, Apple Music, iTunes and iCloud.
Apple claims the deal will help further its understanding of the Chinese market, as well as providing a hoped for financial return on its investment. Despite Apple’s strong presence in the Chinese market, Apple’s investment in Didi highlights the need to work with Chinese players for Apple to strengthen its position in China. Working in partnership with local partners to enter new parts of the Chinese market is a common strategy for international companies looking to grow in China. As Didi operates across the Chinese market, not just on Apple devices, it could help Apple gain greater insight into the behaviour of users beyond its own ecosystem.
Apple’s extends its existing Maps strategy into the transportation market
Taxi apps can also be a way into developing a wider automotive strategy and this investment is further evidence of Apple’s interest in transportation, and perhaps the automotive market, beyond its current Apple Maps software.
IHS Technology’s monitoring of investment and M&A activity in the mobile industry demonstrates Apple is not typically an investor in other companies. Usually Apple acquires companies outright.
Competitors such as Google – through its Google Venture arm – have been very active investors. Apple, however, tends to prefer fully acquiring companies and then integrating them into its existing product strategy or creating new products based on those deals. Apple’s acquisition of Beats to launch Apple Music is the most notable example.
Apple’s recent acquisition targets include companies involved in augmented reality, artificial intelligence, GPS and navigation, camera technology and education, all of which give insight into its future strategies and priorities.
The shift in Apple’s strategy to invest at such a scale highlights the strategic importance of the Chinese market to Apple both in terms of the scale of the opportunity and the need for local knowledge and local partnerships for it to further its position there.
The threat to Uber grows from Apple-backed Didi
In terms of global scale, Uber is by some distance the market leader, operating in more cities and with greater reach than its competitors. However, as Didi’s operations in China show, there are significant local and regional players, such as Ola in India and Grab in Southeast Asia.
Many of these apps have significant backing from global technology companies. Uber includes Google and Baidu as investors; Japan’s Softbank has invested in both Ola and Grab; and Apple joins Tencent and Alibaba as an investor in Didi.
Taxi apps provide a number of strategic opportunities for mobile ecosystems. Unlike many other mobile apps, taxi apps are able to quickly establish a billing relationship with their audience as they require an immediate transactional relationship with users. Ride-sharing is often only the first step. Once these apps have started charging users for the journeys they take, they can then use this payment information as a platform for a range of other services, such as deliveries and then wider mobile commerce services. These apps also capture a huge amount of valuable contextual user data.