In Uber's Quest to Win Over China, Tencent Blocks the Way

Uber Accounts on WeChat, Tencent's Messaging Service, Mysteriously Deactivated

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Credit: Andrew Harrer/Bloomberg

China's dominant ride-hailing app has powerful friends. Among the backers of the car-booking app Didi Kuaidi is Tencent, owner of the country's most popular messaging app, WeChat. The service's more than 600 million active users, most of whom reside in China, use the app to communicate with friends, as well as receive updates and coupons from many of their favorite domestic and foreign brands -- with one major exception.

Uber is nowhere to be found on WeChat.

The company says its accounts began to disappear from the service on March 16, starting with its customer support profile in Hangzhou and then Beijing the next day. Over the next few months, Tencent had banned or frozen all of Uber's accounts on WeChat, says Emil Michael, senior VP-business at Uber. The San Francisco company is speaking out for the first time about the practice, which it describes as anti-competitive, Mr. Michael said.

Tensions between Tencent and Uber surfaced shortly after the Feb. 14 merger of Didi Dache and Kuaidi Dache, the country's two biggest homegrown car-booking apps, according to Mr. Michael, who's currently leading fundraising efforts for Uber's Chinese operation. "From then on is when you start to see a deterioration in the competitive environment, and it hit a crescendo where our accounts actually got shut off in March," he said.

Uber is spending furiously in China, telling investors in a recent letter that it plans to spend $1 billion there this year. Uber says the country accounts for half of the top 10 busiest cities by number of trips booked through the app. But Didi Kuaidi is far ahead. The company accounts for 78% of the country's private car business, according to market research firm Analysys International.

Tencent initially blamed Uber's issues on WeChat policy violations and then on technical glitches, according to reports in the local media. Uber remained silent on the issue until now. Tencent and Didi Kuaidi declined to comment.

"They are very sensitive on this," Gene Cao, an analyst at Forrester Researcher who watches the Chinese ride-hailing market, wrote in an email. "Tencent, particularly their WeChat business unit, is very conservative about publicly commenting on any WeChat strategy."

Rivalries in China's technology industry run deep. In 2013, Alibaba suspended some of Tencent's messaging services, while Tencent blocked Alibaba's payment processor, Alipay, from WeChat. Tencent eventually expanded its ban on Alibaba's businesses after striking a deal with another e-commerce company,

Before the taxi app merger in China, Tencent blocked Kuaidi Dache, backed by Alibaba, from sharing coupons through WeChat. Tencent has also barred users from accessing services provided by Qihoo 360 Technology.

Of course, American companies employ their own tactics designed to needle rivals, and Uber is certainly among them. The ride-booking startup Lyft complained about Uber employees flooding its app with thousands of fake ride requests in New York last year and telling investors not to fund the company.

But the loss of WeChat is a particularly big hit to Uber in China. WeChat has become an important promotional tool for companies trying to reach affluent Chinese. Companies and public figures can use special accounts to post advertisements, commentary, or news to followers. The Chinese version of WeChat had 8 million public accounts as of October 2014, according to Tencent. Before March, WeChat had become a significant part of how Uber communicated with passengers and drivers.

Uber is unlikely to get help from the Chinese government. Beijing tends to side with local companies over foreign ones, and Silicon Valley has suffered as a result. Mobile chipmaker Qualcomm was fined $975 million by Chinese antitrust regulators in February, and other tech companies, including IBM and Microsoft, have also had to contend with government backed efforts to favor home-grown technology over foreign vendors.

~ Bloomberg News ~

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