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How China's Taxi App Market Stole Google and Facebook's Thunder

Alibaba and Tencent Have Revolutionized Taxi Apps as Mobile Commerce Platforms

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Credit: Didi Dache taxi-hailing app backed by China's Tencent

There is a phase Westerners often use in Asia: "Same same but different."

It's a cliché with a simple meaning: While on the surface something may seem very familiar to the Western eye, look a little deeper and it is actually very different. There is no better example of "same same but different" right now than the taxi app wars being fought out in both the U.S. and China.

I remember discovering the taxi app Uber for the first time on a 2010 trip to San Francisco. It had only been launched a few months previously, but my friend Justin explained how it was already taking the city by storm.

Its simplicity of use and clear user and driver benefits made it one of those "smack me in the face" moments of the year. Why had no one done this before?

And now the same moments of clarity are happening all across China. As we speak, the Uber model is not only being copied and localized, it is being transformed into a mobile commerce opportunity (stick with me and I'll explain how.)

On the surface the meteoric rise of taxi apps on opposite sides of the world revolves around the same premise: the universal human insight that you can never find a taxi when you want one, especially when it is raining. And on both continents, enabling the screen in the pocket to allow you to jump to the front of the virtual queue by paying a premium has solved the problem.

Of course imitation is the highest form of flattery, and good ideas travel fast, especially in China. With rough estimates putting the number of taxis in Shanghai alone at 50,000 and urbanization growing rapidly, there was always going to be a use for an Uber-type solution in China.

But this is where the "same same but different" philosophy comes into play. The first difference is the competitive landscape. While companies like Hailo are making some inroads in the U.S., Uber has pretty much cornered the market.

In China however, two of the country's biggest internet companies, Alibaba and Tencent, saw an opportunity and are battling it out over the lucrative market by backing similar but rival taxi apps.

Internet behemoth Alibaba is behind Kuaidi Dache ("Fast Taxi"), while Tencent, the company also behind fast-growing social app WeChat, is backing Didi Dache, a name that roughly translates to "Beep Beep Call a Cab."

But what was the opportunity they saw?

Both Tencent and Alibaba soon realized that once users had downloaded either of the market-leading apps and validated a bank account, they suddenly had a viable mobile e-commerce platform in their pockets.

So unlike Uber, which is content to control the (admittedly sizeable) U.S. taxi market, Alibaba and Tencent seized the opportunity to win the greatest digital prize of all, the chance to control the inevitably massive m-commerce market, fuelled by the country's 500 million smartphone users.

The humble taxi apps are just the beginning. WeChat POS is rumored to be launching very soon, enabling any merchant the ability to generate a unique QR code to scan and link to native payment services.

In just six months we have seen yet another example of what China does brilliantly, namely major micro-innovation. The taxi apps were just the beginning of an m-commerce revolution, a narrative that ended up as a great idea taken further by creative thinking and innovative implementation.

And what a massive missed opportunity for Western companies. Despite every year since 1997 being "The Year of Mobile," mobile commerce has yet to take off in significant numbers in either the U.S., Europe, the Middle East or Africa.

Yet in China it is flourishing. In 2013, the central bank handled a total of 1.67 billion mobile payment transactions worth $1.6 trillion, according to official government figures.

Interestingly it was not the newest and hippest start-up taking a lead on creating an m-commerce ecosystem; it was the biggest and most established players in the market.

Think about the implications. What if Google or Facebook had made the same play with Uber? How many of the 160 million smartphone users in the U.S. would now have an m-wallet? And what volume of commerce would now be going through them?

Forget virtual reality systems. Mobile commerce could have been the game changer that tipped a great social network into one of the most dominant financial institutions on the planet.

As we say in Asia, "Same same but very different."

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