DiDi Cab Caller App in China, makes me and driver happy, but truly burns investors money for no good reason

By August 22, 2013
Keywords : Cab App

Living in an utterly crowded metropolis like Shanghai, the traffics always get on my nerves. Sometimes I even have to fight for a taxi. So most of the time, I rather use metro to commute. But what if metro had a major breakdown? This was how I experienced today morning. Throngs of hopeless commuters walked outside of metro station, hoping to catch a cab, which was highly unlikely during such a peak time and worst scenario. However I was able to get in an empty taxi with my gleeful smile when rest of multitude watched me agape. My secret weapon was a cab app called DiDi, but it does not seem to have a sustainable future.

Of course DiDi is not that magical, just a third party cab caller app which connects taxi drivers and passengers for location based services. It worked like a charm this time simply due to information asymmetry; I believe that crowd outside metro station has not heard of the existence of DiDi yet.

Next I had an interesting conversation with the taxi driver, and below are the extract:

Me: “When I submitted my taxi order to DiDi, it spread my message to over 200 taxi drivers nearby, and within 2 minutes, you took my order, gave me a phone call and told me your car plate number. So what was your incentive to take my order? I was told you guys can get subsidy from DiDi, right?”

Driver:”Of course, to pick you up, DiDi is gonna give me extra RMB30 for this ride”

Me:”Always RMB30?”

Driver:”Sometimes RMB10, sometimes even RMB100 per ride…it depends. To me, DiDi seems to design this reward system for drivers in a random way.”

Me:”How does Didi verify you pick me up?”

Driver:”Come on, don’t you see the App has rating and review for both of us. If I stood you up, you would complain my service to DiDi, then DiDi would put me in a black list which would prohibit me taking order from DiDi for a long period of time; of course it works the other way around”

Me:”Okay, no wonder these days I feel very difficult to just walk on the street and stop a cab even though it is empty…Does your taxi company allow you to use third party cab caller app?”

Driver:”Yeah, with extra money earned, who cares to pick up random stranger on the road anymore. My taxi company forbids that, but who knows!!! I no longer take order from my company’s call center which would never give me same amount of monetary incentive as DiDi. But sometimes I do wonder where DiDi got all these money for our driver”

Me: “Investors, especially venture capitalists, are fueling this. DiDi makes you and me happy, burns the pockets of investors, and annoys these taxi companies. It does not appear to have sustainability”

Driver:”I agree. I was told Beijing regulator is already trying to intervene, wishing to consolidate those cab Apps in the wing of big taxi companies, however once these App starups are no longer independent, I think I probably would not receive huge subsidy anymore”

So if I were one of the investors for DiDi-like App, I would really be perplexed about what are the ultimate purposes there for throwing my money to taxi drivers as subsidy? To gain adoption, popularity among users? Sure, but still for what? To create a new breed of taxi company based on digital technology? But drivers are just allured by subsidy which cannot last forever to run a taxi business, right? Somehow I feel I cannot come up a good answer.      


Legal mentions © L’Atelier BNP Paribas