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What Does Uber’s Retreat Say About the Ability of U.S. Internet Innovators to Succeed in China?

By Angela Bao

Unlike many, I don’t see Uber China’s acquisition by Didi Chuxing (“Didi”) as the end of Uber’s story in China. Nor do I put it in the same category as many other well-known Silicon Valley failures in the world’s largest internet market. Uber China investors will soon own 20 percent of Didi (valued at $35 billion post acquisition). In exchange, they would give away a little more than 10 percent of Didi’s market share. That is a great illustration of what the old Chinese proverb says, “retreat for the sake of advancing (以退为进)”.

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Uber was able to grow from 10 Chinese cities to 60 over the course of 12 months, a laudable effort considering how heavy the overhead is for running a strictly regulated cab-hailing business in China. I think one lesson that Uber China has taken to heart from its western predecessors is that, the headquarter knows it cannot strategize about China while sitting in the Silicon Valley office. Uber’s management values China enough that they gave the local team a massive amount of autonomy, and the leadership is among the most-seen western business leaders in local Chinese events and press. All of these have shown the newer generation of Silicon Valley entrepreneurs’ galvanized determination to listen, to adapt, in order to win.

That said, Uber China still finds itself struggling to move fast enough to meet Chinese consumers’ appetite. Uber is widely seen as one of the most aggressive companies worldwide, but in China, where deep mobile penetration, seamless connectivity and fierce competition have allowed consumers to be extremely demanding, Uber’s pace falls short.

Here is one example. More than once when I used Uber China in Beijing, I found the driver would not call me when he/she arrived (the location on Uber China’s map was often not accurate enough for the driver to easily find me). The reason has always been the same: I registered a Uber account using my U.S. cell number, and when the driver tried to call me, it would dial an international call which the driver cannot afford. So they would discontinue the call and circle around, expecting me to miraculously spot the car from the busy Beijing traffic. I always ended up being the last one to be picked up if all other friends chose Didi. It is simply hard to imagine such technical issues are not resolved by a local startup over a couple of weeks, if not days. The minor inconveniences have grown and gradually eaten into Uber China’s traction.

Despite all the barriers that China presents, I continue to think it is a promising market for western companies who dream big and want to win big, especially in areas where local startups are not yet able or willing to dive deep into. That would frontier technologies such as robotics, artificial intelligence, and developer tools. But the discussion on that is for another time.

Reposted from Chinafile.