It’s rumored (Chinese link) that at a dinner attended by Ant Financial and Hello TransTech (formerly Hellobike) bigwigs, Ant Financial CEO Jing Xiandong cracked open a bottle of Guizhou Maotai, an upmarket brand of Chinese rice wine, Jack Ma had previously gifted him, worth over a million RMB.
What prompted the celebration?
The short answer is, by taking the wheel of Hello TransTech’s Series D and every subsequent funding round after that, Jack Ma-controlled Ant Financial secured a critical component of Alibaba’s mobility ecosystem designs.
Ali’s mobility gap
Since Ant Financial’s involvement in Hello’s Series D, Hello has raised RMB 7.8 billion (about $1.1 billion) from investors. That’s a truckload of cash, even for China’s shoot-from-the-hip VC scene. To understand Ant Financial’s investment in Hello and what that means for Alibaba, we need to wrap our heads around two things: (1) why on-demand mobility matters for Alibaba; and (2) what pieces Alibaba had in its mobility ecosystem before Ant Financial pounced on Hello.
On-demand mobility was the missing link in Alibaba’s local services and entertainment ecosystem. Alibaba’s restaurant review, venue booking, ticket purchase, and hotel reservation services are all linked to a common theme: going out and having a good time. This requires adjacent services to transport users from home to venue, between venues, and back home again. As such, on-demand mobility closes the loop between the existing services in Alibaba’s ecosystem.
In Alibaba’s ideal world, users look at where they want to go using the restaurant review tool Koubei, find where they need to go using AutoNavi (a mapping service, not too dissimilar to Google Maps), pay for their meal using Alipay, and head home by plugging into an Alibaba-invested or operated on-demand mobility solution. It’s all about keeping the user in the the mesh of apps, services, and affiliates that make up Alibaba’s ecosystem.
Let’s now have a look at what Alibaba’s on-demand mobility ecosystem had under the hood prior to Hello’s Series D funding round in December 2017, led by Ant Financial.
First, there was Alibaba’s mapping service, AutoNavi. AutoNavi is the “quiet achiever” in Alibaba’s ecosystem. It has over 100 million daily active users, which makes it the most used app in Alibaba’s ecosystem outside Alipay and Taobao (Chinese link). That also makes it the most used navigation service in China (Chinese link), ahead of Baidu maps. In April 2018, AutoNavi rolled out (Chinese link) a ridehailing aggregation service. Users input where they want to go, and can cycle through different providers like Didi, UCAR, Shouqi Limousine & Chauffeur, and Caocao Chuxing, comparing prices and wait times. That move brought AutoNavi closer towards Alibaba’s sweet-spot of asset-light marketplaces, and one step closer to a “mobility super-app” that offers users everything they need to get from A to B.
Second, prior to Hello, Alibaba had a smattering of on-demand mobility investments. Alibaba received a minority share of Didi when Alibaba-backed Kuaidi Dache and Tencent-backed Didi Dache merged in 2015. Despite Alibaba’s further 400 million co-investment in Didi with Ant Financial, Chinese sources claim it doesn’t have a much of a voice in Didi’s boardroom (Chinese link). Alibaba also acquired around 10% of Didi competitor UCAR in 2016. Outside ridehailing, Alibaba had also participated in ofo’s $700 million Series E financing, relieving capital pressure on ofo after hopes of a tie-up with Mobike were dashed.
Bikes and beyond
Enter Ant Financial’s investment in Hello. In my previous article, I laid out why Hello looks a little better off than sharebike rivals ofo and Mobike.
But Hello has used Ant Financial’s capital injection to rebrand and expand beyond bikesharing. At the start of the year, it rolled out a carpooling service. That’s the same service Didi was forced out of after the murder of two Didi female passengers and a male Didi driver last year led to suspension of its carpooling service and a “Delete Didi” campaign.
In February, Hello claimed the new service was performing well, with users across 300 cities logging 7 million rides in the first month of operation. That’s a good sign, because setting up the carpooling service didn’t come cheap. Hello has earmarked RMB 500 million to roll out the service, with incentives for drivers and passengers. If Hello’s carpooling service takes off, the payoff could be significant—Didi’s carpooling service facilitated over a billion trips in the space of three years.
Bizarrely, Hello has yet to make the move that’ll really make it an on-demand mobility contender: integration with AutoNavi. At the time of writing, none of Hello’s services are displayed in AutoNavi’s app, instead relying on traffic from its own app and a mini-program in Alipay. It’s still not clear why this integration hasn’t happened more than a year after Hello joined the Aliverse. This state of affairs is far from ideal, especially when you consider that AutoNavi is the country’s leading navigation service.
In fact, getting Hello’s sharebikes and carpooling service on AutoNavi may be critical for Hello’s future fundraising aspirations. It hopes to raise between $500 million to $1 billion in its next funding round. As part of their due diligence, would-be investors will likely examine app traction and integration with third-party navigation apps before committing funds in a relatively capital-constrained environment.
With Hello, the Alibaba ecosystem gains two forms of on-demand mobility: sharebikes and carpooling. Although this is not the whole on-demand mobility pie, Hello will need to pick its fights carefully if it’s to avoid the scrapheap. With Didi’s carpooling service clouded by regulatory uncertainty, expect Hello to push as hard and fast as it can into that area. But it isn’t on course for a head-on collision with Didi over ridehailing just yet.