Will put $142m into apps in hopes of capitalizing on online-to-offline industry
Major Chinese social media platform Weibo Corp announced it has agreed to invest $142 million in Chinese taxi-hailing service Didi Dache and Kuaidi Dache, according to Weibo's filing published on Tuesday (U.S. time), a tie-up which experts said could create a win-win situation.
Weibo will invest in Didi and Kuaidi in their latest round of equity financing, through their Cayman Islands holding company, Xiaoju Kuaizhi Inc, according to the company's filing with US Securities and Exchange Commission (SEC).
No details about the capital raising process were revealed in the report.
Didi Dache and Kuaidi Dache, backed by Chinese Internet giant Tencent Holdings and e-commerce giant Alibaba Group Holding respectively, announced their merger worth $6 billion on February 14.
The merged company, known as Didi and Kuaidi, is seen as the major rival to U.S.-based car service firm Uber in China.
Weibo has high expectations for the booming online-to-offline industry in China that Didi and Kuaidi represents, which partly explains why the company invested in the car-hailing service, according to a comment sent by Weibo to the Global Times Wednesday.
Ye Yun, Kuaidi's PR, said Didi and Kuaidi would not comment on the equity financing.
There was a significant increase in third-party mobile payment driven by mobile Internet payment including for taxi-hailing apps from 2014, stated a report published by Beijing-based market consultancy iResearch in July 2014.
In 2014, third-party mobile payments increased 391 percent from 2013, reaching 6 trillion yuan ($1 trillion), according to an iResearch report in March.
Weibo was attracted by an increasing number of customers who use car-hailing service apps, Qi Xu, an analyst from iResearch, told the Global Times Wednesday.
"The cooperation is likely to help Weibo boost its revenue, as the company will benefit from the increased daily transactions in taxi-hailing service," Qi noted.
One possibility for Weibo to benefit from the cooperation would be to set up a mobile payment feature for users to pay for taxi services while another is for Didi and Kuaidi to send notifications to Weibo users based on their posted locations, said Qi.
In December 2014, Weibo had 175.7 million monthly active users including ordinary people, celebrities, organizations, government agencies and media outlets, according to the company's website.
Zhang Xu, analyst from Beijing-based market research firm Analysys International, echoed Qi's view. Zhang said Weibo has been experiencing stagnant user growth and a decline in user engagement since 2012.
"Weibo has been trying to figure out how to convert its website traffic into revenue and the cooperation with the taxi-hailing service could be an opportunity," Zhang said.
Weibo and Didi and Kuaidi also have an indirect past history, since Kuaidi's parent company Alibaba used to invest in Weibo, Zhang said.
"Didi and Kuaidi could also benefit from Weibo's advertising and marketing, which are two advantages in the company's operations," Zhang noted.
Weibo generated revenues mainly from advertising and marketing services to customers, according to the company's annual report for 2014 published in April.
For the first quarter of 2015, Weibo reported net revenues of $96.3 million, compared to $67.5 million for the same period last year. However, a loss of $2.85 million in net income was recorded in the first quarter of 2015, according to its financial report published in May.
Didi and Kuaidi have 1.35 million registered drivers operating in 360 Chinese cities, Xinhua News Agency reported over the weekend. The company's premium car services are now operating in 61 cities and the number of daily calls has reached 4 million per day, according to Xinhua.
