On August 1 Uber announced that it is selling its Chinese brand and operations to Didi Chuxing for $1 billion, its annual burn rate in that market, in exchange for a 20% stake in the local competitor. And that the two companies’ CEOs, Travis Kalanick and Cheng Wei, would take seats on each other’s boards.
While the deal triggered a flurry of articles, they mostly have repeated the few facts that are known so far, with a few variations. At the company level there is general agreement that the merger for (near) monopoly will benefit both Uber and Didi Chuxing by increasing the profit pool in the Chinese ride-hailing market, but there’s some disagreement on whether this was Uber’s plan from the beginning. And at the country level, some have averred that this is yet another illustration of Chinese uniqueness, at least as far as U.S. tech companies are concerned.
Rather than rehashing these points, I want to take a broader perspective and use the Uber-Didi deal to reflect more broadly on platform companies and globalization. “Platforms” as a business concept have been traced back as far as 500 years, but the surge in their popularity is much more recent and reflects in no small measure their eye-popping valuations. Thus, the Center for Global Enterprise has identified 176 platform companies globally with a combined valuation in the excess of $4 trillion, including the five most valuable publicly held U.S. companies as of August 1 (Apple, Alphabet, Microsoft, Amazon, and Facebook).