Bottom line: WeChat’s recent blockage of Uber reflects challenges the US company will face from rival car service operators and their backers in China, providing yet another obstacle as it tries to build up its local business.
A colorful war of words has broken out in China over the last week between high-flying car services provider Uber and the popular instant messaging service WeChat, providing not only some good entertainment but also valuable lessons for foreign companies doing business on the Chinese Internet. In this instance, WeChat has been blocking keyword searches on Uber, meaning users of the popular mobile messaging service can no longer access Uber’s public account or any articles with the Uber name. WeChat has given its own explanation for the blockage, blaming it on technical issues. Of course it’s probably no coincidence that WeChat’s parent Tencent (HKEx: 700) is also a major backer of rival domestic car services provider Didi Kuaidi.
Anyone who thought that Beijing censors and bureaucrats were the biggest enemies of foreign companies doing business in China might have to think again, following this latest incident. The reality is that Chinese Internet companies are a fiercely competitive group, and often do business in many of the same areas. They are also far more likely to use their market position to favor their own businesses and undermine competitors, for example by excluding a rival from search its results like WeChat is now doing.
The latest online spat broke into the headlines last week, when media reported that WeChat searches using the word “Uber” were coming back empty. (Chinese article) The blockage was noticed by WeChat users, who discovered their searches on Uber-related articles and accounts in the public accounts section of the service were producing no results. Such articles and accounts would be an effective way to publicize Uber’s services, which have become quite popular in China these days.
WeChat attributed the problem to technical issues, and said it was working to fix it. I did my own quick searches on WeChat today, and the term Uber still failed to produce any results from the public accounts section of the service. Uber made its own statement shortly after the controversy began, saying the blockage was actually old news and had been going on since as early as March, when it first discovered its WeChat public account was being blocked from search results. (Chinese article)
To be fair, I should point out that Chinese companies more often direct this kind of behavior at their domestic rivals than at big international players. Several years ago a series of such tit-for-tat moves saw many of the industry’s largest sites block their material from indexing by search engines operated by Baidu (Nasdaq: BIDU) and Alibaba (NYSE: BABA). Many companies are also often accused of engineering their software to direct people towards their own products and away from those of rivals.
In this particular case, Uber has also probably become a popular target because of its aggressive move into China over the last year. Despite hitting several roadblocks in China, similar to other parts of the world, Uber chief Travis Kalanick has said he has no intention of leaving the market, and plans to spend $1 billion there this year alone to expand the business. (previous post) I’m personally a big supporter of the company, as I think it’s really shaking up a stodgy Chinese taxi market that’s famous for its poor service.
But this latest WeChat run-in provides yet another reason why Uber’s drive into China won’t be an easy one. Tencent is being smart by blaming technology for the problem, even though everyone knows it’s a big investor in Didi Kuaidi, which also counts Alibaba as another major backer. Uber has responded to that challenge by lining up some big Chinese backers of its own, most notably Baidu. Still, the company can probably expect to face many more obstacles ahead on its road into China, both from the government and the private sector.
(NOT FOR REPUBLICATION)