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Hailing a cab on your smartphone: a rising app market

By Alan Hellawell III and Vivian Hao   (Shanghai Daily)

08:15, May 27, 2013

Mobile taxi booking apps have emerged recently as a focal point of interest in China due to sharp usage growth, as well as growing scrutiny from China's regulators.

We view the taxi booking apps market as already quite crowded, with independent app companies as well as several Chinese internet and telecommunications groups offering solutions.

According to the latest report from Analysys International, by the end of April, Didi Taxi Booking, believed to be invested by Tencent, claimed a 36.8 percent market share in terms of cumulative downloads, followed by Yaoyao Taxi Booking (21 percent), China Telecom's Easy Taxi Booking (14.9 percent), Taxi Booking Secretary (13.3 percent) and Kuaidi Taxi Booking (10.1 percent).

Other players each saw less than 5 percent market share. In order to further penetrate the market, most competitors are offering subsidized installations to taxi drivers and passengers, with subsidies usually in the form of mobile recharge cards.

We believe taxi booking apps, broadly speaking, solve two long-time problems in the taxi market.

On one hand, hiring a cab can often be challenging in cities such as Beijing and Shanghai, particularly during rush hours. On the other hand, taxi drivers often ply the streets for long periods of time without a customer during off-peak periods.

Taxi booking apps generally enable passengers to catch a cab during peak hours by paying acceptable extra fees and push booking request to the most proximate cabs in order to reduce idle time. Taxi bookings apps thus can create value for both drivers and passengers.

Nearly all the existing offerings in the market are free to download.

In the medium term, we view commissions to be the most feasible source of revenue for such apps.

An ongoing experiment is virtual item sales on Yaoyao Taxi Booking. Users can purchase items on the app and use them as tips to enjoy priority in the booking queue, with Yaoyao sharing a slice of the gratuity.

The sudden rise and wide application of taxi booking apps have drawn the attention of regulators. The government believes that taxi booking apps have disturbed the system as they often encourage taxi drivers to favor customers offering big tips and those in need of long rides, thus creating difficulty for passengers who do not use such apps to hire a cab.

The Beijing Traffic Management Bureau recently defined using virtual items as tips as an indirect price hike, and a violation of existing regulations. Meanwhile, regulators in Shenzhen, Guangdong Province, banned the use of cab booking apps among taxi drivers in mid-May.

We expect a tightening of regulations on such apps in more Chinese cities in the future.

A likely solution might involve the integration of taxi booking apps and taxi companies' existing booking systems, with both charging a reservation fee set by the local regulator.

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