So Baidu is investing in Uber: is that really a good idea?

Rumors have been swirling for a few days now that Baidu was planning an investment in Uber, but today the company more or less confirmed it. A spokesman from Baidu told Tech in Asia (and every other media outlet that called) that the Chinese search giant will announce an investment and partnership next week with an American startup that is “a household name.” Unless Baidu has decided to troll the entire world’s tech press, that means Uber.

The size of the investment and the details of the partnership are unconfirmed, but both Bloomberg and the Chinese tech press are reporting it could be as much as US$600 million. Whatever the true number ends up being, it seems clear that Baidu means business.

On the one hand, the Baidu-Uber link-up seems entirely logical. It fits well with Baidu’s ambitions of further expansion beyond China’s borders, and gives the company an immediate entry point to the white-hot transportation app market in China. From Uber’s perspective, it gets a powerful and knowledgable local partner to help further its expansion into China, and it may also get access to valuable data from Baidu’s other services (like user location data) that might give it a leg up on local competitors. But…

Uber is looking like a risk

On the other hand, this investment comes at a time where Uber is looking like a riskier play than ever, especially in Asia. In the wake of an incident in India where an Uber driver with a criminal history of sexual assault raped an Uber passenger, the app has suffered a wave of bans. Numerous Indian cities have banned it, as has the nation of Thailand (although it’s still operating there). The app has also been banned in Spain, and it is being sued by two US cities for misleading customers about its safety practices.

In short: Uber is looking like a much riskier play today than it was at this time a couple of weeks ago. There’s no doubt the app’s growth potential is huge, but even the most powerful startup cannot override the law, and Uber is clearly vulnerable to being entirely shut out of large, potentially very lucrative markets. Baidu has shown a lot of interest in expanding into developing markets like Southeast Asia with its other products, but with Uber bans in Southeast Asia raining down all week, Uber’s prospects there look dimmer than before.

See: I fell for Uber’s safe image because I didn’t – and still don’t – have better options

It’s also hard not to wonder if the list of countries that have banned Uber could eventually include China. Baidu has a good relationship with China’s government, as must any Chinese internet company that wants to remain in business. But if a high-profile safety scandal like the rape in India were to unfold involving Uber in China, it seems unlikely that Baidu’s clout would prevent regulators from shutting the American startup’s operations down. Certainly, China’s authorities have proved over the last decade that they are not hesitant to ban foreign tech companies from operating in China if that seems to be in China’s best interests.

Guilt by association?

Investing in Uber isn’t just a financial risk. It’s also a bit of a public relations risk. Although these issues have not gotten much play in China, Uber executives have earned their company a bit of a reputation for being sleazy. Most recently, Uber’s senior VP Emil Michael made comments suggesting that Uber could respond to media critics (like PandoDaily’s Sarah Lacy) by hiring researchers to look into their “personal lives” and “families” and dig up dirt on them. Michael later apologized for his comments, but that was simply the latest in a series of foot-in-mouth PR incidents that have harmed Uber’s reputation, especially in the United States.

This should be of particular concern to Baidu, because the company is already operating at a disadvantage abroad when it comes to PR. While it may be unfair, like any Chinese tech brand Baidu has to contend with Western perceptions that it supports censorship and that it is too closely connected to the Chinese government. Many Western consumers (and their governments) are nervous or straight-up negative about Chinese tech products. To combat this, Baidu needs to work on building a positive reputation. But teaming up with a company that’s quickly building a reputation as – to be frank – assholes could well have the opposite effect.

Or, to put it another way: Uber’s executives have already made a reputation for shooting themselves in the foot. If Baidu decides to stand next to them, there’s a decent chance that Baidu’s foot could end up getting shot, too.

Worth the risk?

Of course, I don’t know the details of Baidu’s impending deal with Uber. Although talks surrounding this deal must have been in motion before the recent scandal and Uber’s subsequent bans, Baidu executives could presumably have pulled out of the deal if they felt the risks did not match up with the potential payoff. And with Uber’s valuation at US$40 billion and growing, it’s not hard to see how the benefits for Baidu really could outweigh these risks.

But the risks are substantial enough that personally, I’m doubtful. A month ago, investing in and partnering with Uber would have seemed like a sure thing. Today, I’m not so sure.

This post So Baidu is investing in Uber: is that really a good idea? appeared first on Tech in Asia.

So Baidu is investing in Uber: is that really a good idea?