On October 8, Dida travel submitted its prospectus to the Hong Kong stock exchange. Not surprisingly, the first share in the field of domestic shared travel is about to be born. Compared with Didi, the industry giant, and the online car Hailing platform with the background of car companies, Dida is not well-known, and its business focuses on free ride and online taxi Hailing. But in the industry generally does not make money in the state, Dida relies on these two businesses to realize successfully. According to Dida’s prospectus, Dida’s adjusted net profits in 2019 and the six months up to the first half of 2020 are 172 million yuan and 151 million yuan respectively, and the profit margins are 29.7% and 48.6%, respectively, and the profits are growing on the whole. < / P > < p > in 2019, the total transaction volume of Dida’s platform was RMB 11 billion, of which the free ride business accounted for nearly 80%, accounting for 8.5 billion yuan. According to the data previously released by Dida, it has achieved 15 consecutive months of profit by September 2020. As a cash cow business, the contribution of free ride can be imagined. < / P > < p > Dida’s high liquidity rate is based on the asset light mode. On the one hand, it can make the platform operate at a lower operating cost, but on the other hand, it will also reduce Dida’s ability to control core resources, and it will be at a disadvantage in the subsequent scale expansion and competition. < / P > < p > the funds raised in this IPO in Hong Kong will be mainly used to expand the user base and strengthen marketing and advertising promotion. It can be understood that in the face of the current competitive environment surrounded by giants, Dida tries to expand its business by raising funds. Therefore, the feedback from the secondary market after listing will directly affect Dida’s follow-up development rhythm. < / P > < p > Dida’s business is relatively simple, its core business is free riding, and online taxi Hailing is in its infancy. In addition, there are some advertising and other service revenue. In essence, Dida is engaged in the business of information matching. At present, it mainly collects service fees from private owners who facilitate the free ride transaction. Another business network offers taxi services. Starting from August 2019, it has taken measures to collect service fees from taxi drivers in pilot cities. < / P > < p > in 2017, 2018, 2019 and the six months ending June 30, 2020, the average service rate of Dida was 3.7%, 4.1%, 6.3% and 8.3%, respectively. Dida’s service fees have been increasing. According to the financial report, service fees will be collected in other cities covered by the business, and may continue to increase in the future. < / P > < p > the focus of the prospectus is the free ride business data. Dida is one of the earliest travel service providers to do free ride business in China. By the first half of 2020, Dida’s hitchhikers have covered 366 cities in China, with about 19.2 million registered owners and 9.8 million certified car owners. < p > < p > the total number of passengers taking the taxi was 36.7 million. In 2017, 2018 and 2019, the total amount of free ride transactions was 700 million yuan, 1.9 billion yuan and 8.5 billion yuan, respectively, with a year-on-year growth of 171.4% and 347.4% in two years. < / P > < p > in the same period of time, the number of Dida hitchhiking orders were 23.6 million, 48.2 million and 179 million respectively, with a year-on-year increase of 104.2% and 270.5% in 2018 and 2019, respectively. < p > < p > specifically, the average monthly orders of Dida in 2017, 2018 and 2019 were 1.97 million, 4.02 million and 14.92 million respectively, and the average daily orders were 65000, 130000 and 490000, respectively. < / P > < p > Dida hitchhiker began to grow rapidly in 2018, and reached the peak of order growth in 2019. The number of orders more than doubled, and it crossed the 100 million mark and approached 200 million at the same time. < / P > < p > the financial report explains the reason for this growth. In 2018, Dida invested 1.094 billion yuan in marketing expenses to expand its user base. After achieving the results, it will reduce its marketing investment by 80% in 2019. According to this time node, the reason for Dida’s growth is that didi was offline after the hitchhiker incident, which led to the transfer of some users to Dida, hailo and other ride platforms. < p > < p > Dida the main way of realization is to charge information service fee, which is the core of asset light. That is, Dida does not own the vehicle itself, but obtains the intermediary fee by matching the demand information of both parties. < / P > < p > the advantage of asset light mode is that there is no depreciation and loss cost of vehicles, and there is no need to subsidize the drivers to stimulate their enthusiasm, so the fixed cost and the risk of change are small. In 2019, Dida’s subsidies and incentives for free riders and taxi drivers only accounted for 4.6% of the total revenue. In the first half of 2020, the proportion dropped to 0.03%. < / P > < p > that is to say, as long as the operating costs can be controlled in a suitable proportion range, Dida can achieve profits. However, strict control of expenditure also means that Dida’s business expansion will be more passive, especially in the current market environment, the business model is basically finalized, and each company can only do something about subsidies and service cost performance in consolidating and expanding the market. < / P > < p > in 2017, 2018 and 2019, Dida’s operating revenue was 49 million yuan, 118 million yuan and 581 million yuan respectively. While the revenue doubled in three years, Dida’s gross profit increased from 24 million yuan and 69 million yuan to 462 million yuan in 2019. < / P > < p > it is worth noting that at the same time, Dida’s sales and marketing expenses also experienced the same trend: 99 million yuan in 2017, 1.094 billion yuan in 2018, 219 million yuan in 2019, accounting for 203.0%, 930.7% and 37.7% of the total revenue in the same period. < / P > < p > and Dida will turn losses into profits in 2019. Therefore, it can be inferred that Dida’s revenue data is getting better, and the reduction of marketing costs has played a key role. < / P > < p > according to the financial report, in the early stage of business development, Dida provides various forms of subsidies and incentives to obtain users and enhance the stickiness of users to the platform. With the continuous improvement of platform acceptance and strategic adjustment of marketing measures, Dida gradually relies on word of mouth to promote the spread of the platform. < / P > < p > in the first half of 2019, Dida’s sales and marketing expenditure was 109 million yuan, accounting for 58.2% of the total revenue in the same period; in the first half of 2020, the figure was 80 million yuan, accounting for 25.8% of the total revenue. < / P > < p > Dida currently carries out marketing activities through existing user introduction, discount coupons, social media, app store, search engine, etc. But as the financial report says, “marketing initiatives are likely to become more and more expensive, and it will be more difficult for them to generate substantial returns.”. < / P > < p > in 2017, 2018 and 2019, the revenue from Dida’s advertising and other services accounted for 43.4%, 33.7% and 7.1% of the total revenue, respectively. < p > < p > in the first half of 2019 and the first half of 2020, the proportion of this income in the total income remains at a relatively low level over the years, 12.0% and 7.2% respectively. < / P > < p > the first is to consolidate the leading position of hitchhiker in the industry; the second is to continue to promote the digital transformation of taxi industry; the third is to improve the liquidity ability and enrich the cashing channels; the fourth is to enhance the technical ability; the fifth is to seek strategic alliance, investment and acquisition. < / P > < p > but we need to face the fact that the strategy of Dida marketing promotion and subsidies means that its growth can only rely on pure natural flow. But in the face of didi and Hello, who are well-known, financially strong and fast-moving competitors, it is difficult to say that Dida has a competitive advantage. < / P > < p > “some of our competitors have stronger financial, technical, marketing, R & D, manufacturing and other resources, higher visibility, a longer history or a larger user group. They have more resources for the R & D and commercialization of new technologies, which may enable them to obtain higher benefits from the existing user groups, expand the user base at lower costs, and improve the user base for new technologies It is also possible to establish a cooperative relationship with a third party to further strengthen the resource supply capacity. < / P > < p > Dida also mentioned this in the prospectus. The travel market is highly competitive, technology changes rapidly, user preferences change constantly, and competitors frequently launch new services and products. Existing competitors with more resources in the market and new entrants have more advantages. The resource advantage of < / P > < p > can make the competitive pair get higher returns with lower cost, obtain more users, and actively obtain more resource supply, thus forming a good supply-demand cycle. < / P > < p > according to the F & s report, the total transaction volume of China’s four wheel travel market (taxi promotion, taxi online booking, online booking and free ride) will increase from 711.9 billion yuan in 2019 to 1100.5 billion yuan in 2025, with a compound annual growth rate of 7.5%. Among them, the free ride market will become the fastest growing segment market. According to the Ministry of public security, the number of private cars in China will be 207 million by the end of 2019. China’s road traffic infrastructure is approaching the limit of use, especially in the first tier cities, where commuter congestion on weekdays is increasing. With the increasing shortage of road and parking resources, carpooling is accepted, and free riding will gradually become the mainstream mode of travel. < / P > < p > hitchhikers cater to the trend of green travel in the policy direction, and will become the most potential high cost-effective travel mode in the future. In the current market environment, taxis are also underestimated. In 2019, taxis will occupy 68.6% of China’s four-wheel travel market, and it is estimated that the taxi market will still maintain a share of about 53.9% in 2025. In other words, taxis will be the largest segment of China’s four wheel travel market for a long time to come. < p > < p > however, in 2019, the total transaction volume of domestic taxi promotion accounted for 96.3% of the total taxi transaction volume. This means that the market potential of Yangzhao taxi is huge, and it will co-exist with online car Hailing for a long time. < / P > < p > this is the reason why Dida chose the online taxi service as another key business. In the second half of 2019, Dida launched a new business of “smart taxi”. So far, it has reached cooperation with Xi’an, Shenyang, Xuzhou and Nanjing. < / P > < p > different from the operation of connecting taxis to the Internet, smart taxis can launch “taxi taxi taxi assistant” and “smart code”, and passengers can pay, complain and feed back the service quality of drivers through the code. Taxi companies and management departments can audit, operate and manage the data left by passengers, so as to get through the passengers, drivers, meters, taxi companies, etc Barriers between data management departments. By June 2020, Dida’s smart taxi system in Xi’an has generated about 9.4 million service records, accounting for 64.0% of the total taxi trips in Xi’an. These data will become the basis of taxi digital management, and also provide unlimited development possibilities for Dida. < / P > < p > China’s hitchhiker market is still in its infancy, whether it can be accepted by the public and how many people can accept it is unknown. The most important thing is that the relevant regulatory rules are not comprehensive, and the relatively clear online car Hailing rules can not be applied to the business model of free ride and online taxi Hailing. < / P > < p > in 2016, the guidance issued by the State Council only distinguishes free riding vehicles from online car hailing in terms of definition, and there is no relevant laws and regulations and follow-up regulatory trends. At present, there are different detailed rules, different enforcement rules and different compliance conditions in the regulations of free ride operation issued by local regulatory agencies. < / P > < p > the platform is faced with different compliance risks in different places, which means that the cost of compliance is high. For example, due to the lack of relevant license applicable to online car Hailing service, Dida hitchhiker was fined 77 cases in total, ranging from RMB 5000 to RMB 30000 for each case, and a total of RMB 2.07 million was paid.