Drivers Without Borders?
The global groundswell against Uber is, on its face, a futile fight because Uber has a huge war chest it can use to beat back legal challenges around the world.
If the goal is to get rid of all companies offering Uber-like apps and service, well, that moment has passed, too. Consumers are hooked on ride-hailing apps from Uber, Lyft and smaller local competitors in the U.S. and Asia because the apps are often the best, fastest, most reliable way to hail a cab. Popularity is a hard thing to beat down.
But regulators and politicians fighting to stop Uber's expansion - from Rio de Janeiro to Berlin, from Colombia to Thailand - could still damage an essential piece of the mythos that has helped to underpin the company's huge $41 billion valuation: the belief that transportation apps are a winner-take-all game, and that Uber will most likely be that winner.
The valuation thesis hinges on the notion that Uber's riches will allow it to put more cars on the road, which cuts down on pick up times, which increases the use of Uber's app, which attracts more drivers. That virtuous circle should leave little room for a competitor. It should also make way for Uber to build a huge logistics network on top of an army of drivers, most of whom are average Janes and Joes who drive their own cars (often to make some extra cash; sometimes as their full time jobs).
Yet despite being the dominant player in many of its 240 markets around the world, Uber already faces strong local competition in China from the Alibaba-backed Kuaidi Dache and another company, Didi Dache. The latter just raised $700 million from investors including the sovereign wealth fund Temasek and Yuri Milner's DST Global. (I'm fairly certain that if China wants to select a domestic company to win the battle, it can easily make it so. Just ask Facebook and Twitter.)
Uber also has fledgling rivals in India, Spain, Latin America and France. And Flywheel is emerging as a competitor in U.S. cities including San Francisco, Seattle and Los Angeles. As judges halt the use of Uber's app and the company grinds away in international courtrooms on appeal after appeal, it opens the door for others to steal market share.
As we've seen in India, where an Uber driver was accused of raping a passenger, the company doesn’t have a great international brand strategy. It perfected its marketing message in the U.S.: safety first, no more drunk driving, carefully vetted drivers and a record of your ride. That message may not work in countries where no ground transportation company can possibly make or keep all of those promises.
A significant amount of customization and regional targeting has to be done for an international company to enter a local taxi market, Raghunandan G (yes, he says that's his last name), the co-founder of Indian ride-hailing app Taxi For Sure, told me. Customer expectations, driver behavior and even payment systems can all be different from country to country, for example.
Taxi for Sure tries to solve that problem by letting its riders hail cars from existing taxi fleets. Those drivers are all vetted and employed by the taxi companies themselves, which own and lend their cars to their drivers. Taxi For Sure hopes to build a stronghold in India, and also says that it's in talks with some companies in Africa that want to use its software.
Other app makers that link traditional taxi drivers with passengers have grown more popular lately as cab fleets watch Uber and Lyft cut into their margins. Flywheel says that 80 percent of all San Francisco cab drivers now use its app, despite the fact that the company takes 10 percent of the fare.
All of this leads back to the question of whether Uber - or any other single car-hailing app - is inherently a global business.
Hotel chains and airlines are naturally global companies because so many of their customers travel from country to country. Even Airbnb, which can't guarantee the uniform experience that Hilton can, is inherently global because so many international travelers use its service.
The car and cab services Uber is stalking aren't, inherently, global businesses. Most cab riders are locals getting around, heading to appointments and running errands. It's quite possible that advantages such as driver fealty, shorter wait times and customer loyalty that the network effect conveys to a dominant local competitor fades outside the borders of any given city, region or country. (Those effects may even be weaker than we assume even within a given city. I might love Uber, but I’ll hop into a taxi if it pulls up beside me. I’m not going to let the cab go so that I can fire up the app and wait for five minutes for my car to come.)
If cab services can leverage software, or if local ride services can form a coalition of sorts, I wonder whether country-specific ride-hailing apps might be rolled up into a larger, global parent company. Big real estate names like Coldwell Banker and Sotheby's have gathered together local brokerage companies under one branded umbrella, and perhaps Uber could follow suit.
Uber pioneered the idea of getting transportation - instantly, effectively and predictably - from a smartphone. But just because that's become routine for urban nomads in the U.S. doesn’t mean that it will be the app of choice for passengers elsewhere around the globe.
And if that's the case, then it puts a little extra pressure on you if you’ve gone and raised hundreds of millions of dollars from investors that need to generate big returns and adore you because you have a certain kind of global sparkle.
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Timothy L. O'Brien at email@example.com