Google’s Self-Driving Cars + Ad Network = Free On-Demand Transportation?

Could electric powered autonomous cars that recharge themselves, drive costs low enough for a freemium ad-driven model to be possible?

After recently hearing rumors of Google’s interest in entering the on-demand transportation arms race, I’m just going to dream out loud for a bit about the possibilities for Google in Uber’s market

Prior to this news, many have talked about how Google is in the perfect position to be the next big competitor to Uber.

They own the mapping software Uber relies on. If Google were to cut Uber off from using its Google maps right now, Uber would be put in an very tough position. While Uber is using human drivers, their human drivers could likely get by with a less accurate mapping software, but it would at the very least take time for Uber to switch. Where Uber would likely be crippled without Google maps is in the coming battle with autonomous cars. These autonomous cars will rely heavily on mapping software being as detailed as it can be. Uber would have no option but to develop its own detailed mapping software which would be a huge undertaking.

The other huge advantage Google has with their mapping software is its ubiquitous use among smartphone users. This gives Google massive amounts of data about their users daily transportation patterns. They already use this traffic data to show their users traffic estimates and dynamic commuting times. This data will be a huge competitive advantage for Google if they decide to join the race.

They have the strongest foothold in the coming “robot taxi utopia”. Google has been investing heavily in their self-driving cars for a long time now. Validating the sector’s possibilities when they won the DARPA challenge back in 2005. They already have 700,000 miles on public roads without causing a crash and expect their cars will be in public use within 2–5 years. If self-driving cars reach the point where they are accepted for public use, their greatest value will be in on-demand transportation and off-setting the need for car ownership by doing so. Ownership of autonomous cars will be initially cost prohibitive and would take a long time for market saturation to bring prices down. Whereas on-demand transportation would become much cheaper with autonmous cars, allowing for quicker adoption and scale. Uber has shown repeatedly that the lower they drive their prices, the more demand there is for their service. For this reason, an Uber competitor with autonomous cars will have significantly more demand than Uber with more expensive human driven cars. The market has shown it cares little about anything but price.

To compete with this, Uber recently announced they are opening their own research into self-driving technology. And from the looks of it, are making a significant investment in the sector. Getting into the game so late, this may reflect the significance of the threat Google’s autonomous technology poses rather than Uber’s prospects of being able to survive the market change with their own self-driving cars.

And of course, the more obvious advantages Google has—deep pockets, access to users, technology resources, workforce talent etc. make them a tough competitor in any market they take on.

But most interesting to me is Google’s foothold and focus on adspace. This is where I believe we will see strong motivations for Google to win the on-demand transportation race. If Google wants to be in your house, you better believe they see the same value in being in your car. Could Google couple their self-driving cars with their ad network to create a freemium transportation model?

The Uber vs. Lyft battle and Uber’s focus on algorithms that reduce price in order to drive demand have shown very clearly that the market cares about whoever can give the lowest price. Uber’s brand, no matter how well known and relied upon it becomes, will not be strong enough to keep its customers past a competitor with lower prices. Think of it like gas prices. We couldn't care less about the brand, we look for whoever has the cheapest prices. Sure, we start relying on a certain brand that we think generally has lower prices than others, but we’ll kick them to the curb the second a competitor comes in with cheaper prices.

Lets give Uber the benefit of the doubt and say they manage to find a way to provide their own autonomous cars to compete with competitor robot taxis wishing to enter the on-demand transportation market. Great, now there will be a battle for the cheapest robot taxi. Autonomous cars will go electric, they could easily drive themselves to recharge stations and recharge on their own. Now you have a car that runs off re-usable energy and has no driver costs. The only costs left are the capital intensive requirements to build the fleet in the first place and then ongoing maintenance/upgrade costs. Uber and Google will have no problem handling the initial costs of building a fleet, Google more than Uber. Once these costs are paid for, all you have left is maintenance, new technology and replacement costs. At this point, autonomous cars will be able to offer rides at extremely low prices. The prices will likely be so low, that costs could be negligible for passengers. Imagine spending $1 to get from one side of SF to the other. At this point we would see widespread adoption of on-demand transportation and a significant drop in car ownership for consumers living in or near dense cities. When costs are this low, you will also start seeing less price elasticity among users. Consumers will start to decide to use the competitors with a better customer experience over the one that’s 90 cents vs a dollar even though that’s a full 10% discount.

Enter the Freemium Model

Companies powering this on-demand transportation market will have significant customer data. This could be a hyper local, hyper targeted ad platform and who better to squeeze the most revenue out of it than Google? Google can pass the costs over to businesses and offer their customers free transportation in return.

This would kill Uber or any other competitor. Sure, Uber could scramble to put together its own freemium platform, but it would be significantly outgunned. Adspace is Google’s domain and their primary revenue model. It would also create massive widespread adoption of on-demand autonomous transportation which would offer even more ad potential.

This ad platform could take many forms.

There will be ample space on the outside of every car for ads. Since Google is creating their own fleet, they will completely control this space.

And Google can serve videos to customers during their transportation. Google could get tricky with ensuring customers don’t develop ad blindness or simply put in earbuds during their commute by using questionnaires after each ride that asks easy to answer questions about the ads they were shown. Users would answer these questions on their phone after exiting the car. Too many failed responses and you’re put back on the premium paid plan.

This ad platform would be extremely strong for local businesses. Google would know if you’re someone that frequents their competition.

On the way to a haircut with your usual choice? Well Sue’s would like you to give her a chance next time and serves up a video on your way over.

Headed to dinner? Here’s an ad for a bar next door and even a coupon that pops up on your phone for your first beer free if you redeem it within the next two hours.

Forget the value Google could have by being in your home, being in your car could prove significantly more valuable. It could offer the most targeted ad platform yet. All of this targeting will allow Google the ability to charge businesses higher prices and cover the costs of offering their transportation for free.

Now maybe whether or not Google can make enough off of their ad platform to offer the service for free is questionable when you’re looking at a single passenger, but when you look at options for multiple passengers, it’s hard to imagine how it couldn’t pay for itself.

Uber is currently testing its newest product “Uberpool”. This allows drivers the ability to pick up additional passengers who are traveling along a similar route. Take a look at the picture below to get an idea.

With a system like this in place, you might start to see Uber cars get bigger and bigger. An Uber bus running on this system could in theory offer a superior service to public transportation. They will have significant advantages to cut costs and improve customer experience that public transportation services don’t have access to. A large transportation bus on the Uber platform could work by using a system of known stops along with a series of impromptu stops/pickups driven by users. For example, if lets say 5 or more users were to signal they wanted to stop at 5th and Market, Uber could add that stop to the trip (if it’s already along their route).

By the time autonomous cars are ready for public use, Uber will have this system pretty well worked out. Google will be able to use a similar system. Now Google is looking at being able to serve ads to multiple passengers with the same running costs of serving them to one. There will likely be a range of vehicle options. 1–2 passengers, 3–8 passengers and 9–200 passengers. Imagine smart, efficient, and free public transportation.. Google would be looking at the ability to serve ads to 20–100+ passengers at a time to pay for its costs, plus all the ad space available on the exterior of these larger vehicles.

The implications of this system with market saturation would be the biggest lifestyle changing technology since computers.

It would all but end car ownership, large car manufacturers, traffic congestion, time lost driving, add an average of $8000 back into consumers budgets (from lack of car ownership), end global warming (due to autonomous cars being solar)? And probably most felt, will generally be the massive convenience that on-demand transportation will offer. It’s hard to fully imagine the change free on-demand transportation would add to our daily lives, but it’s easy to see it will be significant.

Whereas consumers buying autonomous cars would have a drastically smaller effect on lifestyles. It would offload all the costs onto the consumer and leave a long road to market saturation.

Lets look once more at the advantages each company has coming into this possible robot taxi future.

Algorithm for picking up and transporting users — Uber

Autonomous cars — Google

Mapping Software — Google

Driving habits data — Google

Ability to use ad network to offer a freemium model?— Google

The only technology Uber has a foothold in is their algorithm driving the app. That being said, Uber’s team has shown themselves to be incredibly scrappy. Chris Sacca noted in a recent Medium article he would never want to compete with Travis Kalanick. If a small team like the one working on Cruise can beat Google to market on autonomous cars, maybe it won’t be so hard for Uber’s new research team to gain a foothold. I wouldn’t say I’m arguing Uber will be beaten by Google, it’s most likely they will just end up working together. I’m more interested in opening dialogue about pushing adoption of self-driving cars through the share economy and the possibility of that driving costs low enough to allow for a freemium model—as that would have huge implications.

Look at Uber’s mission statement.

“Transportation as reliable as running water, everywhere for everyone,”

What if it were possible for transportation to be as cheap as running water too?

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