Fascination with Uber downfall

For the last year I have been working in the Corporate Travel Industry sector, my company Talixo is the first corporate employee ground transfer platform out there.

One of the most important parts of our system is a Fleet Management System with Drivers Apps , allowing our Corporate clients worldwide to have transparency about who is driving their employee’s and at what rate. Due to that I have been talking to taxi and limo fleets around the Globe for the past few months.

What I encountered many times is that Corporate clients dislike Uber — as they prefer to work with reliable licensed providers with fixed rates in order to do cost-saving, then with unreliable non-licensed providers that are common for Uber.

During my travels I flew to Big Apple couple of times and managed to understand why Uber was so immensely successful in NY.

European Taxi and Limo market is very tech-savvy and organized in comparison to their American counterparts. Imagine we have a city, size of NY, or Berlin and you would like to order a car to pick you up. And it’s a year 2015.

In Berlin you would propably open MyTaxi or Talixo app to order Taxi, or Blacklane, MyDriver, Talixo if you would like to order Limo. You can also try and book an Uber — but you would get the same rates for Taxi so why bother?

But in NY in 2015 you could go to AppStore get Uber, get Lyft and get….. yeah what?

If I told you that the city size of NY has no other app through which you can actually access all or majority of the cars in this city you would probably laugh at the idea. But it’s actually true.

There are so many willing to tackle Uber.They all want to start tackling the Giant on his home playground — New York. That really fascinates me. It fascinates me how these attempts seem to me not to take into the account how the market in NY operates. Let’s take Karhoo.

They are willing to tackle Uber through building on existing software platforms that bases in NY use through connectors, pulling the data to new Karhoo Customer App, they are sitting on 250 mln, so they should not be taken lightly.

They partnered with Carmel at the end of last year in order to get access to LimoSys — a system that offers bases in NY software platform with networking function under which they can trade the excess of transfers that bases cannot execute themselves. Everything seemed to go well till LimoSys CEO informed their bases that Karhoo has an exclusivity clause that would limit any future work being received from Karhoo competitors and therefore hurt LimoSys network of bases. He informed all the bases in the network that any base that will sign contract with Karhoo will be expelled from the biggest NY bases network — thus cutting a lot of jobs from that bases. LimoSys has more then 10.000 drivers in it’s network , with them it will be hard to expand in NY for Karhoo.

What I think Karhoo neglects is the trust issue in NY market. After Uber damaged bases businesses , and damaged dispatch software providers as they are earning money through subscriptions, nobody can be easily convinced to cooperate with a possible new Uber -like monster.

Moreover from Talixo experience — if the fleet is not using your own system you are going to run into huge operations problems in the future.

But let’s skip on that and let’s move to the second big name. Juno.

Juno co-founder Talmon Marco — who recently sold Viber for 900 million saw an opportunity in Uber treatment of drivers.

To be frank Uber due to worker compensations is charging up to 36,5% from each fare that Uber drivers are taking. That means that Uber is actually making insane amount of money out of driver’s potential salary. Drivers are switching to Uber due to various reasons, lack of jobs in their bases , quality of these calls, treatment by base owners and base & insurance fees play a big factor. Uber with different insurance fees level, all give-away and a lot of calls presented a great option for thousands of drivers in NY. But in the long run , NY Council who is already putting more and more stretch on Uber, and Uber own investor pool will change the picture.

Combination of less calls — partly due to driver base expansion, higher Uber commission — partly due to NYC regulations, less incentives to new drivers — partly due to expansion levels reached all result in Uber drivers getting paid less and getting less jobs.

For me Uber is like a ticking time bomb. Why?

There will come a day, where Uber rides will be close to market value.At the moment bases are charging drivers fixed fees. They don’t eat on drivers income. Uber is.

We can of course agree that bases way of doing business is in decline, but it will not disappear in few months. If you will be able to take calls from your own base and get all the money but pay fixed fee monthly , or take it from Uber and get 2/3 of money and pay no fixed fee monthly , it will be just a question of how big is the fix fee.

So with whom I will make more?

Juno is trying to address such issues telling drivers that they will be Uber — but they will just eat less money then Uber. And to expand fast — they will even pay driver 50 a month just to “test” their app.

Basically Juno says — I will be for you all that Uber couldn’t. The problem that I can see — is that lowering commissions and giving incentives to much Juno’s proposal would be no problem for Uber — basically they just still

SIT ON A LOT OF CASH.

I am looking forward to observing who will make the biggest impact in NY city in 2016. 
Karhoo with the lowest money stack — and with software integration approach.

Juno with the medium money stack — and let’s be Uber but cheaper atttitude.

Or Uber with the insane money stack — and let’s just be good old Uber, or after re-branding — which — I didn’t get good new Uber.

As it was my first post I am looking forward to any comments and your views on the topic.