I know plenty of people who don’t wear a watch. My wife doesn’t wear one. My father doesn’t wear one. My boss doesn’t wear one. Their reasons are usually quite similar: “I don’t need a watch, I can just look at time on my phone!” or “I’ll ask someone around me to tell me the time!”. For others, a watch is more of a fashion statement — something they wear as a jewel, not something functional. Those latter people may or may not wear their watch on any given day, but they won’t experience any inconvenience about it.

I’m not that kind of guy. Without a watch, I feel lost. I wear a watch pretty much every one of my waking hours. It’s in part because of my job — I go to client sites a lot, I have have to attend meetings and I travel around using public transportation very often, all activities that require keeping a good sense of time. I hate missing my train. I hate being late to client meetings (though it does happen more than I’d like). But that’s not all there is to it.

Knowing time is a tool I use a lot during meetings. It’s a way to help me respect other people’s time. Say a client told me “I have until 3:45”. 10 minutes from the end of the meeting, I might switch into “we’ve got 10 minutes left mode” and use that moment to ask the hard questions: “We have 10 minutes left. Based on what we’ve discussed so far, do you believe what I’ve shown you could be a good fit for your company?”. I can create a sense of urgency and improve my chances of getting straight-to-the-point answers.

A reliable sense of time has thus become an ingrained habit. Glancing at my watch is a reflex. It’s a way of quickly finding out “where do I stand right now? How much of the day do I still have ahead of me?”. When your job requires you to meet people a lot, you need a reliable way to know what time it is at any point during the day. You cannot depend on a third-party or on an accessory that might be out of reach just when you need it.

If I have one remark about the upcoming Apple Watch, it would be that I’m afraid it’s not going to be ruggedized enough. Will it stand my wrist bumping into doors while I’m moving around? Will it stand being put under the faucet while I wash my hands? Those are the questions I am concerned about. My watch is with me all the time, more exposed to the outside world than a phone or a tablet. To become truly personal, it will have to be able to accompany me whatever I’m doing, all day long. I have already lost or impaired several iPhones due to water exposure. Watches, not so much.

Wearing a watch is not optional for me. It’s an essential part of how I run my days. I’ll probably get the Apple Watch or the Whithings Activité when they’re released to the world. I’ll probably enjoy the built-in activity tracker, heart-rate sensor, maps and the ability to pay simply by extending my arm. But my watch sure as heck has to tell me time whenever I’m looking at it.

The legal 15-minutes delay before private driver pickup might actually be a good thing for Uber.

Believe it or not, in some ways the imposed 15-minutes delay could offer a huge opportunity to Uber in Paris. This could give Uber the opportunity to out-compete other services thanks to its roots as a technology company.

Expected pickup time is a big criteria when deciding whether to request a car (you’re more likely to order a car if it can be there in 2 minutes rather that in 20), so a slump in demand is to be expected when the new regulations get into effect. Based on this, two scenarios could play on after January 1, 2014:

First scenario: lax application of the law

Companies such as Snapcar have already stated their intention to have their drivers ignore the law:

This is the case of SnapCar, one of the market leaders, whose cars “will continue to arrive at the location of booking as soon as possible.” “We will not ask our drivers to slow down deliberately and artificially” argues Snapcar’s boss, in a letter sent to its users. “We will take responsibility for any financial consequences,” warned Yves Weisselberger.

One of the big uncertainties with this scenario is the reaction of drivers. While some companies operate their own fleet of cars (such as Les Voitures Jaunes or LeCab) and might be able to cover the incurred costs for their employees, many others (such as SnapCar, Chauffeur Privé and Uber) are only intermediaries between users and drivers. They are less likely to be able to convince drivers to break the law, or to provide cover for the potential legal fees incurred by drivers.

In any case, if the law is not strictly enforced, the current market conditions won’t change much and Uber will retain its existing advantages (notably global scale and access to capital) against competitors. All the company will have to do is to keep trying to out-execute the competition.

Second scenario: the government plays it tough

The second and more likely scenario is that the government will eventually try and implement control mechanisms in order to make sure that private driver services respect the 15-minutes delay when sending cars to clients. Even if they don’t do it willingly nor effectively at first, the taxi lobby will be on their necks until they do.

In this scenario, private driver services will be facing the perspective of a dwindling demand, being left to fight harshly for the remaining pool of clients. In order to attract those clients, the services that have to make money out of their own fleet of vehicles might be tempted to lwer prices in order to entice clients. The artificial constraint on demand generated by the new law might trigger an all-out war between services. They could also choose to exit the market altogether.

Assuming enforcement of the law, personal driver services will end up having to optimize the way they manage advance bookings in order to respect the law. Yet right now, Uber does not offer advance bookings in Paris. Why is that?

Advance bookings are difficult to manage

In the taxi world, it’s notoriously difficult to get a reliable advance booking done. Oftentimes, drivers that you though you had booked in advance simply don’t show up or get on location late. The night of my wedding, a friend had booked 3 cabs to come pick him up at 4am. 2 never materialized while the third showed up more that 1 hour late.

There are two big issues with advance bookings: planning and trust, the second stemming from the first. It is easy for a cab to decide whether or not to pick you up now: they’re either available or doing a ride. The problem is harder when you’ve asked to be picked up 45 minutes from now at a specific location. Should the driver say yes and forgo other potential opportunities in the meanwhile, or accept and run the risk of doing a low-paying ride later on? The opportunity cost for a driver accepting an advance booking is high.

This problem is compounded by the fact that some drivers accept advance bookings but then proceed to also accept incoming rides which result in their inability to honour the booking. This creates a mistrust in clients, who search for other alternatives even when they’ve booked a cab and sometimes leave before their cab has gotten to the agreed upon pickup location.

A service such as Uber has all the information needed to alleviate both issues. First and foremost, they have access to the identities, reputation and payment information of both parties. In addition to this, they manage a large fleet of cars. Assuming sufficient overall supply, Uber should therefore be able to select the best car in advance of the agreed time and dispatch it on site. If either the selected car or the user doesn’t show up, Uber can use their reputation mechanisms, combined with a fee for the cancelled ride.

In other words, Uber has the opportunity to do with advance bookings the same thing it did with immediate car requests: amaze customers with a service that will be much, much better than what exists today.

Integration with other services

In order to fully achieve the vision outlined above, Uber could do much more than only adding bookings in its app. It could go on to open-up its service to third-parties for programmatic access.

Personal assistants are a hot category right now, with services such as Don.na and Google Now providing their users with useful location-and-time-aware information: “Leave now in order to get to your meeting on time”. This type of use case could easily be extended to “I booked a black car for you so that you can get to the airport on time”. Personal assistants have access to a wide variety of data, including an user’s calendar and address.

Personal assistants are not the only type of service Uber could associate themselves with. In many of the city where it launched, Uber worked hard to associate itself with events and venues. “You’re at this cool party, why not get an Uber ride home?”. Going further in this direction, Uber could integrate with services such as Foursquare to offer advance bookings. “We noticed that you just got to the stadium, do you want a ride home when the game is over?”.

With the advent of the iPhone 5s’ motion co-processor, this type of use case could become much easier to implement. Let’s see how it could work: an user arrives at a game and checks-in with Foursquare. Foursquare notifies a personal assistant service. The PA service accesses the user’s calendar and looks at the event’s end time. The PA sends a notification to Uber (“User X is at location XY, estimated end time is 6:00pm.”). Uber sends a notification to the user to offer an advance booking for that location at the event’s end time (or just does the booking in the background). Alternatively, Uber could add a virtual fence around the user’s current location and pop up a notification suggesting that they book a car when the user passes the virtual fence. Creepy? Maybe, but also very useful.

Tech company vs car company

This type of use case is exactly where Uber’s advantage shines. At its core, Uber is a technology company. Uber is competing with services that see themselves first and foremost as transportation providers. Even the most technologically advanced actors in that market don’t see much further than making their logistics systems more efficient. On the other end of the spectrum, Uber is all about convenience.

Uber’s goal should be to become the underlying service that somehow magically knows when you need to go from one place to another, and delivers the best vector to get you there in a timely manner. By becoming able to predict where and when people will need a car, Uber could achieve the vision of fully embedding itself in the daily life of its users. This is in line with its “cross of logistics and lifestyle” positioning.

Of course, there are significant challenges to overcome before achieving such a far-reaching vision, notably from a technological and privacy standpoint. What if the user forgot he ordered a car? What if a PA service starts sending requests on behalf of the user that end up costing them real money while the user didn’t expect it? Many things could go wrong, but the value to unlock is commensurate.

Increasing supply is a more urgent challenge

Whether or not this long-term vision actually makes sense for Uber to pursue, their dev team probably has a lot of more pressing issues on their plate. As outlined in this candid Facebook post by Travis Kalanick, Uber’s founder, the company still faces significant challenges when it comes to fulfilling its core promise:

Noah, I hope we can resurrect some of that Uber love. We’re innovating, not-sleeping, racking our brains every day to continue to make the service better. We actually appreciate you holding our feet to the fire, and I expect that we’ll be up to the challenge.

Uber still has to invest significant time and money in solving its key promise: getting cars to people upon request, as fast as possible. Since demand for the “basic” service is still growing fast (from Travis’ post, monthly growth in SF is still in the double digits), it will be tough for Uber’s technology team to tackle a large new feature. The vision I outlined requires several large technology blocks to come together, which would require significant time and effort to implement.

Yet if Uber is to succeed in markets where regulation imposes a time lag between car request and actual pickup, it will probably have to move towards advance bookings head-on. Unsurprisingly, this also happens to be an oft-requested feature.

What should Uber do in Paris? was originally published in Personal driver and ride sharing-services on Medium, where people are continuing the conversation by highlighting and responding to this story.

Incumbents are fighting hard to preserve the status quo for taxis and private drivers - will they succeed?

Fred Wilson had a great post yesterday about the effect of disruptive services on established players:

In arabian stories, the Genie is a magic spirit that has powers to do things for you. But if you let it out of the bottle, you can’t control it anymore and bad things can happen. I like to think of this story when I think about startups and technologies that have the potential to be big game changers. The key is to get the Genie out of the Bottle because then they (the incumbents and establishment) can’t put it back in.

Fred goes on to cite the example of a petition launched by an AirBNB host to push for the legalization of sharing in New-York. The petition garnered over 70,000 votes in about a week. The local authorities are bound to notice the petition and provide some type of answer. Fred concludes that he believes that as long as you have thousands (or even better, millions) of people on your side it’s very hard to go back.

We can see something similar happening in Paris right now. Several services grouped under the “FFTPR” nickname have launched an online campaign that seeks to turn the government’s efforts in derision. Under the hashtag #PourNePasFaireDeConcurrence (“in order to avoid competition”), they encourage users to post their ideas about how to prevent undue competition in other sectors. The current leader is a tweet stating that “In order to prevent undue competition for postal services, emails will be delivered one day late”. They also launched a Facebook group dubbed “Les dodos” to promote their cause, which attracted a meager 177 likes so far.

In a similar fashion, Uber France has launched an online petition that seeks to convince the French Prime Minister to remove the provision that would force drivers to wait 15 minutes before picking clients up. The petition currently has 13,650 backers (it went past its initial objective of 10,000 in less than a week). However, after an initial burst of backers, the number seems to have stalled. For comparison’s sake, that number is less than the total number of taxi drivers in Paris (currently pegged at 17,173 drivers).

There is one big difference between AirBNB and Uber. While the former is a marketplace that lets anyone rent a room out of their flat, private driver services are targetting professional drivers on the supply side. Anyone could see themselves renting a room someday, but not everyone picture themselves as a chauffeur. In addition to this, private driver services (at least in Paris) have so far been mostly focused on addressing the high-end of the market. Their prices are often higher than those of taxi services. Those two elements combine to make the pool of potential backers much smaller than it is for AirBNB. This would be different for services such as Djump or Lyft (which is yet to launch in Europe), but those community ride-sharing services don’t seem to be concerned by the current regulation change.

Another factor at play is plain old protectionism. Although many of the companies listed in this article were created in France, the largest one is a US company backed by US capital. I skimmed through random comments under several French press articles on this subject. While many readers were bashing taxis, a significant number took the opposite stance, to the tune of “Why should we try and advance the interests of an US company to the detriment of Paris’ taxi drivers?”. While this myopic bit of analysis doesn’t seem to take into account the fact that Paris’ private drivers are mostly French, nor the overall economic benefits of a more efficient car transportation market for consumers, it’s still rampant among the population.

Bryan Caplan wrote a full book about the myth of the rational voter:

Caplan argues that voters continually elect politicians who either share their biases or else pretend to, resulting in bad policies winning again and again by popular demand. […] Caplan contends that democracy fails precisely because it does what voters want.

Even though the political elite probably understands the overall benefit of increasing competition in the market, they have to compose with what they believe the opinion of the majority of their electorate to be. And they’re acutely well aware of the impact of a taxi strike on their popularity — and thus on their chances of getting re-elected.

In other words, private driver services have a very uphill path ahead of them if they are to battle those misconceptions and get the 15-minutes regulation removed.

Is the genie out of the bottle in Paris? was originally published in Personal driver and ride sharing-services on Medium, where people are continuing the conversation by highlighting and responding to this story.

This week, taxis got the upper hand in their battle against minicabs. How long will they be able to hold their ground?

It was such a great success story. Back in 2008, Garrett Camp and Travis Kalanick had the idea for what would eventually become Uber. From Wikipedia:

The initial idea came at LeWeb tech conference in Paris in late 2008, while his friend Garrett Camp just wanted to “Push a button and a car shows up”.

18 months later, a first version of the service was born. From the official account of Uber’s founding:

By January 2010 we did our first test run in New York. We had 3 cars cruising the SOHO/Chelsea/Union Square areas and had a few people using the system. The core crew was Garrett, myself, and Oscar Salazar, Garrett’s friend from Grad school who helped build the prototype in early 2009.

The service was soon to start expanding globally, and by the end of 2011 Uber had launched in the city where it was initially conceived. The service was met with success, Paris being chronically underserved when it comes to taxicabs. Users flocked to the service, which spanned an army of copycats to enter the market. Alas, the honeymoon wouldn’t last long. France 24 has a summary of last week’s events:

The French authorities were accused Wednesday of caving in to lobbying from Paris’s biggest taxi operator and cabbies’ unions, after imposing restrictions on the capital’s burgeoning minicab market.
From January 1, 2014, minicabs, called Tourist Vehicles with Chauffeur (VTCs) in France, will be obliged to wait 15 minutes between taking a booking and sending out a vehicle.
Licensed taxi operators that offer pre-booking services, the biggest being the G7 Group, had initially asked the government to impose a two-hour delay for VTC bookings.

Unsurprinsingly, Uber Paris is up in arms against the new law:

Why does the government want to make you wait any longer for a car that is on your doorstep? Why kill innovation and progress, and so deprive thousands of drivers a professional opportunity? Because the powerful taxi industry exerts pressure in order to defend their private interests, to the detriment of the inhabitants of our capital.

In a great article aptly titled “The gravediggers of innovation”, Nicolas Colin looks at the reasons behind this law and its probable consequences. In short, the French state got pressured by the very man who owns 2 companies that among them have a 75% share of the taxicab market in Paris. An incumbent with the ear of the prince, Nicolas Rousselet was able to bend the law in the favor of his interests. The issue, as Nicolas Colin points out, is that these lobbying efforts come with significant side effects on future innovation in France:

Innovation cannot thrive in the presence of barriers that stiffen the economy and protect existing positions. The mere existence of these barriers, particularly legislative and regulatory ones, deter any capital allocation to activities that move the lines within the sectors concerned.
What’s the point of investing in an innovative French company working in the field of VTCs if the ROI will be degraded or even eliminated by the regulatory obstacles that protect the rent of taxis?

It looks like the government caved in under the pressure of a potential taxi strike. Taxis have long used a very effective tactic when on strike, triggering traffic slowdowns and blocking streets in Paris and thus provoking the ire of millions of commuters. Right now, estimates for Paris seem to indicate that private driver services have more than 1000 cars in total. That’s more than enough to trigger a massive slowdown in key parts of Paris. The Boulevard Périphérique is 4 to 5 lanes wide. You could put 50 cars on each part of the road, slowing the traffic down significantly. The same is true on key axes such as the Boulevard de Magenta or the rue de Rivoli.

Such a show of force would serve to indicate to the government that it is putting a large number of jobs in peril at the same time that it is trying to find ways to ignite job growth and curb unemployment across the country. While this type of action might be borderline when it comes to legal aspects, it would definitely put personal driver services front-and-center on the radar of the political elite.

A less extreme way to achieve this would be to organize “car flashmobs”, bringing many cars in one location (and thus hindering traffic) in short bursts of time. Incidentally, it would also serve as a great demonstrator of the technical prowess of personal driver services and their ability to get cars to places quickly.

Party’s over in Paris — or is it? was originally published in Personal driver and ride sharing-services on Medium, where people are continuing the conversation by highlighting and responding to this story.

Three services are currently vying for the crown. Hailo is defensive, Uber is obsoletive while Lyft is disruptive. Who brought a knife to a gun fight?

Now that we have analyzed in more detail the market for personal driving services and what it’s going to take for any player to win, let’s look at the various players and their likelihood of success. I have grouped them in 3 categories: defensive, obsoletive and disruptive.

A couple preliminary notes: I am basing my definitions on yet another great post from Ben Thompson of Stratechery. I have selected the 3 companies listed below based on their current execution status (Hailo and Uber have already launched in 15+ cities, Lyft is US-only for now) and their ability to have already attracted very large investments ($307M for Uber, $82.5M for Lyft, $50.6M for Hailo). They’re clearly not the only participants in the race. In previous articles, I have mentioned Djump, leCab, Addison Lee and others, but none of these services seem to be playing in the same league just yet.

Defensive

Poster child: Hailo

Services such as Hailo are bent on giving existing players the tool to compete in a fast-changing environment. They are about empowering existing networks of regulated cab drivers with new generation tools. They are exemplified by Hailo, which started in London and quickly expanded to a number of additional cities.

The great advantage of “defensive” services is that they can tap into a large network of readily available cab drivers. For instance in February 2013 Hailo boasted more than 10,000 drivers and very short waiting times thanks to its extensive use of the Londonian taxicab network:

In central London, the average time from Hailo tap to taxi is under two minutes and the quality of the service has led to Hailo becoming the world’s highest rated taxi app with over 7,000 five-star reviews […] with a network of almost 11,000 London drivers and over 250,000 registered London users

The link between short waiting times and high customer satisfaction seems to confirm the hypothesis I was making in yesterday’s post. It should also be noted that onboarding more than 10,000 drivers in any given city is a pretty impressive feat. Services that don’t rely on taxicabs will have a hard time recruiting that many professional drivers.

Although these type of services benefit from the fact that they operate in a well-understood legal framework (existing, regulated taxi cabs), they are also limited by it. Since they only add marginal value, they cannot impose a high rake on drivers. For instance, with their recent launch in NYC, Hailo apparently won’t get more than $1 or $2 per ride. They have to make up for it by generating a significantly higher amount of rides than other services in order to capture a similar amount of revenue.

In addition to this, these services are limited in the variety diversity of services they can provide their clients with. The taxicab industry is a pretty traditional sector that isn’t known for its appetence for innovation. I expect that it will difficult for Hailo to get taxi drivers to change their habits and start delivering complementary services. That leaves a space open for competing services.

Obsoletive

Poster child: Uber

An even cursory examination of tech history makes it clear that “obsoletion” — where a cheaper, single-purpose product is replaced by a more expensive, general purpose product — is just as common as “disruption” — even more so, in fact. […] The Mac (and PC), iPod, and iPhone weren’t so much disruptive as they were obsoletive. They absorbed a wide range of specialized tools for a price far greater than any one of those tools cost on their own.

Right off the bat, personal driver services offer more services than a cab. They let you know exactly where your car is. They let you pay on behalf on someone else or share a fare off your credit card, without having to take cash out. They allow your driver to communicate with you should you or they have any issue getting to pickup location.

So far, so good. But this is just better than taxi services. Why should we go further and apply the “obsoletive” wording?

Most new products are simply better — stop calling them disruptive! — while the most revolutionary products — all of them, ever more personal versions of truly personal computers — are obsoletive. They are more expensive, more capable, and change the way we live.

There is reason to argue that services like Uber are more than just “better”. Here’s why. Existing transportation services answer a limited contract: getting you there. The vision behind services such as Uber goes way farther. Travis Kalanick hints to this in one of his interviews:

So today, we’re in the business of delivering cars. We’re delivering a car to you that you, then, can do whatever you want with. Well, the car has a driver as well. […]
But I think could it be that next summer we just do an entire summer of ice cream? Sure. It’s very simple. It’s very straightforward for us to basically give them a phone with an app on it and say, look, when the thing is blinking, hit the screen and go to where the map tells you to go. And you don’t have to pick them up and take them anywhere, just give them ice cream.

Personal driver services are not just about getting you to places. Ultimately, they’re also about bringing stuff to you, or letting you move things around. Forgot your keys, can’t go to your mum’s to pick them up? Just send a car to her location in order to pick them up. Town cars are just a start. I believe that this type of opportunities are similar to what Ben Thompson hints to when he points out that single-purpose products ended up being superseded by products with a wider functional coverage. Who needs a walkman in the iPhone era?

There is a limiting factor though. Do you really need a professional driver in a Benz to go and pick up your keys when a friend could have done it a no cost? Even if no friend is available, aren’t there less costly options available?

Disruptive

Poster child: Lyft

Disruption is low-end; a disruptive product is worse than the incumbent technology on the vectors that the incumbent’s customers care about. But, it’s cheaper, and better on other vectors that different customers care about. And, eventually, as the new technology improves, it takes the incumbent’s market.

The services listed above were all about making more out of a pre-existing professional infrastructure: the taxicabs and black cars industries. Both are somewhat high-end services: in both cases, you’re paying a professional to get you from one place to another. The ride price reflects that. That’s where ride-sharing services have a distinct advantage. While you’re not sure what kind of car you’re going to board next (lower quality of service), they can offer their service at a highly competitive price. Sure, a black car is nice. But those $15 you’ll be saving by choosing to go home in someone else’s Golf could also buy you and your girlfriend a last round of drinks, couldn’t they?

Another significant advantage of ride-sharing services is that they can theoretically achieve ubiquity and liquidity much more easily than other type of services. Their potential driver pool is pretty much anyone with a driving license over 3 years old who also knows how to use a smartphone. They can easily summon additional drivers to cover a specific area at a specific time, potentially dynamically adapting suggested donation prices to match supply and demand.

However, trying to build a truly disruptive service comes with a specific set of legal and regulatory challenges. We’ve seen it happen in the sub-letting space:

Airbnb has faced questions about whether its business runs afoul of illegal-hotel legislation that is already on the books in several cities. From the company’s perspective, Airbnb users are getting picked on, largely because the startup poses a vital threat to the hotel industry.

Ride-sharing is no different. Although the legal framework is currently patchy (there’s no law against using a convenient service to pick people up and give them a ride home, nor is it forbidden to thank your driver through an optional donation), ride-sharing services should expect litigation-prone taxicab trade unions to try and take action against them through any the legal means they may find. While it looks like long-distance ride sharing services have been mostly spared the annoyance so far, this should change drastically once the services step on the taxicabs’ turf.

It is not clear yet which of the above three companies will end up owning the market. A new competitor could emerge and take all 3 by storm. Yet another possibility is that I’m just plain wrong and that the taxicab, black car and ride-sharing markets will remain clearly delineated and separated in the future. I wouldn’t bet on it though—there’s too much proximity and porosity between those markets.

As a side note, I’m also expecting to see a wave of consolidation and international expansion through acquisitions taking place at some point, much in the same way that Groupon bought local players when it decided to start expanding internationally (as did eBay and others before them). Consolidation could happen vertically (eg, Lyft buying a local ride-sharing service to get a foothold in Europe) or horizontally (eg, Uber buying that same local ride-sharing service to get into the ride-sharing market). May the best man win!

One spot, three contenders: the race to become tomorrow’s leading personal driver service was originally published in Personal driver and ride sharing-services on Medium, where people are continuing the conversation by highlighting and responding to this story.

If there is to be but one winner, what do they need to do in order to own the personal driver market?

Personal driver services are a play for convenience. They are about making it easier for people to be where they need to be, on time and without hassle. The leading service is therefore the first one that will provide a sufficient amount of convenience to the most users. Convenience should be analyzed across several dimensions. They’re outlined below, following a classical “4P” framework.

Product — do you have what it takes to be a leading provider?

First in this list is the quality of the service proposed. To compete in the first place, you have to provide a service that will be good enough to make people want to use it again. And again. And again. And recommend it to their friends. A service they will trust enough to put their grandma in when they need to get her back home (true story!). For the purpose of this article, we’ll assume that the best services are able to get you picked-up by a functioning car with a competent driver.

All other things being equal, I would argue that the biggest component of quality of service is the average waiting time between a car request is put out and the time it arrives for pick-up. I don’t have access to real data, but my bet is that whenever an user sees a potential pick-up wait time that is above 10 minutes, they’re way less likely to order a cab than if the wait time is shorter. The actual inflexion point might be at longer/shorter wait time, but in any case it needs to be figured out and addressed. The longer the expected wait, the lower the likelihood of converting “lurkers” into regular paying users.

The second key characteristic of a leading product is going to be its ubiquity. In order to succeed, the personal driver companies will need to have their service available in as many locations as possible. As a user, I don’t want to have to register my credit card account and switch apps when I move from city to city and around the world. There is a significant fast-mover advantage to the first company that will cover a broad enough range of cities and locations to make itself the default choice for most users.

Once you can quickly get a good-enough car to your users wherever they are located, another thing comes in play — how much will it cost?

Pricing — the importance of a low rake

This being a marketplace, getting pricing right is of utter importance. In order to maximize the value extracted from the marketplace, the service will need to be able to address all ends of the markets with offerings that correspond to their willingness to pay. Offer only high-end cars and you’re cutting yourself from most users. Offer only ride-sharing with non-professional drivers and you’re not getting all the money you could out of clients looking for a better experience.

Ben Evans has a great article about this regarding iPhone pricing:

The trouble with only selling one product is that you can only hit one spot on the demand curve; you don’t have a product for customers who fall lower on the demand curve (red in the illustration), and you are charging less than you could to those higher on the demand curve (yellow).

This line of thinking applies almost as-is to the personal driver space: to succeed, you need to try and extract as much value as you can from the market:

This is why companies typically sell multiple variations of a product; the idea is to also sell a higher-priced product that appeals to those willing to spend more, and a lower-priced product that attracts those lower down the demand curve. Ideally, the lower-priced product doesn’t cannibalize the higher-priced ones.

But this is just one part of the equation for the services. Beyond the price paid by an user for a ride, the commission pricing choice that the platform owner will make will also play a big role in their eventual success or failure. From an excellent article on this topic by Bill Gurley:

High volume combined with a modest rake is the perfect formula for a true organic marketplace and a sustainable competitive advantage. A sustainable platform or marketplace is one where the value of being in the network clearly outshines the transactional costs charged for being in the network. This way, suppliers will feel obliged to stay on the platform, and consumers will not see prices that are overly burdened by the network provider. Everyone wins in this scenario, but particularly the platform provider. A high rake will allow you to achieve larger revenues faster, but it will eventually represent a strategic red flag — a pricing umbrella that can be exploited by others in the ecosystem, perhaps by someone with a more disruptive business model.
As Jeff Bezos is fond of saying, “your margin is my opportunity.”

From a very short review of the marketplace, commissions in the personal driving space range from over 25% for some services to less than 5% for others. In other words, the gap is huge. The challenge for competing services will be to find the balance between charging enough to build a long-lasting, sustainable business and avoid over-charging, which would lead drivers and customers away from the service.

Assuming a marketplace can figure out an ideal product and pricing mix, a big challenge still lays ahead: getting itself in the hands of as many users as possible.

Distribution- how can we reach users?

First, there is a technical challenge to address. Each service needs to have the technical chops to build for the leading app stores (iTunes Store, Google Play…) as well as for mobile browsers. While for larger companies this challenge is easy enough to tackle, for smaller, emerging players it represents much more of a strategic choice. Should they launch for iOS or Android first? How much should they focus their developers on improving the user experience on the platforms they already support versus try and build for new platforms?

Once an app is available on several stores, it needs to be made aware to users beyond those who already know what to search for. While word-of-mouth is great to get started, it is not sufficient for sustained growth. Some distribution vectors could include partnerships with prescriptors — hotels and venues come to mind. One could imagine a service offering a discount on the first ride of users coming from a specific hotel, provided that hotel displays an advertisement for the service. In a similar fashion, Uber announced a partnership with American Airlines last year.

Further down the road, revenue-sharing agreements between prescriptors and services could be arranged. For instance, it’s already what happens when an user recommends Uber to one of their friends: the friend gets $10 off their first ride and they get $10 off their next ride once the friend has completed their first ride.

Another venue for integration is with personal assistant services. Don.na already does this with Uber: it detects that you need to leave for your next appointment and gets a car ordered through Uber on your behalf at the right time so that the car is waiting for you when you get out of the building, without you having had to do anything about it.

Last but not least, the enterprise. A current target of many existing transportation services is companies looking for ways to move their employees around. From Addison Lee in London to Taxis G7 in Paris, many existing services already cater to the needs of companies, offering priority service, high-end cars and payment facilities to corporate users. This is a lucrative market where incumbents will likely want to try and carve a space for themselves. In order to target those type of customers, it might be necessary to start operating an inside sales force dedicated to corporate customers.

Now that you have a great service and that you know how to get it in the hands of your users, how can you get your growth to accelerate?

Promotion-”Lyft”, you said?

Getting known can be done through so many ways that it begs the question, where should any service start. Clearly having a website and an app are prerequisites, but probably not sufficient to get a service from 100 users to 10,000+. Options abound. For instance, a strategy successfully followed by some ride-sharing services has been to adopt a distinctive item displayed on their drivers’ cars (such as green mustaches for Lyft or a rose hat for Djump).

Obviously, traditional means of advertising could be used. Services could decide to spend large amounts of money buying ads on TV, in newspapers and over radio. Given the large costs associated with those types of initiatives, they probably wouldn’t be pursued at first. Web advertising would probably come first.

Growth hackers have a sweet spot for piggybacking opportunities. One of AirBNB’s early growth boosters was its ability to automatically post to Craigslist when a user published a new offer. What’s the similar play for personal driver services? A partnership with a global hotel brand might be a good target for such an opportunity. The services need to be visible in places where people are on the move.

Done right, PR is a great way to raise awareness about a service. Coupled with clever stunts, such as Uber’s ice cream delivery days or Djump offering a free ride to a specific event, PR can deliver a wide reach for a comparatively low investment.

All this to say that the service with the optimal marketing mix is likely to win the market. In order to win, a service will need to embed itself in the fabric of personal transportation.

The topics discussed above are about winning the market as it stands now. However, this is not sufficient. Say you’re now the world’s leading service, serving pretty much every city, everywhere through a wide variety of cars. Cars are available quickly once you call them, driven both by normal people and professional drivers, and they get you where you need to be efficiently. What’s next?

There are business opportunities that stand close to that core market. Travis Kalanick has called Uber a company bridging the gap between lifestyle and logistics:

I mean, the way we look at what Uber is is it’s the cross between lifestyle, which is give me what I want and give it to me right now, which we’ve seen online, right? We all — remember, it was like instant gratification. It was like the wave of the future in the early 2000s, right? Give me what I want, give it to me right now, and the logistics to get it to you, right?

And a bit further after that:

Jessi Hempel: But just to go back and complete the circle on whether Uber is thinking actively about being more than vehicles…
Travis Kalanick: So the answer is, yes, we’re thinking about it. What we’re doing right now is we’re in the experimentation phase where you sort of find some interesting ways to do promotions, like Uber ice cream.

One could envision several extensions to the concept. First, and oft-requested, is the ability to book rides in advance. This poses challenges in terms of demand-management and availability. It might be achievable through flexible pricing and supply management (raising prices preemtively when too many cars are booked for the same time, asking more drivers to come on the grid).

Another could be extending the concept to the transportation of mail and goods, competing with courier services. This is a sector that is seeing lots of acivity right now, with P2P services allowing smaller shops to offer same-day delivery services for goods sold online. The infrastructure and cost-structure needed to deliver efficiently on this type of service is not eactly the same as when you’re transporting people, but it’s not that far either.

In my next post, hopefully the last in this improvised series, we’ll look at the current state of the market and possible winners.

What needs to be done to win? was originally published in Personal driver and ride sharing-services on Medium, where people are continuing the conversation by highlighting and responding to this story.

Why I think the personal driver marketplace will be owned, not just led, by one single service.

After reading my last post, @ldubost took issue with my use of the word “winning”. His main argument is that “winning” implies a single company owning a market, which will not necessarily be the case — several actors could split the personal driver market between themselves. He suggests that I could have used the word “leading” instead. I stand by my choice of words. Here’s why.

In my article, I hinted at the fact that I believe there will be one actor that will own the personal driver market. This stems from my analysis that the leading service will be the first to achieve marketplace status.

This is a topic touched by Peter Thiel in one of his CS183 class sessions:

For a company to own its market, it must have some combination of brand, scale cost advantages, network effects, or proprietary technology. […] What’s understood is that if you manage to build a brand, you build a monopoly.

Peter goes on to apply these principles to tech companies:

There are three steps to creating a truly valuable tech company. First, you want to find, create, or discover a new market. Second, you monopolize that market. Then you figure out how to expand that monopoly over time.

Quickly followed in the same article by this practical bit of advice:

The best kind of business is thus one where you can tell a compelling story about the future. The stories will all be different, but they take the same form: find a small target market, become the best in the world at serving it, take over immediately adjacent markets, widen the aperture of what you’re doing, and capture more and more. Once the operation is quite large, some combination of network effects, technology, scale advantages, or even brand should make it very hard for others to follow. That is the recipe for building valuable businesses.

I believe this is exactly what will be taking place in the personal driver space. On the demand side, the user base for that type of service is global. A Uber user in Paris, France is the same guy who will be using Uber on his next trip to San Francisco. Similarly, on the supply side, a driver for Uber is the same as a driver for chauffeur-privé (it looks like it’s currently common for drivers to subscribe to more than 1 service).

Once a service starts having a clear lead over others, a self-reinforcing phenomenon will be taking place. Word of mouth increases exponentially with the number of users. Convenience increases for users with the added number of vehicles. The marketplace becomes more and more liquid. People start using the service because their friends use it. Drivers flock to the service. With more data and more drivers, the leading service will be able to significantly improve its user experience over competitors (shorter waiting times, precise ETAs…). Once it reaches critical size, the service can start lowering its fee while still generating significant revenue, out-pricing competitors in the process. The network effect imposes its full force on the market.

Peter Thiel goes on to list a number of services that lead in their respective fields (eBay, Amazon, Twitter…). Each of these services has succeeded in creating its own kind of monopoly, at the expense of their competitors (Borders, anyone?). That’s what I meant: a service completely dominating its market, in the same way that Facebook owns casual social networking and LinkedIn owns professional social networking. In other words, they won.

I’m sure Andy Swan would agree.

The winner in the personal driver space will be the first company to achieve platform status.

Last Saturday, a car wearing a pink hat picked-up my wife and I at one in the morning to get us home. We were trying out Djump, a self-styled “social ridesharing” app. Its concept is similar to that of Lyft: a network of drivers who will move you around a city at will. Launch the app from your smartphone, request a driver, wait for them to pick you up and take you to your destination, pay from your phone: you’re done!

Sounds like a familiar company? Uber maybe? The big difference with Uber is that Djump drivers are no professionals: they’re simply individuals with an available seat, willing to spend their Friday evening roaming the city waiting for passengers. In theory, once enough drivers are available, Djump drivers would pick you up on their way back from work or to a party. Right now though, they’re a core team doing it all evening long.

I had tried out Uber for the firt time about a week prior. The difference between both services is stark: whereas our Uber driver arrived faster than expected in a BMW series 5, our Djump driver was 10 minutes late — and the car much less impressive. Of course, the price reflected this as well: our Djump ride was about half the cost of Uber, for a similar distance, at around the same time (late in the evening).

Uber and Djump are far from the only companies operating in this space. In France, companies such as leCab and chauffeur-privé are competing headfront with Uber in the personal town car driver space. In the UK, Addison Lee and Green Tomato Cars have been operating on this market for a while. Hailo is yet another fast-growing contender. One might also want to include long-distance ride-sharing services such as BlaBlaCar in this list.

From the outside, it feels like each of these companies sees itself as a vertical player. leCab is for high-end cars. Green tomato is for eco-friendly cars. Hailo is for actual cabs. Lyft is for ride-sharing. Uber has a bit more diversity, offering both town cars and a less expensive option through UberX. All these service are for intra-city transportation, while BlaBlaCar is for inter-city ride sharing. The segmentation between all these services is huge.

Yet looking at it from the other side of the mirror, the target market for each of these apps overlaps in many places. My choice of any given service at a particular time will be based on a combination of factors: if it’s late in the evening, I’m tired and a bit drunk, I might prioritize a costlier option that will get me home faster. Yet I’m the same guy who will be looking for a cab home next time I get to the train station back from a trip. The same guy who’ll try to find a cheap way to get to Lille from Paris over the week-end. The same guy who will go on a business trip in NYC and indulge myself with town car rides.

In all those cases, I’m trying to solve the same problem: getting back home. My priorities and criteria of choice might change from time to time, but my credit card number will not. If one application were to offer me a great variety of choices to get home, I’d use it all the time. It would offer me the convenience of not having to go through 3-4 apps to select the best available option.

In other words, one of these services needs to come out and become a full-on marketplace for transportation services.

Ben Thompson over at Stratechery had a number of great posts on the difference between horizontal and vertical businesses recently: ”The Dropbox Opportunity”, “Services, not devices” and “Understanding Google”. In those articles, he argues that the biggest mistake a company can make is go for a vertical strategy when it is naturally built to go after a horizontal strategy:

The surest route to befuddlement in the tech industry is comparing a vertical player, like Apple, with a horizontal one, like Google.

Vertical players typically monetize through hardware, only serve a subset of users, and any services they provide are exclusive to their devices. Horizontal players, on the other hand, monetize through subscriptions or ads, and seek to serve all users across all devices.

Let’s apply this analogy to the current crop of personal driver companies. Right now, almost all of them is focused on a specific segment of the market. Yet, as pointed out above, their target market overlaps broadly. In addition to this, one should keep in mind a very important fact: most of these companies are not operators. The drivers are not employees of the company, nor do the cars belong to them. Personal driver companies are intermediaries between passengers and drivers. In a way, they are already a marketplace — albeit a limited one.

We have seen this type of consolidation happen before in the internet space. Two well-known examples illustrate this.

The first one, and the most obvious, is Amazon. They started out as an online book retailer. Today, they sell pretty much everything, from automotive tools to gourmet food. The key to Amazon’s success was to recognize early that its strengths in online inventory, logistics and delivery could be applied to a wide variety of products.

In a similar fashion, AirBNB started out as a service to rent spare beds during events. Today, you can rent pretty much anything through the service, from a couch to a country. Again, the key to the success of the company was to recognize early that its core competency could be used to widen its target market.

As it turns out, the same is true for personal driver services. The infrastructure you need to connect people and drivers and get them to pay for rides is pretty much exactly the same whether you’re looking at cabs, town cars or ride sharers. Sure, there are regulatory and legal considerations to handle, but the basic service is exactly the same.

This is why it seems clear that this seemingly unending expansion of personal driver companies will have to stop at some point. The reason for this is simple: the first company that will stop thinking about itself as a service company, and look at its activity as a marketplace is likely to win the market.

What if from within the app, I was able to get access to all options at once? For the organization running the marketplace, it doesn’t really matter which option I choose as long as it can get its cut. From the perspective of the company providing the service, what matters is:

1/ Getting me a driver
2/ Letting me pay from the app
3/ Taking its cut of the transaction (usually around 20%)

The fact that I’m going home in a Benz or a Prius is irrelevant.

The big curse of marketplaces is the chicken and egg problem. To create a great marketplace, you need both buyers and sellers in the right proportions. Too many buyers and they’ll leave the marketplace frustrated, unable to get what they want. Too many sellers and those will leave in turn, unable to generate enough revenue to sustain their activity in the long run.

Uber was able to overcome this problem by identifying a market that was illiquid (black cars) making it liquid in one specific market (San Francisco). They started by making an existing market more fluid and went on from there, expanding to additional countries and cities. Sounds a lot like AirBNB’s expansion story, doesn’t it?

Another trend is intertwined with the rise of those services: the rise of what I will call the “prosumer seller”.

What’s interesting is that both Amazon and AirBNB (and other marketplaces such as eBay or Etsy) led to the rise of sellers who were not able to reach a market before, which I refered to as “prosumer sellers”. That is, actors that before the internet would not have considered becoming professional sellers, but were able to become so once the transaction and distribution costs went down sufficiently to sustain their businesses.

A similar example of this phenomenon is taking place in France in the long-distance ride-sharing space. Services such as BlaBlaCar let users book seats in rides from one city to another, usually at a much better rate than if they took the train or even an intercity bus from one destination to another. While the initial goal of the service was to let people who often took the same route get additional people on board, it quickly led to people who made it their business to run such routes. For instance, the Paris-Lille route in France is ran by semi-professional drivers who do it yearlong.

As AirBNB renters have found out, this leads to a number of regulatory and legal issues. However, the key to a successful marketplace is to ensure that supply and demand match each other. Prosumer sellers are a big part of what made it possible for new services to reach an audience and expand their activity. It seems logical that this trend will find an application in the personal driving space too. This would be the best way for a service to launch in a lot of cities at once, especially in places where black cars companies do not operate at the moment.

Let’s wrap things up. Here are the characteristics of the personal driver service that will own the future:

1/ Available on every platform, in every city of every country
2/ Offering every option, from the lower to the higher end
3/ For both short-distance and long-distance rides
4/ Through professional and “prosumer” drivers

May the personal driver platform race begin!