Apps Like Uber Story: Taxi Aggregator Market
Uber once revolutionized the world of cabs without offering anything new: the private taxi service existed in many countries before it.
In May the map service Mapbox analyzed the international market of the cab aggregators. The study was called A Game of Rides (a reference to the series “Game of Thrones”). Figuring out who finances whom and how in this market is really not much easier than in the relationship between the characters of George Martin’s universe. For example, Softbank has at various times invested in Uber, China’s Didi Chuxing, and India’s Ola. Didi Chuxing, in turn, invested in Ola in 2015, and in 2016 merged with Uber in the Chinese market. Uber may now merge with Ola in India.
The global cab aggregator market is growing at a breakneck pace: in 2017, Goldman Sachs estimated it at $36 billion, predicting growth to $285 billion by 2030. So far, mobile cab services account for 15 million rides daily, but in 12 years the number should grow to 97 million. However, historically, it has been growing unevenly in individual countries and regions.
For America, the first important milestone in the history of “self-employed cab drivers” can be called the height of the Great Depression. At that time the New Yorkers, who were out of work, began to take private taxi services en masse. As a result, there were almost more cars than passengers in the city. It was difficult to control the industry, so the authorities decided to intervene. Since 1937 all cabs in the city were to have a license. That’s how “private drivers” disappeared from the streets.
Forty years later, against the backdrop of the oil crisis, the U.S. authorities began to encourage the concept of shared rides (so-called “ridesharing” or “carpooling”). Drivers who hitchhike were allowed to use dedicated lanes on highways. Thanks to this and other measures, by the eighties nearly a quarter of Americans were sharing rides on intercity routes.
Both private car aggregation and ridesharing are not new concepts, but both of these markets have changed markedly with the advent of technology. Uber is now considered by many to be such an IT pioneer in the U.S. market. However, as we can see, the company created by Travis Kalanick and Garrett Kemp in 2009 did not invent anything new and became an intermediary between passengers and “private individuals” not at once – the service was generally conceived as a joint booking service for limousines.
Back in 2007, the Zimride project was launched in the United States. It connected Facebook users with each other for joint long-distance trips. Lyft grew out of Zimride in 2012. Now it is the main competitor of Uber in the U.S. market.
The main functions of a modern aggregator – ordering through the app, communication with the nearest driver, geolocation services – were defined in the early years of competition between Lyft and Uber. At the same time, business models were being honed. In the battle for customers, the companies began separating different fares into separate services. Available from the same app, they were based on different mechanics. For some services companies entered into partnerships with entire taxi fleets, and for others they engaged “independent” drivers in cars of different classes to work in cabs.
Capital has played an important role since the early days of the modern aggregator industry. One of the biggest players in the U.S., Sidecar, lost that race in 2015 and closed. The company’s founder later revealed that Sidecar was unable to compete with Uber, which had raised more than $5 billion in investment by 2016.
In 2012, transportation officials discussed for the first time at a high level the problems of aggregator services. The main issues everyone was concerned about were whether their business model was legitimate and whether they were putting passengers at risk. While the issue was being addressed, individual states issued the first fines to aggregators and banned them from operating in their territories. In 2013, California was the first to allow aggregators to link passengers and “privateers.” Operators were subject to certain requirements to conduct inspections and train drivers. Colorado and other states followed California’s example.
Meanwhile, the leaders were expanding in the U.S. and winning new markets. Some of them had their driver base grow from zero in 2012 to more than 140,000 in 2014. By then, Uber cab drivers were earning a national average of $19.19 an hour. Lyft’s claimed pay level was about 1.5 times higher. The services unleashed a price war – the cost of paying drivers was falling. On this ground, the resentment of licensed cab drivers turned into protests. In the summer of 2014, drivers in Washington went on strike and blocked traffic on parts of the city’s roads. They protested unfair competition with unlicensed colleagues. The latter, though they received less at reduced fares, did not pay tolls and taxes. Similar protests took place in other American cities.
U.S. operators began their European expansion in 2011. Long before that, in 2003, drivers and passengers in London were connected through mobile technology by a startup called Zingo. It provided an automatic system for finding the nearest cab driver. All the user had to do was call the service number on his or her cell phone, and it passed the data on to the driver. Cab drivers did not appreciate the merits of the new service because they had to pay a subscription fee. Zingo accumulated millions of losses and soon the company left the market.
In 2011 the first local aggregators appeared in Europe. They adopted the business models of American competitors and successfully implemented them at home. It was easier for local services familiar with the situation to win the trust of users and the favor of cab drivers.
London, famous for its cabs, has strict requirements for taxi companies. With this in mind, the Hailo service was built in 2011, linking passengers with cab drivers. Hailo attracted investment and grew quickly enough. It even managed to enter the American market, where the company continued to work with licensed cab drivers, but this model was not successful. In the end, Hailo was taken over by another European service, MyTaxi, owned by Daimler. This company is growing on similar deals: in addition to Hailo, it acquired the Greek Taxibeat and the Romanian Clever Taxi.
In 2013, a 19-year-old entrepreneur from Estonia launched the startup Taxify. The service now has 10 million customers in 40 European and African cities. It is valued at a billion dollars, and it can safely be called one of the leaders in the European market.
The expansion of aggregators has become a stress for licensed European cab drivers. As in the U.S., their growing discontent has led to protests. In 2014, cab drivers in major European cities blocked traffic, demanding that they “chase Uber away. The cab drivers’ complaints did not go unanswered: in 2017, the EU’s highest court equated Uber with transportation companies. This means that the service must comply with the same rules as all cab operators, including licensing drivers. In the same year, London authorities banned Uber as not meeting safety requirements.
As in Europe, in Asia local leaders emerged almost simultaneously with the arrival of international aggregators. The Asian market, however, has its own peculiarities. First, the concept of sharing has been extended here from the beginning not only to cars, but also to bikes and bicycles. Secondly, foreign services in Asia have had a particularly difficult time. The authorities of various countries raided their offices and banned them from operating, while local cab drivers went on strike along with the rest of the world.
The main feature of South-East Asia is that, to date, “foreigners” here have lost out to locals. This year it became known that the local leader, Singapore’s Grab service, is acquiring all of Uber’s regional business.
Grab appeared in 2012 in Malaysia. The service worked on the well-known aggregator model, providing drivers with orders, but taking a lower commission than taxi companies. And now it has the biggest deal on the horizon for the industry – Toyota is going to invest a billion dollars in Grab.
Roughly the same thing as around the world is happening in the Russian market. Yandex.Taxi and Uber launched a major merger deal in 2017 and closed it this February. Mail.Ru Group has recently carried out a whole series of investments in the cab market: Citimobile received financing in April and Veset in June.
The Russian cab market has largely developed according to its own scenario. Russia has historically had a culture of private transportation. But we did not have a regulated market and the need to buy a license for a lot of money, as in the U.S.. Drivers only had to have a car and the desire and ability to moonlight. For years this whole segment was in a “gray” zone. Hence the security problems. The market needed tools to connect customers with drivers and guarantee passenger safety – mobile applications with geolocation functions, monitoring services, and rating of cab drivers.
Such solutions began to be developed by local players – they had grown out of the “old school” services, had been working in Russia for many years and were firmly holding on to their market share. Many of them began by taking orders by telephone, and gradually moved on to the model of cab aggregation we are now familiar with. They were competed by the foreign services which appeared in Russia in the early 2010s.
The rapid growth of Russian users of aggregator apps occurred in 2014. It happened for several reasons. Firstly, by 2014 the main backbone of players in this sphere had formed. On the one hand, competition grew, and on the other, competitors began to work together to actively promote ordering cabs through apps. Thanks to this, virtually every Muscovite understood that it was convenient. As a result, a core of active users grew up who recommended the apps of cab aggregators to friends and relatives. Secondly, the market benefited from the growth in mobile Internet penetration. And the turning point occurred closer to the end of the year. The advertising budgets, the winter, the cold, and the New Year holidays did their part: during that season, the Citymobile app alone experienced a doubling of its client base.
With the emergence of aggregators in Russia, the “voters” from the streets disappeared, and “private drivers” began to “legalize themselves” by registering with the apps as drivers. However, when we talk about the birth of aggregators in Russia, as a rule, we are referring specifically to the market in the capital. In the regions, too, the cab industry is actively developing, but competition between aggregators here began later. In addition, the rate of mobile Internet penetration on average in the country differs from that in Moscow. In 2013 the national penetration rate was below 20%. By 2018, this figure had reached 73%. Nevertheless, Moscow is still ahead of other regions both in the volume of mobile traffic and Internet penetration, and in the level of cab services.
Read more about phone tracker apps in our article.