Uber’s London Rivals Are Plotting Its Downfall

Mourad was teaching languages at a secondary school in London when he decided to go part time for family reasons. In 2016, he started driving for Uber for extra money, mixing trips with shifts as a supply teacher. “At the beginning I liked it,” he says. “It was a very flexible way of working.”

Wired UK

This story originally appeared on WIRED UK.

The ride-hailing service launched in London in June 2012, and quickly took over. It wasn’t the first such product in the capital—Hailo’s app for black cab drivers predated Uber—but it quickly became dominant, particularly with the launch of UberX, the cheaper rides that moved the app on from its original focus on luxury. At one point in 2016, 30,000 Londoners a day were installing the app on their phones, eschewing iconic black cabs in favor of a Toyota Prius summoned with a tap.

But now, Uber’s stranglehold on the city is loosening. On Monday, Transport for London, or TfL, announced its decision not to renew the company’s operating license in the city, after granting it a short extension which expired this week. Uber will appeal, meaning it can continue to operate for now, but its future in London is far from certain. And what’s bad for Uber will likely be good for pretenders to its throne.

At coworking spaces from Mayfair to Shoreditch, newcomers are taking chunks out of Uber’s market share, undercutting it on price, and promising a better deal for drivers. Today, there are several alternative ride-hailing apps operating in the city—Bolt, Hailo, Kapten, ViaVan, Wheely, Xoox, and more. Mourad has set up a website—driverapplondon.co.uk—to help drivers navigate the muddle. London’s ride-hailing scene is fragmenting—both geographically and demographically. But are the new players really offering a ride-hailing revolution, or just more of the same?

For the tens of thousands of new drivers who signed up to the platform in the early years, Uber seemed to offer everything—in exchange for a hefty 25 percent commission. But the drivers were always aware that their livelihoods dangled by a thin thread—their pay and working conditions depending on the whims of a multinational company with a reputation for bad behavior. “Drivers were under a lot of pressure,” Mourad says. “If anything went wrong, if there was a complaint from a rider or something going wrong with a ride, we were at risk of being deactivated from the platform.”

Things started to change in September 2017. First, on September 7, Estonian startup Taxify started operating in London—gaining a route into the city by purchasing an existing company that already had a private hire license. But TfL quickly shut that down, resulting in an embarrassing retreat for Taxify. Then a few weeks later, the regulator shocked the industry by rejecting Uber’s application to renew its license to operate in London, kicking off a saga that has been rumbling on ever since—and which will now be settled in the courts.

Meanwhile, other operators have been arriving in the city. ViaVan launched in April 2018, and has picked up more than half a million users in the capital with its focus on shared rides. Rather than working at cross-purposes with TfL, ViaVan—a joint-venture between Via and Mercedes–Benz Vans—seeks to act as a complement to public transport. “Our goal in coming to London was to offer something that was different and more sustainable and in line with the city’s goals,” says Chris Snyder, ViaVan’s CEO, when we meet at the company’s offices near Angel.

On the ground floor, a number of drivers are sitting in an airy waiting room, ready to be “onboarded”—the term that ride-hailing companies use for registering new drivers on their app. Finding a suitable office is one of the first big challenges faced by new arrivals into London. They need somewhere that they can initiate and train drivers, which means finding an office that’s not in the congestion charge zone, with ample parking nearby, but still in an area that drivers are likely to pass through during a working day.

As a result, most of them have congregated in a small area: ViaVan in Angel, Bolt in Shoreditch, the soon-to-launch Ola in Liverpool Street, and Kapten near Old Street. Wheely is based in well-to-do Mayfair, in line with its focus on the higher end of the market.

ViaVan has focused on shared rides, where your journey will be slightly cheaper if you opt to share the car with a stranger who might get picked up on route. The company is also working with TfL on an on-demand bus service in Sutton, an area of London not well served by other forms of public transport. “London has a number of challenges. The mayor has done a very good job of identifying congestion and emissions, which are very high on the list,” says Snyder. “From that point of view, having two or three Uber clones in the city doesn’t really make a lot of sense. It’s not addressing the problem.”

For drivers, the launch of ViaVan was a landmark moment. “We were so craving another operator, an alternative—so when one came on board everyone was aware of it,” says Mourad. There was more to come.

In May, Paris-based startup Kapten launched in the city, bankrolled by BMW and Daimler. “We started quite aggressively,” says Mariusz Zabrocki, Kapten’s general manager. “We attacked Uber from the beginning.” A billboard in Leicester Square announced Kapten as “London’s new ride-hailing app (that pays it taxes locally)”. The company tried to set itself apart from Uber in the eyes of passengers with a focus on social responsibility, and an advertising campaign firmly aimed at younger riders.

While 75 per cent of black cab rides take place inside the congestion zone, that’s only true of 17 per cent of journeys taken with Kapten, according to Zabrocki. He says Kapten is positioning itself as a “last mile” solution in Zones 2, 3, 4, and 5 of London. Commuters might use it to get from the tube station to their home, for instance.

But the main driver is price. For years, Uber has operated a virtual monopoly in the city; it grew a huge customer base of 3.5 million people by being cheaper and more convenient than black cabs for most journeys. But now, new entrants like Kapten are undercutting it on price—and subsidising rides in a way that Uber, now a publicly traded company, can’t afford to do anymore.

The company is being squeezed from both sides. Private minicab firms are finally getting organized with apps of their own, and in 2018, Wheely—a luxury ride-hailing service—launched in the capital, aiming at the higher end of the market. It is slowly gaining a foothold, particularly for airport transfers from areas such as Kensington and Knightsbridge, according to founder Anton Chirkunov.

But the battle for passengers is only half the story. The process of launching a new ride-hailing service starts a long time before the first rides are taken. Stage one involves applying for a license—which can take anything from six months to two years. But in recent months, there has been a glut of approvals. In June 2019, Taxify returned to London with a proper license and a new name: Bolt.

“We went on this journey of redemption with TfL,” says Sam Raciti, an Australian who helped launch Taxify in Melbourne and Sydney, and who was now tasked with rolling the service out in London. At the company’s rented offices near Old Street, Raciti and his team accelerated their aggressive driver-recruitment process using an “off the shelf” plan which had worked in other cities.

Drivers are almost more important than passengers when it comes to determining success for a ride-hailing app. If there aren’t enough drivers, passengers will face long waits for rides when opening the app, and they’ll quickly switch back to Uber’s glut of cars.

So for months before it launched, even before it got its license confirmed, Bolt was onboarding drivers so that it would have several thousand available on day one. The company relied on digital advertising—targeting social media and online search to find drivers who had expressed interest in their rivals. Bolt’s offer to drivers is simple: 15 per cent commission instead of the 25 per cent that Uber takes. It is, says Raciti, “a game-changer.” “In the space of five months we’ve captured over 50 percent of the driver base.”

It was a similar story with Kapten, which went from license to launch in a matter of weeks. “We had people on the ground from the beginning of the year,” says Zabrocki. “We started with onboarding teams—the people who are recruiting the drivers. By May we had most of the team recruited, we had our marketing campaign ready. You can’t move that quickly without preparation.”

Today, Bolt has around 25,000 drivers in London; Kapten has 20,000; Uber has 45,000. But they’re all the same people. Rather than abandoning Uber and switching to other platforms full time, the majority of drivers are “multi-apping”: switching between paymasters depending on which ones are offering the most work. That’s been vital for the new entrants to the markets, who don’t yet have the scale in terms of the number of passengers to keep drivers busy through a whole shift.

When they’re looking for a job, drivers will keep three or four different apps open. “You need to have a fast phone,” Mourad says. When a job comes through on one, they accept it, making sure they go offline on all the other apps so they don’t get penalized for turning down jobs.

It’s resulted in a virtual arms race. While the ride-hailing apps battle for passengers with promotions and discounts, a parallel war is taking place with drivers too, with concessions and features suddenly being introduced as Uber tries to keep them on board.

Both Kapten and Bolt offered hefty bonuses to drivers when they launched—sometimes £10 or £20 per trip, although Mourad says many drivers reverted back to Uber after this honeymoon period was over. At first, Uber’s response was mostly on the driver side. “Many drivers switched from Uber to Kapten, and we know that the power users were contacted by Uber and asked what was happening, and why they were leaving the platform,” says Zabrocki.

In the last six months, Uber drivers have gained the ability to see a rider’s destination before they accept a trip, access to Uber Pro (a tiered loyalty scheme that rewards them for making more journeys on the platform), and a more lenient approach to driver deactivation. “They used to deactivate drivers who had a high cancelation rate,” notes Mourad. “Now they can’t really afford to do it.”

The moments after a trip finishes are crucial. “The best thing that we can do is serve them what’s called the back-to-back trip,” says Taxify’s Raciti. “So while they’re finishing their current trip, we send them a notification that there’s another trip nearby.”

All the apps are slowly bringing in features copying their competitors—from ride-sharing options aping Uber Pool to features aimed at retaining passengers and drivers, from the ability to book your favorite drivers in advance to Kapten’s “car match,” which gives you a free ride if you’re reunited with a previous driver.

Although the market may be becoming more fragmented, you could argue that all the apps are becoming more similar. There are more launches to come—mirroring the proliferation of cycle-sharing schemes in the city. Indian ride-hailing firm Ola received its London license in the summer and was due to launch in September, although things have gone quiet since then. Rather than Uber’s one-size-fits-all approach, Ola takes a much more localized approach to its new territories, and has been starting its UK journey in smaller towns and cities like Exeter, Wolverhampton, and Cardiff.

While both Bolt and Kapten came in promising a better deal for drivers, they’ve had teething problems of their own, with some drivers reporting being paid the wrong amounts for journeys, for example. Bolt’s policy on turning down rides is particularly harsh: Any driver that does not confirm more than 60 per cent of trips falls into a three-step deactivation process. First they’ll be banned from the app for a day, then a week, then a decade. As the number of passengers grows, Bolt needs to keep drivers using its app, so that they’re available to pick up riders. “During our growth phase, we rely so heavily on positive word of mouth to essentially grow the business,” says Raciti.

For months, driver forums have been full of complaints about late payments and disputes with each of the major ride-hailing platforms. Now, those posts have been replaced with the news about Uber’s London license not being renewed. “They’re worried,” says Mourad. “But they’re less worried than they were a year and a half ago when there was only one app.”

The question for drivers, riders, and TfL is whether these new entrants have a business model that is any more sustainable, or if they’re essentially the same thing with a new logo. Bolt in particular take great pride in claiming to be more efficient than Uber in terms of capital expenditure—saving money by not splashing millions on autonomous vehicles or drones, and passing those savings on to passengers. But the company is still subsidizing rides in London for the time being.

“There is always interest in the new shiny object to show up, whether you’re a consumer or a driver,” says ViaVan’s Snyder, who says his company is offering something qualitatively different. “Often that’s because you’re getting a crazy deal. But obviously crazy deals aren’t sustainable. It’s difficult to imagine that any company is ultimately going to be able to provide something that is frankly much different from Uber.”

This story originally appeared on WIRED UK.

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