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Taxi apps are driving disruption

Written by Adam Pescod on Monday, 01 September 2014. Posted in Disruption, Analysis

Despite courting some controversy, there’s no denying that taxi apps have become big business. And with technology advancing at a rate of knots, there’s no sign of the market slowing down any time soon

Taxi apps are driving disruption

London came to a standstill earlier this summer as thousands of black cab drivers went on strike. Unlike the capital’s Tube staff though, this wasn’t another protest over planned redundancies or paltry wages. While Transport for London (TfL) was the target of the Licensed Taxi Drivers Association’s dissent, the reason for its outrage was something entirely different.

Unless you’ve been living under a rock for the last year, it’s been hard to escape the phenomenon that is Uber, the revolutionary taxi app that’s smashed its way out of San Francisco and has its eyes set on global domination. Already boasting a staggering valuation of $18bn, the super slick tech start-up looks set to leave the traditional taxi sector trailing in its wake.

In short, Uber allows members of the public to hail a car – driven by a TfL-licensed driver – and process payment at the touch of a smartphone button. The process is designed as a seamless solution for people who are often left frustrated when trying to hail a cab from the side of the road. Journeys booked through Uber also tend to cost less than they would in a black cab.

What has really drawn the ire of cabbies is the fact that Uber is not subject to the same regulations as them while being entitled to some of the same benefits; the main point of contention is its purported use of smartphones as a meter. At the time of writing, the matter was with the High Court but it remains to be seen how big an impact a ruling against Uber will really have. Of more intrigue is Uber’s addition of black cabs to its service on the day of the strike – a challenge to the notion it’s attacking cabbies’ livelihoods. “There will always be a place for black cabs in London,” says Jo Bertram, general manager UK & Ireland for Uber. “That’s why we launched uberTAXI, also enabling cabbies to join the Uber platform.”

Time for tech

All of this hype overshadows the rampant innovation that’s been taking place in the sector over the course of the last five years. For while Uber may have been dominating the headlines, a flurry of start-ups including Hailo and Kabbee have been blazing a trail in the space, giving rise to what can now loosely be labelled the taxi app industry. And with established players such as Addison Lee also boasting their own mobile apps, it’s quickly become an intensely competitive marketplace.

One thing’s for sure, the injection of technology into the industry was both essential and inevitable. “Taxis are one of the last industries that had had significant under- investment in technology,” says Justin Peters, founder and CEO of Kabbee, the taxi quote aggregator. “For such a big industry, there hadn’t been someone shining a bright light into the nooks and crannies to see how efficiencies could be created.”

The rise of the smartphone in recent years has certainly opened up a plethora of business opportunities, with a host of entrepreneurs chomping at the bit to see what can be achieved with the technology. “Given the computing power of smartphones and the data-processing capacity that they have, it’s simply become a case of really slick software that allows people to get things at the tip of their fingers,” says Ron Zeghibe, co-founder and chairman of Hailo, the black cab app. Suffice to say, it was a simple decision for Hailo to make the smartphone the primary vehicle through which to deliver its service. “I can’t think of a better application of mobility than using smartphones for something like personal transportation,” adds Zeghibe. “For us, it was just a no-brainer.”

And the same is true of Uber. “We’re passionate about making use of the most cutting-edge technology – and that means providing flexible, affordable and easy ways to get around town, simply through your smartphone,” says Bertram. “We’re responding to the way that people engage with the world around them.”

A game of two halves

It’s worth noting that the innovation that’s taking place can be viewed through two different lenses. In the one corner are Uber, Hailo and newcomer Bounce, the minicab app co-founded by Nicko Williamson, the man behind Climatecars, the eco-friendly executive car service. In essence, they’re taxi companies with a twist, or, in the case of Hailo’s flagship app, a virtual aid for self-employed black cab drivers. Instead of having a traditional bricks and mortar office manned with booking agents, everything is done through a smartphone app, which tracks the position of drivers and customers using GPS technology, ensuring the nearest available driver can take every job.

Williamson believes this model provides significant benefits to both drivers and passengers. “You’ve got all these guys working for companies who are paying their fees upfront and being managed really inefficiently, generally with pretty basic technology,” he says. “But now that everybody has a smartphone, there’s no reason why the position of that driver cannot be passed directly to their nearest passenger and – instead of having a local minicab office – you essentially have a virtual fleet that can be easily be accessed by any customer.”

The flexibility provided to drivers is a compelling reason for them to get involved, suggests Bertram. “Uber’s business model is about creating opportunities for drivers,” she says. “Drivers are in complete control of their hours and earnings, rather than being an employee with set hours, working patterns and often a fixed fee to work on the platform.”

However, there’s also been a great deal of activity in another part of the market. While the aforementioned hailing apps are ultimately out to disrupt or compete with traditional taxi firms, a number of tech start-ups are helping to keep the UK’s established minicab sector alive and kicking. Firms like Kabbee, minicabit and Minicabster aggregate quotes from minicab companies and act as a comparison service for consumers in a similar vein to services like Expedia and JustEat.

One benefit that this route offers start-ups is access to an enormous pool of experience. “These companies not only have a supply of drivers but they have also got hundreds of years of expertise in picking up customers on time,” says Peters. Having bought a minicab firm himself in 2007, the Kabbee founder spotted an opportunity to improve the industry and secure its future. “I could see the inefficiencies of having lots of disaggregated firms all across London and I could see the logic of a brand sitting at a higher level getting quotes and demand from all over London,” he adds.

It also presents a real opportunity for fast growth, with the world beyond London opening up ample room for a good breadth of service. “Working with the cab operators meant we were able to scale the business extremely quickly because we were effectively aggregating the aggregators of drivers,” says Brooke Pursey, founder and managing director of Minicabster. “All of the cab firms aggregate drivers and I’m a big believer in creating marketplaces and working collaboratively rather than going in and being destructive.”

There’s certainly a lot to be said for championing the local minicab services that have been providing a convenient service to people for a number of years. “There’s no doubt the cab sector needs to change and get more efficient,” says Amer Hasan, founder and CEO of minicabit. “The general transition that’s happening in the sector now is forcing lots of cab operators to raise their game, which is a good thing, but let’s not discount the fact that customers are used to working with a cab operator, maybe a favoured local operator or driver. We recognise that and that’s why we want to continue working with them.”

Steering clear of the hailing app side of the market also means that start-ups can harness the power of the personal computer as much as the smartphone. “People say you need to be all about the app but there are still millions of PCs and most people are sat in front of their computers all day,” says Jonathan Kettle, founder and managing director of Taxicode. “When people go after the app market, they ignore a huge number of potential customers who are all PC-orientated or Mac-orientated.”

What next?

Given how much has already been achieved in digitising the cab sector, it can be easy to forget the movement is still in its infancy. However, as the market becomes ever more populated, new entrants are going to have their work cut out attracting the attention of punters and drivers. “The cost of creating a basic app that links up to a few different networks is not very high. The cost is in making sure you get enough scale on it and the service really works,” says Peter Boucher, chief commercial officer for Addison Lee. “You and I could probably knock together a basic taxi app but could you put enough cars underneath it and could you make sure that the experience is really high quality day in, day out? That’s where the difficulty lies.”

As Boucher stresses, enabling people to book a cab at the touch of a button is a neat trick but if it’s not followed by some first-rate customer service, the whole thing can fall flat on its face. “Customers aren’t quite as excited about the apps as we think they are,” he says. “It’s convenient and they like it – don’t get me wrong – but they will ultimately judge services based on the experience they receive. The app is part of that but, for us, technology has to be backed up by humans as well.”

And if the rise of Hailo and Uber has taught us anything, it’s that money talks in the tech world. Granted, investment only comes when there’s a solid, scalable business proposition on the table but without a sufficient level of capital behind it from the outset, a start-up in the taxi app space will find itself swimming against the tide before it’s even set sail. “The days of starting up as a couple of guys and a dog in a bedroom, building an app and launching it are over,” says Zeghibe. “I suspect, ultimately, like most of these tech businesses that go to scale, there won’t be one dominant winner-takes-all. But you will have a handful of well-resourced players and it’s going to be those that can still attract capital and have a decent competitive business model that will be the winners.”

With driverless cars now just around the corner, the future could hardly be more exciting. As Pursey says: “This is just the beginning.”

 

Chasing the dime

Hailo

Another app that’s recently incurred the wrath of London’s black cab drivers is Hailo. The company announced the launch of its Hailo for Business service, signalling a move into the executive car space occupied by the likes of Addison Lee and UberEXEC. However, Ron Zeghibe, the company’s co-founder and chairman, is keen to stress that Hailo’s flagship black cab app will remain central to the business’s plans going forward.

“We initially went after the general broad market and have been hugely successful to date – we have well over half a million registered cab customers in London alone,” he says. “Equally, we were recognising and listening to the drivers who were saying they want us to do corporate work. We started to consider how we would develop a Hailo for Business product line and realised, based on the feedback we were getting, that we needed to have an executive car service to go with a more general ‘as and when’ cab service.

“We applied for a private hire licence and that was leaked. People then started filling in the blanks about what we were doing: it got out that we were going into minicabs and we were going to put them in competition with black cabs. That was never our intent; it’s absolutely not what we were doing. In London, it was simply to add choice to the top-end service so that we could go out and win business that, frankly, I knew a lot of the driver base wanted.

“We are hoping that, as people begin to see how we do it, they’ll begin to understand that we are all about keeping the black cabs right at the centre of our service, because it is the best service and that’s what we’re all about.” 

About the Author

Adam Pescod

Adam Pescod

EB's former editor, Pescod was tasked with ensuring these hallowed pages are rich with excellent, engaging and error-free stories, all written with the entrepreneur in mind. Pescod previously plied his trade penning pieces about pubs and pints. He is also a sucker for alliteration. 

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