Juno Takes on Uber

Harry here.  I’m excited for the success of rideshare start-ups like Juno because over the long-run, competition can really benefit drivers.  I’ll be releasing a new podcast next week where we actually interviewed a Juno driver, so make sure that you stay tuned for that.  The RSG Podcast has over 100 5 star reviews and you can subscribe here in iTunes.

Today, senior RSG contributor John Ince takes a look at a couple in-depth stories about Juno and what they’re doing to take on Uber, a story about Uber’s self-driving cars hitting stuff and more.

In this round up, it's all about Juno: what drivers can make with Juno, growth prospects, and more. Would you drive for Juno if they come to your city?

Juno Takes on Uber [New Yorker]

Sum and Substance: At first, Smith was put off by the whiff of exploitation that he detected around rising Silicon Valley enterprises such as Instacart, where people buy your groceries for you, and TaskRabbit, where freelancers can underbid one another to take on errands and other jobs. In middle school, Smith told me, he was assigned a book by Ayn Rand. “I remember finishing it, and realizing that I wanted to be the opposite of everything that was in that book,” he said. “Everything about the celebration of selfishness was just anathema.”

It was shortly after 3 P.M., and five men entered the room and sat down in a semicircle. Their cell phones were tucked away in their pockets; Smith had their full attention. “The fact that you’re in this room, well, means that you’re a professional,” Smith said. To have been invited, in fact, all of them had to have an Uber rating higher than 4.65 (or a Lyft rating higher than 4.7). “So I don’t need to talk about the basics. When it comes to what makes Juno different, the biggest thing is our focus. That’s behind everything we do. And that’s that Juno is for drivers.” He paused to fiddle with the lights. “We built this company with the idea that listening to the drivers and building a business that puts drivers first isn’t just the right thing to do—although we think it is—and it doesn’t just mean that we’re nice, although I think we are, but that it’s also good business.”

Smith moved through his slides and his talking points. The drivers learned that Juno’s commission was ten percent, “guaranteed for our first twenty-four months.” (Uber typically charges twenty-five per cent or more.) On a slide titled “Example Fare,” a bar chart showed a comparison between an Uber driver and a Juno driver on a thirty-dollar ride: the Uber driver, after commission and taxes and fees, would keep $19.11, while the Juno driver would get $23.61. “For literally the same amount of work, you’re taking home four dollars more,” Smith said. “And that’s on one ride. Think about it on ten, over twenty.” Juno was also offering twenty-four-hour support for its drivers, with a promise that you could always reach a real person on the phone, “not a robot.” Finally, Juno drivers could earn an ownership stake in the company, in the form of restricted stock units. “I think this is a huge deal,” Smith said. “And it’s totally unique.”

To qualify, a driver had to drive for at least a hundred and twenty hours a month—approximately thirty hours a week—for twenty-four months out of thirty. The twist was that Juno was offering to count toward this goal the hours that its drivers were working for Uber and other companies, all of it clocked on their dashboard phones.

Half of the two billion founding shares of the company had been set aside for this purpose, although they weren’t going to be worth anything unless Juno was bought out by a larger company or had an I.P.O. Smith went on, “Now, once Juno goes public? And is traded on the stock exchange? You’re an owner. You profit from that. You can sell your shares, you can hang on to them. But you’ll profit from the growth of this company.” There were some murmurs of approval among the drivers….

My Take:  This is the best article I’ve read on Juno.  It digs in and gives us a revealing look at what actually happening in New York.  It’s a story well worth following closely, as it has the potential to change the course of economic history. What Juno, Talman Marco, and his team are doing is very exciting – even revolutionary.  It has the potential to disrupt the ride-hailing industry and the entire “sharing” economy.  But let’s be realistic, they have a ton of challenges ahead of them.  They’re up against Goliath in Uber and no revolution ever came easily.

This article points out that distributing equity shares to large numbers of drivers creates potential legal and logistical problems.  I certainly hope they can pull it off because their intentions and strategy seem much more carefully considered than those of certain unnamed incumbents in this space. The term “sharing” has been abused by Uber, Lyft and I fear they’re on the wrong side of history.

As currently constituted, the sharing economy enriches a very few on the backs of those who are doing the heaving lifting.  Drivers are shouldering the myriad risks – an accident, an expensive ticket, insurance snafu and others.  Drivers feel intimidated by a capricious rating system where at any moment they could be summarily dismissed or “deactivated” on the basis of a flimsy story made up by just one disgruntled passenger – without anything resembling due process of the law.  Drivers deal with these insecurities on a daily basis.

Meanwhile, if you’re Travis Kalanick, John Zimmer, Garret Camp, an investor or a salaried “employee” of these companies your paper wealth has soared beyond all imagining.  Uber has typically offered pay packages to software developers and others that are tilted towards high equity and lower than industry cash compensation.   But drivers get no opportunity to share in this upside.  Juno reverses all that.  They’re offering  a very compelling proposition to drivers.

Sign up for Juno

Juno is now accepting pre-registration.  You can sign up here using our referral link or our code: 5335-180

Granting Shares for Fares: An Uber Rival’s Play for Drivers  [New York Times]

Sum and Substance: Juno is the latest start-up trying to loosen Uber’s grip on the country’s ride-hailing industry. It has arrived on the heels of Curb, Gett, Lyft and the now-defunct Sidecar, each of which has tried in its own way to compete against Uber. Gett came out against surge pricing, an Uber practice in which fares rise during periods of high demand. Curb lets riders hail taxis either by hand or via its app, and then pay for them with the app. Lyft is perceived as a less corporate option, using the tagline “Lyft is your friend with a car, whenever you need one.” And Juno’s approach is to promise drivers a supportive corporate culture and a larger cut of its business.

Juno was founded in May 2015 by an Israeli tech entrepreneur named Talmon Marco and several business partners who together had started Viber, a phone and instant messaging app that they sold in 2014 for $900 million. Juno so far operates only in New York City. The founders had conducted informal research, hitting the streets of New York to talk to Uber drivers about their experiences. They said they detected a morale problem. “If somebody can treat them better, they’ll jump ship,” Mr. Marco concluded. 

Their next step was to ask riders whether they, too, would be amenable to hopping over to a new company. The answer was yes, Mr. Marco said. “As long as the ride-sharing company can provide a quality of service, there’s no problem,” Mr. Marco said he and his Juno co-founders discovered. Then they spent a month devising what he refers to as a “mini constitution,” a philosophy and a set of principles the company would apply to its drivers. These include respect, kindness, fairness and transparency. Their theory was that happy drivers would make for satisfied customers.

Broad equity employee ownership is exceedingly rare within the sharing economy, according to Arun Sundararajan, a professor at the New York University Stern School of Business who studies the sharing economy. (The stock photography website Stocksy.com recently became one of few such businesses offering equity to contributors.)

Every quarter, Juno allocates restricted stock units to its drivers. The first allocation was in July, and the company announced on its Facebook page that its top-rated driver earned 29,673 stock units. (“Finally drivers are getting some respect,” one commenter wrote.) The stock units vest when drivers accept fares for 120 hours a month for 24 out of 30 months. They can cash in the units if the company is sold or goes public.

So far, many drivers have been intrigued by Juno’s ethos and the equity ownership factor. Mr. Marco says more than 15,000 New York drivers have flocked to Juno. According to Harry Campbell, a Los Angeles driver with Uber and Lyft who has a blog and podcast called the Rideshare Guy, drivers in other cities are also interested. “Thousands of drivers are asking me, ‘When is Juno coming to my city?’” Mr. Campbell said.

My Take:  Like the classic Broadway play, Waiting for Godot, it seems drivers are waiting … and waiting … and waiting for Juno to come to their city.  But Talman Marco is doing this very deliberately and methodically – making sure they’ve worked out the kinks in New York City before expanding to other cities.

It’s a fascinating experiment that’s testing the core tenet of ridesharing – network effects.  Uber and its investors bet the house that network effects would create barriers to entry in this space.  Their price cuts and predatory business model are predicated on a strategy of forcing the competition out of the business, so they can then increase fares and start generating positive cash flow.

Now Juno enters the picture with a different strategy – win over drivers with equity distribution and other perks.  It raises a fundamental question now hovering over the entire industry –  how strong and how important is the loyalty of the drivers to a particular platform.  What’s your take?  Can Juno disrupt the disruptors?  If Juno comes to your city, are you willing to drive for them even if it means you’re getting fewer ride requests at least for the gestation period?

Uber’s self-driving cars are already getting into scrapes on the streets of Pittsburgh [Quartz]

Sum and Substance: Uber driver Nathan Stachelek was pulled off to the side of the road when he saw the self-driving car turn the wrong way. It was the night of Sept. 26 and the car he had spotted, one of the autonomous Ford Fusions that Uber is testing in Pittsburgh, Pennsylvania, was heading through the city’s Oakland neighborhood, just steps from the center of campus for the University of Pittsburgh. Stachelek watched the car turn off Bates Street and onto Atwood, a one-way road, going in the wrong direction. From a distance he couldn’t tell whether the car was driving itself, or its human operator had made a mistake. Stachelek took out his phone in time to shoot a brief video of Uber’s vehicle backing up and driving away, then uploaded it to Facebook. “Driverless car went down a one way the wrong way,” he wrote. “Driver had to turn car around.”

Uber, the world’s most valuable startup, with a $68 billion valuation, has rushed to be first-to-market with driverless technology. The company showed off its self-driving cars at a media event in Pittsburgh last month before putting four Ford Fusions into service for a small group of local riders. It plans to add 100 Volvo SUVs to the fleet by the end of this year. Uber is betting on truly autonomous vehicles to transform the economics of ride-hailing by eliminating its biggest cost—drivers. The company lost at least $1.2 billion in the first half of 2016, Bloomberg reported in August, with the majority of that spent on driver subsidies.

For now Uber’s cars have limited operating hours and terrain, and they must travel with two humans up front—a designated “safety driver” behind the wheel and an engineer in the adjacent seat. Even so, the company is pushing this technology onto the public when it remains largely unproven and other tests of driverless cars around the US have yielded their fair share of accidents. Earlier this year a self-driving Google car hit a public bus while trying to make a right turn in Silicon Valley. In May, the driver of a Tesla Model S died in an accident while he had the autopilot function enabled. Google suffered its worst crash yet just a few weeks ago when another driver ran a red light and barreled into its self-driving Lexus.

My Take:  Are these just growing pains, or signs that self-driving technology has really been overhyped?  Only time will tell on that one, but for sure regulators are watching news items like these very closely.  I can’t see them giving the green light to autonomous cars until the data is overwhelmingly positive because who wants to be responsible for approving driverless cars that injure people? Or worse…  One thing is for sure: we’re a long way from there now, and calling an Uber isn’t going to get us there – at least not yet.

Here’s Why Uber Sometimes Pockets Extra Money From Rides [Fortune]

Sum and Substance: Uber pitched “upfront pricing” as a way to add transparency to its service by telling passengers how much their ride would cost before they ordered it. But the change has led to accusations that the company is secretly taking advantage of passengers and drivers. Since the upfront pricing program kicked off in June, some Uber drivers have said that their passengers have been overcharged for rides, according to The Rideshare Guy, a blog focused on driver jobs. Meanwhile, those drivers also complain that they are being shortchanged by the new policy. Their complaints raise questions about how Uber compensates its drivers, many of whom are already reeling from a reduction in pay following a fare cut in January across dozens of U.S. cities that is supposed to spur more demand for rides.

One Los Angeles driver told The Rideshare Guy blog that he made only $9.31 on a 10-mile ride that was supposed to cost his passenger $18.08 (Uber typically takes only a 25% commission). Another driver in Colorado complained that he earned only $15.13 on a ride that cost his passenger $44.31. The questions started after Uber introduced upfront pricing, which the company says takes the guesswork out how much rides cost. Under the old model, Uber’s app would tell passengers that surge pricing was in effect and by how much—1.6 times the base price, for example—so they could decide whether to proceed. Now, the app immediately tells passengers exactly how much their rides will cost.

My Take:  This article goes over some familiar territory for regular Rideshare Guy readers, but I’m glad my former employer (Fortune) is giving this subject some attention.

Sign up for Juno

Juno is now accepting pre-registration.  You can sign up here using our referral link or our code: 5335-180

Drivers, if Juno comes to your city, are you willing to drive for them even if it means you’re getting fewer ride requests at least for the gestation period?

-John @ RSG