Harry here. I’m traveling this weekend so this week’s roundup comes a day late. But today, RSG contributor John Ince takes a look at some breaking news about an Uber driver who went on a shooting rampage, the stealth start-up Juno and more.
It appears that the Uber driver (Jason Dalton) in the Kalamazoo shooting may have been picking up fares as he continued on his shooting rampage. Dalton also had no criminal record, so it will be interesting to see how the Uber connection plays out.
Sum and Substance: The man who police said randomly killed six people and wounded two others in Kalamazoo on Saturday evening was an Uber driver and may have been picking up fares as he continued on his shooting rampage.
Jason Dalton, 45, was arrested early Sunday after a massive manhunt in response to the shootings that began about 6 p.m. Saturday, Michigan State Police Lt. Dale Hinz said.
Dalton surrendered without incident but had weapons in his vehicle. A total of eight people were shot in three locations as the gunman drove around apparently picking his victims at random, Kalamazoo County Prosecutor Jeff Getting said. Dalton next allegedly shot and killed two people at 10 p.m. who were sitting in their cars at a car dealership. About fifteen minutes later he killed four people and wounded a 14-year-old girl at a Cracker Barrel, police said.
Uber released a statement late this morning confirming that Dalton was an Uber driver and said he had passed a background check.
My Take: We don’t know what was going on inside this guy’s head, but we do know that he cracked. With almost a million drivers worldwide though, many of whom may be dealing with lots of different pressures, it’s not surprising a horrific incident like this could happen.
Sum and Substance: Could one of Uber’s greatest strengths end up being its greatest weakness? While Uber has grown into a global behemoth by deploying many thousands of independent contractors, many of those drivers aren’t happy.
New ride-sharing startup Juno–which has so far only launched in stealth mode in New York City–will try to make those drivers into its secret weapon. Talmon Marco, former cofounder and CEO of messaging app Viber (which sold to Rakuten for $900 million in 2014), confirmed to Forbes that he is behind Juno, and promised that the new service under development “will have multiple capabilities that will differentiate it from other such services.”
But likely its biggest difference will be driver relations. While Uber has demonstrated its willingness to anger drivers by slashing prices and commissions over the last few years, Juno plans to take only a 10% commission from drivers. And it claims to have “reserved” 50% of its founding shares for drivers.
“At the heart of Juno is a belief that it’s time for a ride sharing service that treated drivers right,” Marco tells Forbes. “It’s time for an ethical, socially responsible ride sharing service. And that’s what we are doing.”
My Take: From the driver’s perspective, this is very intriguing news. But while it’s an exciting development, let’s not jump the gun here, because Juno is just an early stage stealth startup and the odds are always stacked against startups.
But there’s reason to believe that Juno is something special – with a business model that hits Uber where it hurts – attacking Uber’s vulnerability in strained driver relations. In theory, at least if Juno figures out a way to scale quickly and efficiently it could pose a mortal threat to Uber (and Lyft).
We’ve already learned that there’s no particular magic in Uber’s app. As impressive as it is, it is easily replicated by an entity with enough bucks to hire enough decent coders. (Juno appears to qualify on that score.) It’s highly likely that Juno will improve on the Uber app, by starting from scratch and learning from their mistakes (like not including the tipping option etc.)
But the real game changers here are that 1) Juno says they’ve reserved 50% of their founder shares for the drivers and 2) they will only be taking 10% commission. That would make Juno look a lot more like a true “sharing economy” company. Imagine if drivers felt that they were profiting on the upside of the stock price appreciation, in addition to their earnings as drivers.
Instead of a few early investors and co-founders becoming obscenely wealthy on the backs of drivers, all the people who were doing the work (i.e. the drivers) would be getting their piece of the pie.
Uber has no built in advantage in driver recruitment. In fact, it’s possible they may be at a disadvantage when it comes to recruiting or retaining drivers because their brand appears to be dinged so badly in driver communities.
It’s entirely possible that as Juno grows – and word spreads, drivers could bolt en masse to Juno, leaving would be passengers waiting on the streets for rides. Soon the passengers would simply boot up their new Juno app and request “a Juno” instead of “an Uber.”
For the moment, Juno’s CEO says that they will match Uber’s pricing rates. I suspect that in the longer term, if Juno succeeds in gaining ridership, they will have to raise rates to be financially sustainable if they hold that 10% commission level. The real question is whether the passengers will be as enthusiastic about Juno as the drivers seem to be.
Sum and Substance: Uber is racking up tremendous losses in a high-stakes bid to make a dent in China’s car-hailing market, its CEO revealed this week. “We are profitable in the U.S., but in China we’re losing over a billion dollars a year,” Travis Kalanick, the CEO and cofounder of Uber, said during an on-stage appearance at Vancouver’s Launch Academy on Monday, which we watched later via Periscope.
If that sounds insane, Kalanick claims it’s because today’s startup market is even more insane. “Look, we’re in China where we have a fierce competitor who is raising billions of dollars, but is unprofitable in every city that they exist in,” Kalanick says, presumably referring to rival Didi Kuaidi. “The question for us is do we want to exist in China or not, and can we contain the irrational long enough to get to the point where the world does get rational.”
You read that right: Uber, the $62.5 billion startup that has come to define the era of sky-high funding and valuations, is upset about the era of exuberant funding and valuations. Uber China, a standalone business overseeing its operations in the country, has raised more than $1 billion and is said to be valued at $8 billion. Uber proper has raised more than $8 billion in private funding total.
“I wish the world wasn’t that way,” Kalanick added at the event, “because I prefer building verses fundraising.” While in Vancouver, Kalanick also gave a presentation at the prestigious TED conference on Tuesday to push back against overregulation.
My Take: Hand it to Uber CEO, Travis Kalanick, the guy is confident. For the head of a company that has raised over $8 billion to openly admit he’s losing $1 billion a year in a country where Uber is slashing fares and getting its butt kicked by a better funded rival, and then blame it all on “irrationality” is pretty weird. Just who’s being irrational here – Uber? Didi Kuaidi? Kalanick? Investors?
Sum and Substance: What does it take for a company to move away from a core feature that is central to its identity? Last May, Uber broke from its tradition of only accepting payment via card.
The U.S. company began a pilot that allowed users in Hyderabad, a city in India with a population of nearly eight million, to pay for their rides using cash. One of Uber’s biggest selling points is its seamless payment system. By binding a card to your account, your fare is debited as you close the door of your ride and get on with the rest of your day. That means convenience to most people: no hassle finding small money to pay the fare, no issue if a driver doesn’t have change for your large bank note, no need for jingling coins to fill your pockets when you do get your change, and no weirdness over tipping/not tipping.
Yet, despite all that, cash is becoming an important facet of Uber’s service in some parts of the world. Last week that initial cash payment trial was expanded to a range of new markets that took it to 10 countries across three continents, including India, all of Southeast Asia (minus Singapore and Malaysia), Kenya and Nigeria in Africa, parts of the Middle East, and Peru in Latin America. And that’s just the start. The cash payment option is all set to expand further to reach Uber customers in many more countries in these regions and beyond.
My Take: Here’s what jumps out at you here – only 10% of people in the developing world could use Uber, if they continue to refuse to accept cash. So Uber pivots and starts accepting cash.
So then how exactly is Uber different from taxis now? With Flywheel using an app very similar to Uber’s, the distinctions between the old incumbents and the new disruptors just got a little more blurry. Looks like the biggest difference between old and new now is the illusion that Uber’s drivers are independent contractors instead of employees, and next June we’ll find out just how much truth there is to that one too.
Sum and Substance: The potential Uber class action lawsuit that alleged the company falsely advertised its background check procedures ended with a private settlement.
Uber calls itself a “transportation network company,” which has a website and smartphone app connecting people who want rides with people willing to use their own cars to drive people, creating a private taxi service. Uber states that it is “better, faster, and smarter than a taxi.”
The Uber false advertising class action lawsuit filed in January of 2015, took issue with Uber’s statements that it provided the “Safest Ride on the Road” by using “industry leading” background checks. Plaintiff Jacob Sabatino alleged that Uber does not offer a training program for new drivers, does not require any oversight or supervision of its drivers, and does not, in fact, even meet drivers before they start working for the company.
Sabatino asserted that Uber and the other defendants “do not have the safest ride on the road, do not use industry leading background checks, do not train or supervise their drivers, and are continuously violating California laws.” Sabatino claimed that if he had known Uber’s statements were false or misleading, “he would not have used the Uber App to obtain a ride.”
On Jan. 20, attorneys for both plaintiff Sabatino and defendant Uber Technologies, Inc., ended the potential class action lawsuit, saying that “The Parties have signed a confidential settlement agreement that resolves Plaintiff’s claims against Defendants in their entirety.”
My Take: My guess is that Uber wants to dispose of this case to get it out of the news. Safety is at the core of Uber’s public posture. Anything that compromises safety or the perception of it places Uber’s entire business model in jeopardy.
Drivers, what do you think about this week’s stories?
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-John @ RSG