Follow-Up Friday is our attempt to put the news into context. Once a week, we’ll call out a recent headline, provide an update, and explain why it matters.
If you’ve lived in or visited New York City this summer, you’ve likely seen the inescapable ad campaign of a ride-hailing company that claims to never, ever do surge pricing. That company is Gett, an Israeli outfit that launched in Tel Aviv in 2011, where it’s consistently ranked the top rideshare app. It’s also big in Europe, where it is profitable and claims to be the leading option — in London, for example, Gett partnered with more than half the city’s black cab drivers in a direct challenge to Uber. Bolstered by a recent $300 million investment from Volkswagen, Gett plans to strengthen its hold on Europe.
But in New York, Gett’s only U.S. market, the rideshare app remains an outsider. It doesn’t yet have the name recognition or ridership of Uber or Lyft, and Gett knows it: when I spoke to CMO Nahshon Davidai, the first thing he said to me was, “we want to be bigger.”
Uber drivers protest pay cuts in February. (Spencer Platt / Getty Images)Davidai claims Gett is growing by “leaps and bounds.” But he chose not to provide any numbers to bolster that claim, and admitted that “I do want us to be more present, more ubiquitous as a #1 option for more consumers. We’re not quite there yet.”
Three years into its tenure in New York, Gett is reaching the end of its runway. Another ridesharing startup, Hailo, pulled out of New York after just over a year. Sidecar bailed after two and a half, and soon folded entirely. With the skeletons of failed rideshares littering the New York landscape, can a new entrant still challenge Uber, with its billions in funding and massive head start? The answer seems to be yes — but probably not with the strategy Gett is pursuing.
Gett had been operating quietly in New York for about a year when, on September 4, 2014, it decided to do something to really stand out from Uber and Lyft: it would ferry passengers between any two points in Manhattan for just $10. On a Saturday night, when you might spend upwards of $30 on a yellow cab or Uber getting uptown from the Lower East Side, $10 was undeniably a good deal.
Gett’s iphoness app quickly jumped from the 198th most downloaded travel app in the U.S. to the 9th, according to the app analytics firm App Annie. Riders were eager to seize the $10 anywhere deal, and drivers were happy to earn a rate that was often higher than Uber’s. On top of that, Gett’s app allowed tipping, unlike Uber’s, and took a smaller commission — 10 percent, compared to Uber’s at least 20 percent.
But $10 absolutely anywhere was too good to last, and today, though Gett’s ads still tout that flat fee, the fine print shows that the $10 deal only applies for up to 4 miles or 30 minutes. As of September 1st, 2016, Gett had fallen to the 74th most downloaded U.S. travel app—a far cry from its peak at #9. Still, Gett says it’s growing, and attributes its small presence in New York to its late launch there, when the city was already saturated with competition. “I fully expect us to be in the same place that we are in Europe in New York if we talk again in three years,” Davidai told me, adding, “we have a sufficiently differentiated product in New York.”
But do they? According to the one current and two former Gett drivers I spoke with, the Israeli company has struggled to win the loyalty of drivers. All three cited an unpopular change Gett made last February. Originally, drivers of SUVs and more expensive cars had earned a higher rate than drivers of “standard” vehicles. Then, on February 14th, Gett informed drivers that riders would have to select “premium” or “SUV” for them to earn the higher rate —but that $10 anywhere deal was for standard rides only. Drivers of SUVs now found themselves often making $0.90 a minute during peak hours, down from $1.40 per minute, and in off-peak hours, the standard rate was just $0.62 per minute, 28 cents lower than the top rate.
“The second they changed that, they lost every single driver, almost immediately,” recalled Patrick Witski, who at the time drove for Gett and Uber. He’s since quit both and gone back to driving for a dispatcher, fed up with the unpredictability of ridesharing. He described the situation in February as “a mass exodus of drivers.”
Davidai wouldn’t speak to any such “exodus,” instead noting that driver signups have grown since May, when Gett announced it would pay its drivers the same time and distance rates as Uber (not including surge). “We’re really proud of our pay and treatment of the drivers, and we believe that we are extraordinarily competitive, dare I say better than the competition,” he told me.
David, a 24-year-old who asked me to withhold his last name because he still occasionally drives for Gett and feared backlash, said he mostly stopped driving for the app after the February announcement. But Uber had also just cut driver pay by 15 percent, while still taking a commission two to three times that of Gett’s. Between those two changes, David was beginning to feel like he wasn’t a priority for either company—and he told me that he was longing for an alternative, where he could “feel a part of something.”
The hard truth for Gett is that after two years of offering its $10 deal, those flat fees don’t seem to be enough to win huge numbers of customers away from Uber. New Yorkers have already proven they’re willing to pay surge prices for quick rides — just look at the stories of people paying $200-plus for a seven-mile ride rather than waiting for a yellow cab. So perhaps it’s time for hopeful Uber competitors to try the opposite approach: offer drivers the good deal, and draw in passengers enticed by the sight of a car just a minute away.
“There are a lot of micro pain points and frustrations that drivers go through that build up over time and add up,” says Harry Campbell, who runs a popular blog, The Rideshare Guy, where he dispenses advice to fellow drivers. “New companies might not be able to have the same passenger request volume at first, but they can make themselves stand out in other areas that Uber doesn’t care about.”
The pain points Campbell mentioned might be as small as helping drivers download the app — a how-to guide on his site is one of the most visited pages, he said — or offering them phones support, which Uber does not in all but one of its cities. But the biggest pain point of all is job security: drivers’ desire to know they can go out, make a consistent amount of money, and—for those who see themselves driving for years to come—not fear they’ll lose everything when self-driving cars inevitably replace them.
Indeed, there’s a new entry in the New York market that’s attempting this strategy of putting drivers first. Juno has been operating in beta since May, and all three drivers I spoke to as well as other experts agreed that it’s the most promising competitor to Uber in NYC yet. Helmed by Viber co-founder Talmon Marco, the company has set aside half of its founding shares for its drivers, so that if and when driverless cars do displace them, they can at least reap the benefits.
When I asked Juno marketing manager Keren Kessel why riders should choose Juno over another competitor, she described it as “the moral and ethical choice. It’s walking past a garbage can and putting the water bottle in the recycling bin versus a regular garbage can.” She added that because Juno drivers are paid more, they will create a better experience for customers.
The ethics tactic seems to be working: as of August 26th, Juno had completed one million rides in three months — a metric that took Uber two years to hit—and registered 13,000 drivers, a milestone Uber hit after nearly four years. Gett, meanwhile, had some 2,000 drivers as of last summer, after two years of operation, and when asked about current numbers said only that drivership is growing, while ridership has quintupled year over year.
So far, Juno’s only advertising tactic has been its drivers, many of whom were recruited for their high Uber and Lyft ratings and who talk up the new platform to passengers who request a ride with the competition. In return, the drivers earn $15 for every new passenger they bring in. “Juno has targeted Uber’s weaknesses really skillfully and gone after drivers with a value proposition that’s almost crafted to highlight the deficiencies in Uber’s relationships with its drivers,” says NYU Stern professor and sharing economy expert Arun Sundararajan. “And they’ve managed to do that in a way that is highlighting the fact that Uber can’t react, because Uber doesn’t want to do anything that even suggests remotely that their drivers are employees.”
That said, it’s not in Uber’s worst interest to have viable competitors. When I asked Uber for its thoughts on smaller competitors such as Gett, Juno, and Via, spokesperson Alix Anfang told me that “at Uber, we’re always striving to offer our driver-partners the best earning opportunity in NYC. Competition has improved the level of service riders have come to enjoy.”
To its credit, Gett has made some efforts to go after those “pain points” Campbell mentioned: like Juno, it offers drivers 24/7 phones support, takes only a 10 percent commission, and allows in-app tipping. But so far, Gett’s selling point has really been to consumers — the promise of a surgeless ride, no surprises. As a result, many drivers will simply jump to another app during surges, and riders might have to wait longer to get that $10 deal.
“If you’re a driver and you’re looking at Uber with surge, Juno with equity in the company and a cap on commission, and driving for Gett — they’re going to have to work hard to retain the drivers,” Sundararajan says.
If Juno’s burst of success this summer is any indication, the way for a new startup to take on Uber is to focus not on surge, which most riders seem willing to put up with, but rather on its greatest weakness: its relationship with drivers. For an opponent of Uber’s stature, nothing short of a direct aim at its Achilles heel will do.
