Kevin Echraghi (Fabernovel): “Uber or not, the transport war has only just begun”
How did the Uber company become a unicorn in just two years? The digital agency Fabernovel, which publishes this Tuesday July 12 its study “Uber, the transportation virus», Sought to decipher the development model of the American firm, and to find the reasons for its rapid growth. Kevin Echraghi, analyst and consultant at Fabernovel, returns to Frenchweb on the main lessons of the study.
Frenchweb: Is Uber’s strategy to gain volume as quickly as possible, even if it means crushing competitors, sound?
Uber’s ultra-competitive dynamic is a necessity to provide the best possible service. Indeed, the network economy gives the advantage to the service which has the most extensive user network. The more passengers and drivers Uber has on its platform, the more reliable and affordable its service is. For Uber, it is above all a matter of minimizing waiting time for travelers and maximizing the number of trips for drivers.
It should also be noted that in most of the cities where it is established, Uber is in a situation of duopoly vis-à-vis a local player. And the latter are also forming alliances to resist the young giant: Ola (the Indian competitor), Didi (the Chinese), Grab (the Malaysian) and Lyft (the American) have together created a meta-platform. An Indian user traveling in China, orders a car with his Ola app and will be picked up by a Didi car.
Uber is therefore far from having crushed its competitors. In this new economy, networks can fall apart as quickly as they were formed; Uber or not, the transport war has only just begun.
What are the sectors where the Uber model could develop, and others where it is not replicable?
The Uber model is above all a platform model that puts producers of value in direct contact with consumers of value: here drivers and passengers. It is not necessary to look into the future to see this model extend to all industries: Airbnb for hotels, TransferWise for banking, the Huffington Post for the media, Amazon for retail, etc., the list is long.
The platform model has therefore already spread and will surely continue to expand until it reaches all industries, with more or less efficient economic models. The platform appears as the new production chain. An essential structure to be competitive in the network economy.
The only obstacle to its expansion could be the regulation of certain markets, as is currently the case for pharmacy, for example. But it probably shouldn’t be counted on. Start-ups like Uber, eBay and Airbnb have shown us that viral models know how to exploit loopholes and loopholes to grow, even in regulated markets.
Can the next Uber be French?
Of course! We have the inventiveness and the know-how to create the next Uber. When you look at it closely, Uber relies on the infrastructures of GAFA (Google, Amazon, Facebook, Apple) to provide its service: the AppStore, the PlayStore and Messenger for user access; ApplePay and AndroïdPay for payment; Google Maps and Waze for navigation. More than anything, Uber doesn’t own cars, it monetizes drivers’ cars. Uber’s strength is therefore ultimately to have reconstructed the existing pieces of the puzzle. And that’s what Blablacar did five years before the idea of Uber germinated in Travis Kalanick’s head.
What is missing then? Why do we have so few international French giants? The answer is surely to be found in the difficulty of access to investments, as highlighted by the recent note by Jean Tirole and Marie Ekeland for the CAE, entitled “Reinforce French capital”. Let us not forget that one of the major reasons for Uber’s meteoric success is its unlimited funding: the startup has raised nearly $ 14 billion in 16 rounds of funding from venture capital funds (Benchmark, Fidelity), banks (Goldman Sachs), tech giants (Google, Baidu) and star entrepreneurs like Amazon founder Je ﬀ Bezos.
Ultimately, is Uber a creator of value or a destroyer?
In the economic sense, Uber is above all an optimizer: the start-up has put back on the market cars that remained on average stationary 96% of the time and therefore maximized their economic efficiency.
On the societal level, it is very difficult to adopt such a Manichean vision. By siding with independent taxis, Uber is probably value-destroying. But from the perspective of users who find it exceptionally reliable and convenient, Uber creates value, especially in high demand countries like India. The same goes for the thousands of former unemployed French people who find there a source of income. Yet even for the latter, the judgment is not final. Many demonstrated against the price cuts decided by the platform and this is where Uber’s difficulty lies: the service must satisfy both users who seek to minimize their transport costs, and drivers who seek to maximize their income. This is the endless platform dilemma.
One thing is certain, Uber has the merit of questioning us about our models and relaunching innovation in a sector that has remained unchanged for a very long time. The utopia that the service offers us, where car ownership is a folly of the past, seduces, as it can help reduce congestion in cities, pollution and the senseless use of our territory to park cars. The young giant’s ability to push his vision and get an entire industry on board is in itself extremely valuable. With or without Uber, transportation is changing for the better.
READ also: The Uber “virus” scrutinized by Fabernovel