Last week I caught up briefly with Travis Kalanick, the CEO of Uber. He was relaxed and calm — and for good reason: his car services company has quickly become one of the darlings of Silicon Valley. It’s been on a tear recently, raising $32 million last year to fund expansion and building a presence beyond its home turf of San Francisco, with cities like New York, Chicago and Paris.
But now Uber is getting ready to step up to its biggest challenge yet: London.
The company is preparing to hit the British capital just in time for the Olympics, and the reality is that it’s a venture that has the potential to make — or break — the business.
Europe is already proving tricky
The London launch has been a long time coming. Over the last few months, Uber has been quietly gearing up to open in London, staffing up and making regular visits ahead of a planned debut that could happen as soon as this week. A few test drivers are now in place, and last week hand-picked attendees at the LeWeb conference were given the chance to use the service too — presumably in order to build buzz among early adopters.
It’s definitely making progress. But the same approach was taken in Paris last December, and yet that seems to have not been a roaring success. I’m hearing that the number of registered Uber drivers is just 100 six months later; a figure Kalanick didn’t refute when I asked him about it.
And while Paris might be confusing, London is a monster. It’s a vastly complex, confusing city in which Uber will face competitive threats the like of which it hasn’t seen anywhere else. Can it stand up to the test?
An uber is not a black cab
London’s black cabs are as important to the city’s identity as yellow cabs are to New York’s, but they’re also a much stronger rival to any incomers. London’s highly regulated cabbies are legendary for their intimate knowledge of the city’s streets and while they aren’t cheap, well, neither is Uber.
Think that doesn’t matter? Customers demand a lot in London.
Plus black cabs are pretty available in central London (despite complaints) and you can flag down a black cab on the street, or order one to come and pick you up by calling up a company like Dial a Cab, which is effectively a black cab aggregator, and has developed its own app to make things easier.
And black cabs are just one of many competitors that Uber will have to best. There are more rival startups in this space than I can count, and they aren’t simply clones of the San Francisco company. Some, like the well-backed Hailo, focus on black cabs. Others, like UbiCabs, are pointed toward the lower end of the private hire (minicab) market.
There are more, too: services like Taxizapp, Get Taxi, Tweet a London Cab, London Taxi App, Taxi Square and many more.
These not only provide some competition to Uber; they add to the noise that it has to cut through. And some of them are very well connected to the driver population that is vital to making these services work. Those bonds can be hard to break.
Oh, and then there are the big dogs
But Uber’s biggest rival in London comes from neither the world of black cabs or the world of tech startups. Private hire firm Addison Lee is the most significant player in the British capital’s upscale private driver market that Uber wants to dominate. It’s been around for a while, and it’s doing well: the company’s last financial filings say it ended up with £5.5 million of profit last year ($8.5 million) on revenues of £127 million ($198 million).
Addison Lee may not be liked by all, but it is ubiquitous, connected, competitive and extremely aggressive.
Drivers I’ve spoken to suggest that their contracts with Addison Lee will preclude them from working for Uber as well — and those who care about the money they make (which is all of them, of course) are much more likely to stick with a sure thing than take a risk on a venture-funded company from California.
So what does Uber do?
The company is stuck in a difficult situation. If it’s really aiming for global domination, it can’t ignore London. With a complicated mesh of public and private services, London is an incredibly competitive and valuable market… and that combination makes it so attractive and so dangerous to new entrants.
Uber’s challenge — and it’s something that Kalanick seems to recognize, at least — is to provide black cab-style service at prices that are competitive with other private hire rivals. That’s tough. Sure, it’s got venture money to help it get there — but it’s hard to see how it can sustain massive losses in one market over a long period of time.
With the Olympics just around the corner, winning London would be a huge prize. But scooping the gold medal is going to be tough, and Uber might just have to settle for something less. But will it be happy to come home with silver, bronze — or even worse?
Kalanick seems aware of the challenge: “London is the gold standard,” he told me.
But in another conversation I had with the company recently, an Uber spokesman brushed aside the size of the obstacles facing it. He told me that he’d heard this sort of argument before — for example, when the company hit New York.
“Just get people using Uber and they’ll know what’s different about it,” was the thrust of the argument.
That’s not a strategy, that’s a prayer. It seems highly unlikely that things will come so easy.
Profile of cab used under Creative Commons license courtesy of Steve Bott; Addison Lee image courtesy of panmike1