FOCUS: Uber's drive towards global domination
by Sarah Townsend
Jambu Palaniappan talks nineteen to the dozen and is exceptionally well media trained. As general manager for Middle East and North Africa (MENA) of taxi-hailing app Uber, this is appropriate for two reasons: one, the breakneck speed at which Uber has grown, and two, the controversy that the company has courted in the process.
Since its launch in San Francisco in 2009, Uber has expanded to 60 countries — 330 cities in total — and established itself as one of the world’s best known mobile-based car hire companies, valued at $41bn, according to CB Insights.
For those unfamiliar with how it works, Uber is an app that links up passengers with affiliated private hire drivers in the vicinity, enabling them to book a taxi on their smartphone and start their journey within as little as five minutes.
The company does not directly employ drivers; it provides a platform for limousine firms to offer their services to Uber users, subject to background checks and other requirements.
In June, its millionth driver took his first passenger and driver numbers are growing every day, the company claims.
Uber has cornered the market in most of the cities it operates, but not without ruffling a few feathers. You only have to key the words ‘Uber’ and ‘controversy’ into Google to see a barrage of negative coverage.
Its critics say the company’s growth has been “overly aggressive”. They claim Uber has “barged” into new markets without asking for permission from city authorities, wrestled market share from public taxi services, and put hundreds of established transport firms out of business with a “winner takes all” attitude.
In the US, activists have accused Uber of failing on accessibility for disabled people — Uber insists it has strict anti-discrimination policies in place, an UberASSIST product “in selected markets” to assist riders with impaired mobility, and other products enabling deaf or hard of hearing drivers to work.
There have been allegations of rape against drivers in the US and India — two cases of which have been dropped and the third Uber has acknowledged and said it is cooperating with the authorities in their investigations.
Meanwhile, the company has faced dozens of lawsuits by parties alleging, for example, that the company has failed to rigorously check its drivers’ backgrounds or has violated commercial transport licensing laws.
In March, French police raided Uber’s Paris offices and two of its top executives have been ordered to stand trial over alleged non-compliance with France’s tax and competition laws. The case is ongoing and Uber declines to comment.
On alleged violation of transport licensing laws, Uber says it does not believe its drivers should be required to obtain commercial licences as required in many countries as they are, in effect, freelance contractors who have their own cars and use Uber on their own terms.
Nonetheless, a Frankfurt court has banned Uber from operating in Germany unless Uber buys licences for each of its drivers there and last week city councillors in São Paulo voted 43-3 in favour of a ban; the decision is awaiting approval from the mayor.
This is an exhausting list of concerns for any company, let alone one that is just six years old. And it is the complicated backdrop to the company’s ambitious growth, as it provides an indication of the sorts of issues Uber could face as it continues to expand around the world.
However, Uber’s three-year-old MENA business has so far avoided such negative publicity. On the contrary, says Palaniappan in an interview with Arabian Business in Dubai, MENA is one of the company’s fastest-growing regions and that is unlikely to change any time soon.
“When I first came to the region in 2012, its potential was clear to me right from the start. These are cities and countries growing at rates nobody has seen before,” he says.
Uber operates in 12 cities in eight countries in the region: Amman, Bahrain, Beirut, Cairo, Dammam, Dubai, Abu Dhabi, Doha, Jeddah, Riyadh and the Eastern Province, and since last month, Casablanca. It also began testing the service in Sharjah earlier this month, Palaniappan reveals. A notable characteristic of the
MENA business is that 50 percent of customers (the highest percentage globally) are foreigners, that is, business travellers or tourists that have used Uber in their home country and are looking to use a taxi service they recognise. “People see a lot of value in having a brand they know and trust in the places they visit.”
He adds: “MENA is a particularly interconnected part of the world where regional governments are forward thinking about growth. Rarely in the world does a business grow as a city is built so there’s a big opportunity for us here. Take Dubai: it’s targeting 20 million visitors here by 2020 — a very high number — and our product maps really well to the vision and mission the government has devised.”
The number one drop-off destination for Uber in Dubai is Airport Terminal 3 — which speaks volumes of the in- and outflow of people here, says Palaniappan. “Travel is a core component of our business.”
Tourists are apparently a more appealing target market in the UAE than residents — particularly Emiratis, who may not have been previously aware of the app before it launched here as many expats were.
However, Palaniappan is reluctant to agree to this, saying only, “Growth is coming from across the board but the tourism element is particularly unique to this region.”
The country with the biggest potential in the region is Saudi Arabia, he says, where between 70% and 90% of riders are women. Saudi women are not permitted to drive, and Palaniappan says he has heard taxi drivers report that Uber has become a valuable link to transport for them.
“It’s been discussed quite vocally on social media. You hear that women were dependent on their brother or husband to drive them around and if they weren’t available, they had to stay put. So Uber has helped Saudi women to build consistency and mobility into their days and travel to work or school in a reliable way without the challenges they’ve suffered in the past,” he says.
Palaniappan declines to provide detailed figures to demonstrate growth in the region or how much MENA accounts for total business revenues (“we are a private company and we keep that information private”).
However, he says the company is experiencing double-digit month-on-month growth and claims supply numbers are “a reasonable proxy for how we’re doing” — the number of drivers that have joined the platform has increased fourfold in the past year and tenfold in the past 18 months, he says.
“Quite frankly, what matters for our customers is how quickly they can get a car and that’s a good measure of our success. A year ago in Dubai the average wait time was nine minutes, now it’s about five; in Riyadh that number was about 12 minutes, now it’s six.”
Dubai is the largest city in MENA in terms of gross bookings, and supply has grown 20-fold since Uber launched there in 2013. Cairo, meanwhile, has seen an astonishing 2,157 percent growth in number of partner drivers between January and August 2015, and 2,500 percent growth over the same period in number of drivers with four or more journeys in a given month.
Palaniappan cites the latter two statistics to explain why criticism that Uber is taking business from regular taxi drivers is unfounded. “When I first suggested we launch in Cairo, people said to me, ‘you’re crazy, this business will never work there’. The traffic is crazy, it’s an unpredictable city, there are challenges over safety, security and payment.
“But we’re finding that many individuals are coming to Uber on the driver side because it is an incredible economic opportunity for them in a country with a shortage of work.”
In any case, Uber provides a different offer from regular hail-on-the-street taxis, he says. “The basic principle of our business is that all Uber rides are pre-booked. Our data shows that [regular taxis] continue to do well, for example, the taxi scene in San Francisco [where Uber was born] is no smaller today than it was before.
For us it’s about growing the pie and providing options for consumers.”
He insists Uber does not have unfair competition over other private hire taxi services. “In Dubai, for example, we use Roads and Transport Authority (RTA)-licensed companies and work within the rules set by the RTA around pricing and supply. Because we’ve followed those rules we feel good about potential growth of our services here.”
However, different markets require different solutions and as the ‘sharing economy’ of which Uber is a part continues to grow worldwide it may need to be better regulated. “Services like Uber are part of the future of economic growth and job empowerment, and we would happily work with regulators on a proper municipal legal structure that takes Uber [and similar businesses] into account.”
In the US, around 30 states have passed transport laws that incorporate Uber-style products, and Palaniappan says he hopes some of the ongoing European court cases provide clarity and reassurance to the market. For example, a case in Paris is based on allegations that Uber breached the so-called Thévenoud law — pro-taxi legislation that requires chauffeured cars to return to a base between fares.
“There are rules like this in other countries, too, which we think are not necessarily in the best interests of the market and serve to restrict the growth of services like Uber but I cannot comment beyond this,” he says.
In the coming years, Uber MENA is targeting growth in two ways: first, through footprint expansion and second, with new products and services. “The appetite from our users for us to continue to expand is insatiable. So we are expanding our presence in MENA and people can expect more cars, more drivers, more reliable supply, lower wait times. And each of the countries we move into is growing faster than the previous one — which is good news.”
One of the ways Uber identifies new business is to look at where people have downloaded the app. Often, someone has signed up and tried to book a car in somewhere Uber has yet to launch. This was the case in Casablanca, Palaniappan says, where more than 3,000 people tried to request cars before Uber was available. One country the company is targeting for this reason is Kuwait, and it is also eyeing other cities across Saudi Arabia and Egypt.
When it comes to new products and services, Palaniappan says the opportunities are vast. “Ultimately, we are a technology platform. All we’re doing is connecting you as a rider with a car and that car comes to you in five minutes. If we can deliver you a car in five minutes, there isn’t a lot else we can’t deliver in five minutes.
“The Uber cars that are moving around cities are essentially a mesh of urban transport, a layer of technology, laid over the physical footprint of the city.
“So the question is, if we can get you a car, can we get you lunch? Can we get your groceries? Can we send you healthcare? Those are interesting questions and we are experimental by nature.”
Uber is trialling a clutch of new services including a food delivery product called UberEATS in the US, Canada and Spain; UberRUSH, a New York City-based courier service; UberCASH in Riyadh and Jeddah, where passengers often prefer to pay by cash rather than card, and UberPOOL, a ‘carpooling’ product in the US that would enable people to split the cost of journeys with others going to or from the same place.
Uber is in talks with the RTA over plans to launch a similar carpooling product in Dubai. He says it would make sense for the driver, who would never be without multiple passengers in the car, for passengers, who would pay for their leg of the journey at a discounted price, and for cities, many which are heavily congested with traffic.
“[Carpooling] could have a positive impact on cities, because think about how much congestion is created by all this driving around by ourselves and finding places to park. We estimate that 14 percent of most cities is devoted to parking, which is an astounding figure and incredibly inefficient. What if we could reduce the need for that?” He says he does not believe the product would end up reducing drivers’ workloads to their detriment.
The company has also done what Palaniappan terms “tongue in cheek stunts” in the UAE, delivering ice cream, Ramadan sweets and even rented McLaren sports cars. There is scope to bring Uber boat and helicopter services, trialled in Istanbul and South Africa respectively, to MENA, “where we have a few surprises in store,” Palaniappan says, while again refusing to divulge details.
“For us, focus is important. There’s a lot of runway left in the transport piece. However, experiments are continuing and we hope to bring those experiments to this region someday.” Uber will not comment on whether it will seek additional funding from MENA investors to support its expansion in the region. Reports last
December suggested that the Qatar Investment Authority (QIA) participated in the company’s most recent $1.2bn funding round.
One recent policy change certain to impact Uber MENA is the removal of fuel subsidies in the UAE, especially as other Gulf states such as Saudi Arabia have indicated that they may follow suit.
“There’s likely to be a change in the choices consumers make,” says Palaniappan. “And it could mean that, if the costs of driving one’s own car go up, using shared cars or well-priced private hire cars could be more compelling.”
Still, as he recognises, the ‘sharing model’ is gaining momentum the world over and there are an increasing number of new entrants to the market, including in the UAE, similar car hire app Careem, to which many of Uber’s drivers are affiliated.
For the time being, however, Uber is pressing ahead with ambitious growth in the MENA region and hoping it resists any controversy.