The idea is that party A is driving his own car from, let’s say Paris to Brussels (200 miles), and party B has no car, but needs to get from Paris to Brussels. If B knew A and A would like a passenger, B could ride in A’s car. Basically, BlaBla puts the two of them together. B gets a ride, for less than the price of public transportation. A can charge B to offset some of A’s costs and BlaBla gets to charge A a fee for their service.
From Concept to Business Reality
The concept is simple; many people may have noticed bulletin board notices when they were in college, posted by a driver, looking for passengers (or vice versa by a rider looking for a ride) for the ride home at spring break.
However, it is a very tricky matter to develop it into a business. And it has some serious implications for the economics of the automotive industry.
The start up problem is that it is difficult to match up supply of drivers with the demand from passengers on any given route between two cities at any time. BlaBla addresses this problem by offering the service for free when it starts up a new country. It focuses on certain heavily traveled local routes, and only begins to charge when it judges that it has achieved critical mass in the area.
The Economics and BlaBla’s Success to Date
The basic economics are that 80% of inter-city travel in Europe is by car. On average the cost to the BlaBla passenger will be €15-20 per trip, of which BlaBla receives 10-12%, so about €1.5-2.5 per trip. The company claims that the average passenger may pay less than 10 “euro cents” (there is no standard symbol for 1/100th of a euro) per kilometer, versus the average on public transportation of €1-3 per kilometer.
BlaBla has done a stunning job marketing this proposition. Launched in 2006 and initially brought to market in France, they have, through growth and a series of acquisitions, entered the market in 22 countries, with widespread social cultures, such as Russia, Spain, India, Brazil. The company claims over 40 million members and 9 million drivers. The recent growth has been impressive – as of late 2015 the company was reported to have 20 million members.
Very Shrewd Marketing
Self described as the “world’s largest long distance ridesharing community” with over 600 employees, one has the impression of a social network for a community of road travelers. Subscribers are encouraged to promote various good practices, journey enhancing social habits dealing with vehicle preparedness, conversation – hence blah, blah, blah – punctuality and courtesy. The sense of a real world social network is reinforced by meetings and events for users.
The company emphasizes security and “trust,” striving for mutual authentication of drivers and passengers and makes full use of current smartphone features in their app augmented by their back room in the cloud handling of processes such as billing, collection and data analysis.
Possible Legal Issues
Of course, anytime there is technology-driven innovation, the legal system and regulators have the potential to rear their ugly heads. In order to avoid the now famous confrontations of Uber and others in the ride sharing business, BlaBla, states that the suggested rates (that limit what a driver can charge) are not for profit but for cost sharing to the vehicle owner, and it promotes itself as a subscription service charging 10-12 percent of the given trip’s suggested fees.
This, however, has not prevented at least one case from arising already – in Spain – where the Bus industry association brought an action charging that BlaBla was a “transport service” and that it represented “unfair competition” to buses. A court, however, ruled in favor of BlaBla, finding that the drivers were not employees and were not out to make a profit and the passengers were only defraying part of the cost of the trips. Nonetheless additional legal challenges can certainly be expected.
Future Issues and Prospects
An obvious continuing strategy that the company is committed to consists of its combination of internal growth and acquisitions, particularly in new territories. As long as there are millions of unoccupied car seats around the globe, it has expressed its intentions to move ahead. Since it has already raised about $300 million in financing, it has bushels of cash to spend.
The company has revealed another path to growth, which emphasizes its recognition that with a growing embedded base of users, it may have a lot to offer to other parties in the complex automotive ecosystem. The most notable example of this strategy has been a pilot announced in April with Opel (part of GM, about to be sold to PSA Group) and ALD Automotive (leasing company owned by Societe Generale) whereby BlaBla’s heaviest user drivers in France, who number 28,000 and are called Ambassadors, will be able to lease Opels on very attractive terms.
The carrot in the deal that BlaBla possesses is that its drivers throughout its system are expected to purchase about 1.3 million new cars in 2017. The parties refer to this offering as “car-as-a-service,” stating that it includes, “zero-deposit finance, very attractive monthly payments and fully-inclusive maintenance packages,” as well as other inducements for the drivers.
Regarding a longer term issue – that of autonomous cars – management has stated that it does not find this to be a daunting one. They expect to still be able to match passengers with under-occupied vehicles. (Note that the fact that a car may be “autonomous” in the future, does not imply that the owner may not be present in the car for the trip.)
Our Take – Issues for Automotive Industry
A core issue that the automotive industry is going to be forced to address increasingly in coming years, because of advances in information technology, is the huge under-utilization of automobiles, which are only in use an average of 5% or so of their lifetime. Ride sharing, as with car sharing (discussed in our recent article “RideCell’s Path from Ride Share to Autonomous Vehicles,” 3/7/17) are early responses enabled by 21st century infotech.
These tech advances center on the multi-dimensional intersection of three forces, which, taken together, can cause a macro impact on our economy in the medium to long term. The three forces are:
- Acceleration in computer power available at the edge by SOC (system on a chip) CPUs (see our article about the “edge”, “Fog Computing – The ‘Edge’ Becomes Critical,” 3/21/17)
- Mass market availability of mobile broadband, wireless Internet at low prices
- The smartphone and its millions of Apps
All of the highly valued ride sharing services, i.e. Uber, Lyft and now BlaBla, have as a pillar of their success a smartphone app.
BlaBlaCar is another example of the ease with which a well thought out new business model can be created and made available to the mass C2C market at a fraction of the time and Go To Market cost of eras before the Mobile Cloud. In addition, the interest of Opel and others may very well be due to the potential for disruption of the automotive value chain by changing the asset utilization model of the average automobile.
This change to a more collaborative consumption model in which resources such as cars are re-circulated rather than simply bought and consumed by a single buyer and seller is made possible by software platforms, as market places – serving as mediators or exchanges between those obtaining a service, the rider, and those providing, i.e. owner/driver, in this case.
Visit their website: www.blablacar.com