Challenging Uber
Kiwi company Zoomy takes on the US giant disrupting the taxi industry
Silke Hartung was in an Uber car when she heard about Zoomy. She has day and night jobs in the music industry and had grown used to ordering Uber rides home from gigs, where she’s a wellknown figure at the door. “You can’t walk across town with your takings from the night,” she points out.
But she had developed qualms about Uber’s practices. And then one night, she heard about what seemed like a more ethical option.
“The driver told me there was a Kiwi alternative that treated drivers more fairly than Uber, paid them more and charged the user less. They had at least one driver on staff, or so he told me, paid them minimum amounts per ride and apparently had a dedicated person on the team to work on their app. Sold!”
The fact that she learned about an Uber competitor from an Uber driver isn’t surprising. It’s more or less a feature of the faithless economy in which post-Uber private hire services operate. That faithlessness offers both advantages and drawbacks for everyone involved — “good guys” included.
“Are we the ‘good guys’?” quips Zoomy co-founder James Fisk.
Well, yes — or at least that’s the pitch. Almost every post on the company’s Facebook page embodies some version of that message: “Our drivers earn more, our riders pay less, and we don’t cut corners,” and “Proud to be New Zealand born & bred”, or “Zoomy is better for everyone!”
“We just wanted to fairly reward the drivers by making sure they get paid fairly, and also provide customers with affordable, predictable, safe rides,” says Fisk. “When you get into a Zoomy, you are entering someone’s workplace and it is important that both parties are happy with the deal. And yes, we do like being local, connected, and popular.
“We are not after world domination; we do want to be the ‘good guys’ when you want a lift home.”
How do Zoomy’s claims measure up? For riders, its rate per minute (30c) is the same as Uber’s, but the base charge ($1.20 vs $1.30) and cost per kilometre ($1.30 vs $1.35) are slightly less.
The advantage is clearer for drivers. Zoomy takes a 15 per cent commission which, unlike Uber’s, is not charged on cancellation or airport fees. Uber’s commission is 28 per cent, although some longer-serving drivers pay only 20 per cent.
Ben Wilson, chair of the Uber Drivers Association — like most Zoomy drivers he also runs the Uber app when he’s working — says Zoomy’s claim to be better for drivers is basically true.
“If you get a fare, yes, it is — on average. It’s quite hard to compare, but for the most part an Uber trip will be less than $10, whereas a Zoomy is topped up to $10. So if I’ve got the two coming in simultaneously, I’d always choose the Zoomy ride. But that said, there are a lot less Zoomy rides.”
Almost everything happening here derives from Uber’s abrupt announcement last April that it would cut fares in New Zealand by 20 per cent and begin taking on drivers who did not comply with the legal requirements for private-hire services.
That’s when Hartung and her friends began to have qualms, and when some drivers began to organise. Wilson, who had been driving for only two months, soon found himself leading a fledging driver “union”.
But the controversy also helped Uber, as the subsequent flurry of headlines brought it to the attention of potential customers. This may actually be part of Uber’s strategy.
No one particularly wanted the new world of private hire to suddenly end, and some Uber drivers mulled putting their savings into competing apps, hoping, forlornly, that they might somehow dent the multibillion-dollar giant.
Zoomy was different. It had been founded by Fisk and Neil MacDonald in 2012, before Uber’s arrival, and already operated an app for ordering (and, later, paying for) taxis. It also had real investors. In July, Zoomy jumped, launching a new service on the Uber model, initially for central Auckland only.
“Everyone wanted us to go beyond dealing with just taxis,” says Fisk. “We listened, and changed.”
Zoomy had to define itself against Uber, to drivers and riders. To Wilson, one difference was obvious.
“They met with us the moment it was asked. As opposed to Uber, who have never even acknowledged our existence, except in court.”
He signed up to drive at that first meeting at Zoomy’s office, a converted shop in Ponsonby, producing the certificates that Uber no longer requires: a “P” endorsement on his licence, a Certificate of Fitness for his car and a Transport Service Licence.
Uber drivers who signed up with Zoomy soon discovered another benefit: the passengers were better. They were, according to Uber veterans, more like the old Uber customers: inner-city creatives and professionals who generally didn’t vomit en route.
“Uber passengers took a very sharp deterioration straight after the April compliance change,” says Wilson. “People who would not have been allowed to take a taxi due to being too drunk or whatever, have been taking them a lot more. And there are a lot more discretionary trips, for short runs.
“The other part is a purely psychological thing: if you’re not paying much for something, you often don’t value it.”
For riders, Zoomy offered another feature: no surge pricing. Customers hate surge pricing — which increases prices when demand is heavy — and drivers love it. And that clash of interests poses a significant challenge to Zoomy’s service.
“At any other time, Zoomy is a better deal for the driver,” says Wilson. “But when the surging comes in it’s quite compelling to switch off Zoomy, or to take an Uber in preference as soon as you see it. So there’s a competitive advantage for Uber over Zoomy at those times.”
But drivers running both apps don’t just choose which ride to take — some will simply cancel a Zoomy ride as they near the passenger but spy a more lucrative surge fare on offer.
“A driver you’ve been waiting for for 15 minutes already will just drop your ride, which the app won’t tell you right away,” Hartung laments.
“They offer codes for cheaper rides frequently, which is nice, but for me it’s less about how much I pay, and more about being able to rely on there being a car available that doesn’t come from the other side of town just to ditch me when 200 metres away.”
“We acknowledge it can be an issue,” responds Fisk. “We monitor our systems to detect drivers who have higher cancellation rates, and this can lead to penalties, and potential deactivation of their Zoomy account.”
Another problem for Zoomy — and a cap on its ability to market to the public — is attracting enough drivers. Sometimes, if there are no drivers available, the app will offer a subsidised ride with Zoomy’s long-time partner Corporate Cabs, but even that’s not always ideal. (My first Zoomy ride ended up being a Corporate Cab. The driver took half an hour to arrive, couldn’t explain how the subsidy worked and spent most of the trip badmouthing Zoomy.)
Fisk would “rather not say” how many drivers Zoomy has on its books, “but right now we have enough for most times in central Auckland.
“We let our drivers make the choice about what apps and what companies they drive for and when — we don’t believe you can have it both ways and insist on exclusivity unless you guarantee them a certain number of rides. If they also drive for Uber or a taxi company, that is fine.”
Fisk says Zoomy would “love to see an end to the struggle between traditional taxis and independent drivers so they work better together, and we’ll lead the way with that with Corporate.”
There’s no sign yet of Uber responding to competition the way it has in the US, where its rival Lyft has claimed that Uber employees are behind thousands of “phantom” calls for rides ordered and then cancelled.
Another firm, Juno, has been taking business from Uber in New York City with a similar good-guy brand to Zoomy.
But Uber’s really big advantage is its ability to burn through billions of dollars in investors’ cash. Bloomberg reported last month that the company is said to have lost at least US$2 billion in 2015 and was on track to lose at least US$3b last year.
Zoomy can’t match that for scale, but its investors include companies associated with the wealthy Spencer family, Australian technology entrepreneurs Simon Clausen and Chris Bayley, and GrabOne veterans Vaughan Magnusson and Campbell Brown.
“We’d rather not comment on our investors,” says Fisk.
“We are privately funded and here to stay. It hasn’t been cheap so far, but in the long term we know there is a sustainable business model in Zoomy, and we will look to add other services.
“Zoomy was not created to be a quick hit and we have selected investors with a long-term view. We have also taken on interests from people with deep knowledge of the transport industry already, as well as technology and payments.”
For 2017, Zoomy’s goals are relatively straightforward. “We want to have all of Auckland covered, and two other centres, leading to a national entity. We want a pool of customers telling others how good their experience was, and we want drivers who turn to our app first,” says Fisk.
“We want to bring the average cost of getting around down, but we also want our drivers to make a living. Everything we have put in place so far is about that.
“I think we are already perceived as a smart New Zealand company making some changes in the transport industry. Personally, my goals are simple — I would like to be busy reading all the positive feedback from drivers and riders.”