Uber's plans for world domination
As the $40 billion private taxi firm goes from strength to strength, EDGAR examines its incredible success so far and ambitious plans for the future.February 15, 2015
As with many of life’s great ideas, the premise for Uber was beautifully simple. Push a button and get a ride. This was the concept being punted around by Uber’s co-founders as they stood stranded, cold and miserable in Paris, on a December’s winter night in 2008.
Hailing the attention of Uber’s top man in the region turns out to be as straightforward as using the company's wildly successful app, and access to their Head of Middle East and Africa Expansion comes fast and easy. This wasn’t quite how it was meant to be. Only two weeks before, Uber had been battered by a proper shit storm of negativity as one of their most senior executive rainmakers was exposed wanting to build a team of dirt diggers, armed with a Dr Evil-sized budget of $1 million, to smear journalists who were critical of the company.
It was a rotten incident, and it prompted legendary venture capitalist Peter Thiel, co-founder of PayPal, and the first outside investor in Facebook, to infamously call out Uber out as being “the most ethically challenged company in Silicon Valley”. Uber, who were increasingly being painted by the media as some kind of brash schoolyard bully, had finally gone too far, reckoned multi-billionaire Thiel.
Enough was enough, he said. There were Uber’s fights against taxi unions on multiple fronts; rumours of anti-competitive dirty tricks and poaching drivers from rivals; legal battles with city regulators across swathes of the US, Europe and Asia; and then there were accusations of an aggressive, misogynistic company culture that permeated down from its co-founder and CEO, Travis Kalanick (below). Californian native Kalanick, 38, a self-proclaimed veteran brawler from the startup mean streets, is today believed to be worth somewhere in the vicinity of $3 billion. Uber is currently valued at $40 billion, and is in with a real chance of becoming a ‘super-unicorn’ – Silicon Valley parlance for an elusive tech startup with a value that grows so preposterously, frighteningly large that it is considered a freak of nature. Facebook, Google and Amazon are members of that rarefied $100 billion plus club. Data shows, in each decade, 1-3 of these super-unicorns will be born.
Uber’s Dubai office is situated in the top floor corner of an otherwise nondescript low-rise, glass façade building in the city’s media and tech zone. Inside the third level corridor, Uber’s gunmetal gray door, marked with its distinctive black and silver logo, is closed and locked. More security conscious than their office block neighbours, an intercom and camera lens greet visitors to Uber’s first - and most important - regional outpost.
Around 18 months ago, Anthony El Khoury became Uber employee number one in the region. He is the man in charge of all international launches across the Middle East and Africa - a hit-and-run, fix-it role, a bit like Harvey Keitel’s Wolf in Pulp Fiction. El Khoury is 28, smooth-talking, good-looking and eminently likeable. He’s well educated. Search out Uber employees on LinkedIn: look at where and what they studied; previous companies they’ve worked; and you’ll see the top-tier talent Uber likes to recruit.
If you want to dislike Uber, then El Khoury makes that difficult. Dressed in jeans, untucked white collared shirt and charcoal loafers, sans socks, El Khoury kicks back in his black chair in a sunny boardroom, as the theory of any publicity is good publicity is discussed. “It’s been maybe a difficult couple of weeks for Uber,” he acknowledges, and explains why the hatches haven’t been battened down. “We have a very important message to get across, and it’s a message of Uber changing the way people travel in a city.” The ‘transforming transport networks’ theme is something El Khoury will press throughout the conversation. Equally, he is keen to distance the term ‘disruptive technology’ from the Uber model.
And, yes, he believes Uber is misunderstood. “It’s the media,” says El Khoury, “who portray Uber as this big corporate company that is going to come and aggressively take over the market.” He raises Facebook’s PR woes over data privacy issues – for so long Mark Zuckerberg’s Achilles heel – before saying something that rams home the ambition of the Uber vision and mission. It feels a little unsettling to hear him speak it, because it sounds almost, well, evangelical. “The publicity that comes with Uber, or any company that is trying to move the world to a better place, is very mixed… Uber has a lot to give the world. It really is changing how people transport themselves and travel in cities.” Change the world. If that sounds mildly delusional then it’s important to get beyond the perception that Uber is a neat Silicon Valley idea where an app on your smartphone orders up a car to take you from point A to point B. Think about the implications of Uber’s rapidly scaling technology, and how Travis Kalanick and his ‘Math Department’, as they are known internally, a team of Ivy League rocket scientists, computational neuroscientists and nuclear physicists, envision Uber shaping cities of the future.
Kalanick’s company, with its model of merging technology bits and real world atoms, plans to make Uber so ubiquitous, and its cost so low, that you will no longer need to own a car. To achieve this Uber needs tremendous scale. By the end of 2014, Uber had spread into 252 cities across 50 countries, and continues to grow at an explosive rate. Uber cars are right now available to 55 per cent of the US population.
Latest statistics show the Uber platform is creating jobs for 20,000 new drivers every month, and the company has just raised another $1.2 billion, earmarked for further expansion into Asia Pacific. UberPool is the brainwave that Uber is betting on to radically lower costs – and thus bring about radical change. Currently being tested in several key US cities, with UberPool, you share a ride - and split the cost - with another person who just happens to be requesting a ride along a similar route.
Uber claims that UberX, their lowest cost service (Uber Black is premium limousines and SUVs), is on average 40% cheaper than taxis. They say UberPool has the potential to shave another 40 per cent from that price point. El Khoury thinks UberPool could launch in Dubai from the middle of 2015. It’s way too early to gauge whether UberPool can work, let alone be a success, but Kalanick’s crew of big data crunchers and analysts are clear about the profound effects this bold idea could have.
One fully utilised UberPool car makes enough journeys, they predict, to take 12 cars off the road. Uber points to London, where three million cars are used only five per cent of the time. Car parking takes up 14 per cent of space in the city, and congestion is amplified with cars driving around searching for scarce parking. Energy, environment, economic efficiencies and the well-being of urban communities can all be touched by Uber, so the thinking goes. Expand the mindset a little further and start imagining driverless Uber cars. Google Ventures, who have already developed working prototypes in this field, is a $258 million investor in Uber. “This is the future,” says El Khoury. “This is where we want to get to.”
Kalanick sure has ruffled some feathers along the way, but do ‘nice guys’ bring dreams as big as this into reality? The Uber CEO’s focus on the mission has been described like that of a heat-seeking missile. El Khoury has met Kalanick several times, including lunch with the CEO while attending Uberversity, an induction programme where all new global recruits travel to San Francisco and spend two immersive weeks learning about each division in the company and the Uber culture, which El Khoury describes as “very open, very transparent.”
Every Uber employee is awarded stock options, says El Khoury. He clasps his hands behind his head, pauses and reflects, when asked what Kalanick, his polarising chieftain, is like. In life you come across would-be entrepreneurs with their big idea, says El Khoury. “When I met Travis, within five seconds I understood why this guy made it and others did not. He’s super smart. You can ask him about any Uber metrics on any city and he will answer. He is in sync with everything Uber that is happening all over the world. I cannot imagine the workload he has.”
Each Uber city team runs a lean, bootstrapped operation, made up of three people: a general manager (alpha personality, 10 years’ experience post-MBA), ops manager (analytics guru, focused on supply) and community manager (creative whizz, responsible for demand).
When Uber Dubai first began, the team worked out of El Khoury’s home. “Yes, we are a huge international company,” he says, “but we’re a local startup in each city.” El Khoury runs through each city Uber is operating in across the Middle East and Africa, grading their performances against expectation. Dubai, which is Uber’s fourth fastest growing market outside of the US, gets an A+. “Uber HQ is very happy with regional progress,” nods El Khoury. It’s dark and some time after 8pm when Mudassir Sheika, co-founder of Careem, Uber’s regional rival, sits down at our street-side café table in Dubai’s media zone. Taxis are on the hustle, horns are honking. There are no early finishes for Sheika, not when there is a turf war unfolding in key cities across the Middle East.
“This really is a 24/7, 365 business,” says Sheika, who launched Careem in July 2012, a little over a year before Uber entered the Dubai market. Sheika’s tan trousers, black leather shoes and white collared shirt with sleeves rolled mid-arm hint at his background as a former McKinsey consultant. Equally, his responses to questions – considered, intelligent and informed – are the hallmark of a Stanford Computer Science and Economics graduate.
Like Kalanick, there’s a determined, steely focus to Sheika. Days before our meeting, Careem announced they had raised $10 million. Sheika arrives in a buoyant mood, though he won’t reveal where that funding puts the market valuation of Careem. He does say Careem will use the battle chest to double down on existing markets, currently 14 regional cities; expand into new territories; and strengthen the technology platform.
Their new Saudi investor Al Tayyar is a major player in the tourism and hospitality sector. Sheika says Al Tayyar brings fleets of cars, numbering in the thousands, and customers to the table – not just cash. “[Uber] are trying to drag us into a price war,” claims Sheika, as talk turns to their competition. Careem’s counterpunch, he says, is to soak up the supply of drivers – an essential cornerstone of the on-demand service. Fewer drivers equals slower response times means a drop in service levels.
Sheika goes off the record to explain how, he says, Careem is already winning the hearts and minds of drivers – or ‘captains’ as Careem calls them. There is no secret skullduggery involved, but what Sheika reveals are clever strategies, and Careem clearly see this as an area to be exploited. Sheika says although both offerings may look comparable that Careem is the more reliable service. He outlines several operational features that, he claims, give Careem a local edge over global Uber. Careem has a call centre, and they have built their own maps, processes and algorithms – all specifically geared to tackling chaotic cities and ever-changing streets and road networks in MENA.
“Anyone can get one trip right,” he says, “take ten trips, then let’s talk.” He pauses when asked about Uber’s company culture. “I’d like to think that we live in a paradigm of abundance versus a paradigm of scarcity,” says Sheika. “You won’t see us booking competitor cars or poaching their captains. From the little I hear and read, we don’t aspire any day, any minute to be like them. We feel there is a different way that business should be done. We feel that how we conduct ourselves is a huge competitive advantage.”
Anthony El Khoury checks the time. There are only two hours to go before Uber’s festive promotion of delivering on-demand Christmas trees across Dubai begins. Moving products, not just people, is a space Uber (ice cream, kittens, burgers) and Careem (suits, cupcakes, sheep for slaughter) are both experimenting with. Micro logistics and local deliveries could be the next sector to be given a shake-up. El Khoury talks about changing “incumbent industries” – a favoured phrase of Kalanick to describe the taxi business.
El Khoury remembers London being brought to a standstill last summer, when the city’s iconic black taxis went on strike over unlicensed Uber drivers operating in ‘their’ regulated industry. Amid all the striking hullaballoo, the Uber app went from being 32nd most downloaded in the UK to number one spot for the next two months straight. “We do prefer to show our positive side,” says El Khoury, “but the reality is publicity is publicity.”