Travel

This Uber challenger profits from paying drivers well

By Alex Wood 15 February 2017
image: Taxify
Summary

Giving Uber a run for its money.

It looks like Uber. It feels like Uber. But it’s not Uber.

On the surface, Taxify seems identical, but this app couldn’t be more different.

This Estonian challenger has one simple advantage – the drivers love it just as much as the passengers.

With over 1m customers and counting, Europe’s fastest growing taxi app is coming, whether Uber likes it or not.

And where Uber is losing money, Taxify’s pulling in a profit

As ubiquitous as Uber

I discovered Taxify in Riga, Latvia’s beautiful capital city, while I was in town for TechChill, an excellent conference.

Already the market leader there and across much of Eastern Europe and parts of Africa, Taxify is as ubiquitous as Uber is in London, with its distinctive logo stuck on taxis everywhere.

Of course, It’s easy to write off the company as yet another Uber clone.

But as Taxify’s Estonian co-founder Martin Villig explained, this company is taking a different approach – by focussing on the drivers, just as much as the passengers.

Happy drivers mean happy customers

At least on the surface, Villig’s mantra appears to be working.

Every driver I spoke to in Riga was infectiously positive about using the service.

Taxify drivers only pay around 10-15% commission back to the service, compared to rates of up to 30% with Uber. And they tell me the fares are just as good as a “regular” taxi.

Unsurprisingly, the drivers are hooked, and as co-founder Villig puts it “happier drivers mean happier customers”. That 15% saving also means cheaper rides for customers too.

Taking on a Goliath

So how can a relatively tiny player like Taxify afford to take on a goliath like Uber?

“We’re lean” says Villig “..we do things the Estonian way”.

There’s clearly something in the water in this small Baltic nation: the country that brought you Skype and Transferwise punches way above its weight in terms of tech success.

Villig previously worked at Skype, like much of Estonia’s tech talent, starting Taxify in response to the very same problem as Uber – the wildly frustrating world of private hire taxis.

Its model is just like Uber – except Taxify has kept the personal touch. For each city it operates in there’s a small team on hand 24/7 (by phone as well as through the app), helping with problems and making sure that the service meets the needs of riders.

Unlike Uber, Taxify is far from faceless.

Marathon, not a sprint

This company’s mantra is steady growth and profitability. Taxify doesn’t spend big on marketing or make losses on every ride unlike most players in the so-called sharing economy.

This might sound expensive, but with labour costs dramatically lower than Western Europe, Taxify’s has managed to pull this off.

It’s been built on less than 2m euro in investment. A stark contrast to  Uber, which has taken an eye-watering $12bn dollars to date.

The result? Uber is estimated to have lost a staggering $3bn last year, while Taxify claims to already be profitable.

“When Uber reached the same level of rides as we did, they raised almost $50m dollars in funding” Villig showed off “so that means we’ve been at least 25 times more efficient than they are”.

Taxify operates in parts of the world where Uber has yet to dominate.

Next stop London?

Much of the company’s recent growth has come from parts of Africa, where regulation is relaxed and Uber has yet to enter the market.

Incredibly – none of the local Estonian team have moved out to manage the company’s African operations. True to form, Villig has kept things lean, and manages his 25 strong African team remotely, naturally through Skype calls.

Today half of Taxify’s business comes from Africa. But the company now has it sights set on London, with a launch expected later this year. “It’s early days” says Villig. With regulation more challenging and Uber holding a solid position, London will be a trickier market to crack.

Taking on a goliath like Uber will take time and a lot of smart moves.

But with Taxify’s relentless focus on giving drivers a fairer deal and it’s refreshing take on sustainable growth – this might just be the company to finally give Uber a run for its money.