Why you should care
Because Uber has gone from zero to $41 billion in a matter of a few years.
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One night last month I ordered an Uber ride. It was late. On my iPhone I watched the little car icon zoom right past my street, U-turn and park a quarter-mile down the road. Perhaps the driver was lost? I waited and waited and waited for him to call, and eventually gave up after 10 minutes and called him myself. “Zero points for initiative,” my housemate muttered.
This is Uber. In Nairobi.
In January, the taxi-app juggernaut set up shop on the crowded byways of Kenya’s capital city. It’s just the latest maneuver in Uber’s little-noticed emerging markets strategy, which has already seen the company plant flags in Cape Town, Lagos and New Delhi. For Uber, as for many corporations, the developing world’s potential upside is clear. With an estimated 3 billion people living there — almost half the world’s population — the growth opportunity is off the charts. Even more tantalizing: A predicted 1.3 billion people will move into cities between 2007 and 2025, half a billion of them in Africa and most of them without cars.
But here’s the thing: Already a bevy of local taxi apps operate in Nairobi, and while Uber has disrupted taxi markets from New York to Hong Kong, there are good reasons to expect roadblocks in the developing world. In Nairobi, rivals’ names are Maramoja (“very fast”), Easy Taxi (a Brazilian export) and Sasa Cabs (“now cabs”), among others, and each has tailored its service to the local market in one way or another. Banking on the universality of its technology, Uber has not taken local taxi culture into account much, unlike its competitors — it insists on giving users the exact same experience anywhere in the world. But the truth is that Nairobi is not Brooklyn, or San Francisco, or Washington, D.C. From culture to infrastructure to labor force, the challenges are different.
Start with maps. Many drivers in Nairobi and other developing countries navigate by using landmarks, or just stopping to ask for directions. They don’t use maps, let alone smartphones (which may explain why my driver had a hard time homing in on my location). Speaking of smartphones, only 15 percent of Kenyans have them — a figure that’s relatively high for developing countries — which seriously narrows Uber’s market. In that respect, Sasa Cabs has an edge: It allows users to request a pickup via SMS on a feature phone or even a dumb phone. Similarly, only 4 percent of Kenyans have a credit card, which Uber requires. Indeed, Uber’s decision not to allow alternate payments has drawn criticism in India, where only 2 percent of people have credit cards.
In Nairobi, most people wouldn’t step into a stranger’s car if you paid them.
But Kenya already has the world’s most successful mobile payments system, M-Pesa, which allows everyone from a smallholder farmer to an iHub exec to transact payments. It’s a huge local-market advantage that Maramoja and Sasa Cabs have integrated into their models. But Uber seems to have ignored M-Pesa, at least for now. Though Alastair Curtis, Uber’s “International Launcher,” says the company needs M-Pesa if it wants to scale in Nairobi, it still hasn’t incorporated the payments system two months in. Nor has Uber adapted its pricing model: As in the United States, it charges not just by distance, but also per minute. The notion is unheard of in traffic-choked Nairobi, where 15-minute rides can easily balloon to more than an hour.
Trickier than all this is the biggest obstacle Uber faces: trust. In Nairobi, most people wouldn’t step into a stranger’s car if you paid them. The streets can be dangerous at night and the police are notoriously unreliable. Even user ratings, of the sort you’ll see on Uber, have less persuasive power: They’re anonymous.
Which is why Maramoja might have a leg up on Uber and everyone else. Based on the premise that passengers would trust a driver whom a friend recommends, it scours your phone’s address books and social networks — Facebook, for now — to find drivers your friends trust. “People told me, ‘I won’t even get in a car with anyone but my guy,’” says Jason Eisen, an American consultant who co-founded Maramoja. “They tell me this horror story or that horror story. But then they all have the same problem when their guy isn’t available — they need someone else that they trust.”
Maramoja says it has data to back up its model. It ran experiments in which subjects used the app to choose between two drivers stationed equal distance away: one recommended by a friend and the other with a 3-, 4- or 5-star rating. Subjects chose the driver recommended by a friend a whopping 96 percent of the time.
For its part, Uber contracts a private company to do background checks on drivers and requires them to provide a certificate of good conduct from the police. The method has loopholes: Kenya’s record keeping is not the best and certificates can be easily bought. Still, Uber’s Kaitlin Freedman, who manages logistics and operations in Kenya, maintains that its reference checks “go a step beyond what’s done in other markets.” The point is, she says, to “promote safety by having all of our drivers be someone you can trust.”
For now, Maramoja is an underdog in Nairobi. But then, so is Uber. To be sure, some of the challenges it faces now will likely ease up. Eventually smartphones will saturate poor countries, just like they have rich ones. (The International Data Corporation, for instance, says at least a billion smartphones will ship to emerging markets each year for the next four years.) Credit cards, too, may gain greater purchase throughout the “global south” (the nations of Africa, Central America, Latin America and most of Asia).