APP, APP & AWAY

Dubai 2017 | TELECOMS, IT & MEDIA | FOCUS

This decade has seen the development of a new business model. It is one that has seen internet-based companies becoming multi-million dollar entities without owning any assets, their only service being the easing of usability.

The development of apps has had a sizable impact on the taxi industry in Dubai, with Uber seemingly revolutionizing the sector by developing an interface that allows customers with smartphones to submit a trip request, followed by the automatic calculation of the fare and payment transfer to the driver. As of August 2016, Uber was available in 66 countries and 545 cities worldwide.

Careem utilizes a similar model, and is another app-based car booking service, based in Dubai. The app is available in 11 countries and over 40 cities in the MENESA region. The two have signed agreements with Dubai's Roads and Transport Authority (RTA) that will see Dubai's 14,000 taxis and limousines being listed on these platforms.

Dubai's home-grown competitor to Uber, Careem, signed its agreement with the RTA three months earlier, in October 2016. Having started operations in Dubai back in 2012, the company now has a fleet of 90,000 drivers and 4 million users across the region.

Both applications' appeal to users is that they offer a more secure taxi service at the same price as a usual taxi. However, one disruption to that expectation came in early 2017, when Careem announced that each Dubai-originating trip would carry a AED3 surcharge due to “new fees and regulations.” Similarly, Uber's prices stand around 30% higher than the traditional taxi services due to the regulation imposed on them.

Across the world, taxi drivers have fought back against being undercut on prices through cost-saving products such as Uber-Pool. In Abu Dhabi, the regulator TransAD blocked ride-sharing apps toward the end of 2016 due to a host of issues, such as the legality of the drivers working for the company, over-charging of customers, and not following the law. This had been a problem in other cities such as San Antonio, Berlin, and Rio de Janeiro, with the primary issues revolving around uninsured and unlicensed drivers and the safety of the vehicles being used to ferry passengers.

That being said, both Uber and Careem are unlikely to slow in their growth. Uber's number of regional riders grew 500% between 1Q2015-1Q2016, with driver growth going up 400% in the same period. Both companies see opportunities within the market and are securing the financing to pursue it. Uber received USD3.5 billion in investment from Saudi Arabia's Public Investment Fund, and Careem finalized USD500 million in funding in December 2016, with Saudi Telecom Co. taking a 10% stake as part of the deal.

The two's respective deals with the RTA have also included the capacity for pod transport and driverless cars. Although futuristic sounding, this is part of Dubai's Autonomous Transport Strategy, which aims for 25% smart and driverless transportation in Dubai by 2030. Careem, for example, has promised to deliver a prototype of the driverless pods by 4Q2017, and has already teemed up with the US start-up Next Future Transportation to bring advanced transport technologies and practices to the region.

In the meantime, if commuters do not want to rely on being taxied by Uber and Careem, the RTA has teamed up with companies U Drive and ekar, each of which is providing 100 vehicles that will be able to rent through the RTA for AED24-30 per hour. The RTA has launched a pay-as-you-go rental app to serve this market. The scheme is directed at serving the 80,000 full-time members of staff at Emirates and Etihad, the two national air carriers.

The innovations of the RTA, as well as Uber and Careem, are together providing Dubai's population with options that are focused on making travel as easy and hassle-free as possible. Both represent a tech-focused service that is less capital intensive with higher profit margins, delivering value to the user.

These business models of profiting from designing a platform that coordinates and connects would-be-users to would-be-providers is likely to be the future of not just private, but public service providers too, both working together to create a more efficient future.