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Uber vs Careem Deep Pocket War

Bloomberg reported that Uber’s middle east rival Careem is raising $500m round at $1 billion post money.

Few weeks ago I listened to this recode podcast with Bill Gurley of benchmark capital. Bill is on the Uber’s board of directors and they invested in Uber’s A round.

Reading the Bloomberg report reminded me of this part from Bill’s interview. The bold lines are the host’s words.

When is it going public?

You know, I don’t think that we’re going to be going public anytime in the near future because of all the issues that we just talked about. We have a large number of competitors, even with the deal done.

Well done, by the way.

Thank you. [Competitors] who are very deep pocketed, who have decided that their primary form of competition is not going to be like building a different app or a differentiated service or a different level, it’s just price. And so there are intense subsidy battles going on.

All over the world.

All over the world. And those companies, when they approach investors, tell them, “Uber is going to go public, and then they’re going to have to be profitable, and then we’re really going to sneak up on them with these discounts.” While that’s the game on the field, and it’s one that I find to be remarkably messy and ugly, I don’t think it would be in our best interest.

So raising more money is the way to go.

I don’t know if we need to. We have $9 billion in the bank and $2 billion of debt, which is the most any private company has ever raised.

It is clearly a massive subsidy war. Uber strategy is to end this war by introducing autonomous vehicles and replace all drivers. While this is happening in US, it won’t work in many other regions including the middle east, where Careem is operating.

I used to believe that Careem couldn’t do anything against Uber. Now I have some doubts.

Uber has great advantage when it comes to the tech. It is way better than Careem’s and Careem needs quite some time to reach a stable state.

Uber also has great advantage when it comes to the model’s efficiency. There is no call center, there is no direct interaction from Uber with the drivers beyond background checks and training. The Cairo office is being run by less than 10 people, putting most of the work on the car rental companies who give the drivers the license to operate legally for a fee.

Doing a back of the envelope calculation on Uber, I currently think they are profitable or reaching profitability very soon in Egypt. Due to

  • There is a massive growth in number of drivers and rides.
  • They are also cutting driver subsidies significantly (their biggest cost) & the current model only rewards very hard workers. Drivers who are doing 60-90 rides per week. I expect that most of the drivers are doing less than that making them pay the rewards for the 10-20% (personally estimated) who reach the bonus threshold (60-90 rides per week).

On the other side, Careem’s competitive edge used to be in accepting cash payments, which now Uber has.

If Careem succeeded in raising the above mentioned round, they might have a chance to play the long game against Uber, however I believe for Careem to win they should differentiate themselves on the following:

  • Tech: The tech has to “just works” all the time. The app should be localized and catered for the region instead of just following whatever Uber is doing.
  • CS: They should have an A class customer service. Uber is doing big changes to their customer service flow making it harder for users to reach them. Careem can differentiate on this if they managed to provide an Amazon level customer service while reducing the chances of issues happening.
  • Driver incentives: Uber is cutting driver incentives significantly making many drivers unhappy. Can Careem provide a better model? A model where drivers switch from Uber to Careem? While Careem pricing is more expensive, I think Uber drivers make more money because they get more rides due to the bigger user base.
  • Loyalty: Uber’s customer loyalty is coming from the quality of the service. Careem is doing some trials to make their customers more loyal by offering free credit/rides for the frequent ones. So far the rules for this isn’t clear. I think it could be another differentiation if done right.

Can Careem do all of this and be profitable?

Will one of them win? Who is it gonna be? Is it gonna be a massive “subsidy battle” as Bill Gurley said?

Will they coexist?

Will see.

I daily write my thoughts on technology, and life. Subscribe here if you want to receive my blog updates by email.

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Uber messaging

I am surprised until now, Uber didn’t implement a messaging feature between the rider and the driver. 

SMS is still considerably expensive in developing markets.

The ability to send voice notes and maybe call over the internet could be even better.

I hope they are working on it.

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Uber pickup

There is a scene on the Egyptian streets where someone tries to stop a taxi. After stopping a few all of them refuse to drive the person.

Sometimes I wish there is a version of the Uber driver app where a driver can just pick up random people on the street, drive them, and the app calculates the fare. Think of it as a fare calculator.

Sounds counter intuitive, and stupid. But it might solve the problem of the lack of economic incentive to pick random people off the street.

If you have a weekend, maybe you should cyber it.

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Twitter Sale

I am not happy by Twitter being sold. Big companies have a lot to preserve and Twitter is a place where ideas clash and controversy flourish. 

It is not easy to navigate a platform of opinions specially if you have a core business you want to protect.

I understand there are many problems the platform faces such as slow growth, slow product development, and moderation. I don’t understand how an acquirer is going to fix this.

Maybe I am wrong.

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Seed stage traction

A friend of mine based in Berlin attended a fundraising call between two colleagues of him and a Berlin based investor. They are trying to raise a 2M euros seed round at 10M post money.

The investor told them in order to invest he wants to see numbers.

This made me think that any numbers they will show at this stage will be so small to make any sense.

I am not pro pitching investors right after launching the MVP*. Any loser can build and launch MVP. The tough part is getting people to use what you built, tell their friends about it, and pay for it. Add to this as Mark Suster puts it, it is easier to invest in lines than dots. I see launching the MVP is a dot. Making progress is a line.

So I am wondering if an investor is valuing a seed stage startup based on traction, how much traction is a good traction?

 
* There are exceptions to this. Some might even need to pitch investors before building the MVP. Dropbox is an example of this. Even an MVP of Dropbox would’ve been so expensive to build without investment.

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The white space at the end of my emails

I added the ability to receive email updates for this blog. I used MailChimp RSS campaign template. I simply give MailChimp a link to my blog’s RSS feed and it will email subscribers whenever a new post is added to the feed.

After creating the campaign I noticed there is a big white space in the email right at the end of the blog post content. I also noticed this white space on Mark Suster’s both sides of the table email updates. He uses MailChimp and the same template I use.

I contacted MailChimp support. They said the reason behind this space is the option in the campaign to resize images to fit the template. This option resizes big images to fit the template and avoid horizontal scrolling. It also resizes small images making them as wide as the template.

The latter was the cause of the issue. There is a one pixel image at the end of every blog post. This image is there for WordPress to be able to track how many people read the post through the RSS feed. Because MailChimp resizes small images making them bigger, it is taking this 1 pixel image and making it at least 600 pixels wide, hence the white space.

One immediate solution to this is to disable resizing images. The risk of this solution is having horizontal scrolling inside your email in case of using a big picture.

Another solution is to generate a custom RSS feed from the original one without the tracking pixel and submitting this to MailChimp as the campaign feed.

A third solution would be MailChimp fixing this from the beginning and making the templates just as any responsive template. And give users the ability to use images at the original size if they want (I bet this will be of small usage).

I decided not to take the risk with the first option, and was too lazy to implement the second option. So I decided to not do anything about it.

As the Dutch people say “Niet perfect is ook goed”.

Not perfect is also good!

You can subscribe to get email updates from this blog here.

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Mobile publishing

​Seven out of my last 9 posts published on this blog are written on mobile. I use the WordPress app and hit the publish button from there.

With mobile traffic growing to be as big as – and sometimes bigger than – desktop. I wonder if the same trend prevails for publishing. Are people writing more on mobile with the same rate?

I am not talking about social media posts. I am talking about the main publishing platforms such as Medium and WordPress.

I wonder how the mobile publishing statistics look like.

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Books

My manager wanted to surprise me with a gift of books. He knows I love my Kindle so he went to my goodreads.com profile and bought me 3 books from my “to-read” list. How sweet is this?

I didn’t update my goodreads for long time. It was cool back then during the social media boom. It was nice because it allowed sharing all things books. No wonder it got bought by Amazon.

Luckily, my manager figured out that the list wasn’t updated and he bought me three books of his choice. However this reminded me that I should update or delete my goodreads account. I decided to go with the latter.

I stopped reading physical books. All my readings are now on Kindle. I hate physical books. They are heavy and I can’t hold them for long. Kindle gives me all I want. And I can share what I am reading with the world, which removes the need for a goodreads account. So came the deletion.

On the other side I decided to list all the books I read & listened to. You can check the full list at the end of this post. This will save me time whenever someone asks me to recommend a book.

My takeaways from listing these books is that I read a lot about psychology. I deeply care about understanding the people & the world around me. I like books that are thought provoking, and books that carry a contrarian thought.

My biggest two authors are Dan Ariely & Malcolm Gladwell.

Gladwell was recommended to me by Amr Samir. The first book I read by him was Outliers. Since then I read all his books except blink. I know he is being criticized for using his amazing storytelling abilities to convey messages that may not be scientifically proven or using weak studies. Still, something is captivating about his writings. And it gets better if you listen to his books. He reads them himself. You feel the excitement in his voice.

Dan Ariely I think was recommended by Ahmed Essam, or Amr Samir. I don’t really remember. Dan’s books are revealing. They show you how many of what you think about human behavior is wrong through simple experimentation and observations. I recommend reading Predictably Irrational as a start.

Another takeaway is that I read four books about social media marketing. Those were from my days at Microsoft where I was doing smm. Once I left I stopped reading about the topic.

Here is a link to the full list: http://mostafanageeb.com/books/

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Software vs Oil

I was meeting a friend of mine from college days who is currently working as a software engineer. Someone asked him if you go back in time, would you go to the same college? He said no, I would’ve became a petroleum engineer. They make a lot of money.

The economist published the following chart highlighting the top 10 companies by market cap in 2006 vs 2016.

http://cdn.static-economist.com/sites/default/files/imagecache/original-size/20160917_SRC389.png

In just 10 years, the top 10 companies in the world shifted from being dominated by oil companies, to tech companies.

I think back in time when oil was discovered it wasn’t easy to jump on the ship, walk up the ladder, and start a big company. You rarely hear of the founders of BP, or Shell. Most of these came out of governments, sometimes out of wars, and a lot of times accompanied with lobbying or even corruption to get the business done. The opportunity was there for a lucky few.

It is not only that “software is eating the world”. Software is giving an equal opportunity for everyone to build something people want, & make a lot of money. You get to move without anyone’s permission, and the innovation is everywhere. No need to dig to find it.

Don’t worry Ahmed, you are on the right side.

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The supermarket entrepreneurship

I saw this Ad on LinkedIn. The biggest supermarket chain in the Netherlands is running a competition for the best startup with a product that’s sellable in the supermarket.

The text is machine translated using Google

The winner will recieve 250K euros to further develop their product, and one year of shelf space at Albert Heijn.

There is a bias in the entrepreneurial scene towards tech. This bias is mainly because tech people are very vocal on the internet which gives them reach and scale. And because it costs way less money to start a tech company than to build, produce, distribute, market and sell a physical product.

I think this is a great idea. It will draw the attention to a breed of entrepreneurs not likely to be talked about. It will introduce new innovative products to the market. And it will help these entrepreneurs get feedback, and maybe capital for their ideas. It is a win-win for everyone.

Let’s see what we will get. If you are interested in the details here is the link.