Business brutality and the ‘sharing’ economy

We recently heard about French ride-sharing service BlaBlacar’s latest acquisitions: Hungary-based competitor AutoHop and the German Carpooling.com, the latter being one of the largest players in Europe, with more than 6 million users.

It’s not the first time that Blablacar has gone shopping though; they already bought other small start-ups to kick off operations in Italy, Germany and Poland, paying around 50K euros for each of those companies (not too bad, eh? – nice ‘acqui-hiring’ operations). I imagine these deals were something like: ‘Hey chaps, you’re a tiny start-up and you’re losing money even with a few thousand users. We’re coming to this country regardless, so… take the money and at least we’ll give you a decent job and some paper shares’.

They made their model work in France, where they became a monopoly, making the most of the economic crash and the lack of intercity coach alternatives . My guesstimate is that they’re making a turnover of around 20M euros in France, therefore processing through their system more than 200M euros in transactions. Basically they want to replicate the same model everywhere, establishing a monopoly in each country. If they have to buy out a competitor to achieve their domination, they do so. I acknowledge a level of sophistication in this growth strategy, although it’s a highly aggressive approach in my opinion.

In the short-term, having one car-sharing scheme with a critical mass of members makes sense, as a more affordable alternative to public transport. In the long-run, however, any monopoly will try to ‘milk’ the market for its own benefit, resulting in well-documented inefficiencies for consumers.  The sharing-economy is a great concept, but it can be just brutal from a business perspective.

Nevertheless there is still some hope:

– There are a few great examples of other successful car sharing models around Europe that will continue to challenge the dominance.

– In the UK: Liftshare.com. Using a different model covering both one off trips and commutes, Liftshare have over 1 million shared trips/month. In fact, online car-sharing wasn’t invented in France as the Blabla team might like to portray, but in the UK by Ali Clabburn. (By the way, it’s quite funny the way Nicolas and Frederic copied Ali’s pitch, using the story of the student struggling to find a lift to get back home for Christmas…). I’d like to mention goCarShare here as well, they’ve focussed on travel to events and have had some success. Perhaps they are on the BlaBlacar shopping list.

Amovens is doing very well in Spain, despite the competitive pressure, and now they’re part of GoMore, a Denmark-based start-up that counts Jesper Buch, founder of JustEat, as an investor.

– Outside Europe, Brazilian Tripda, backed by Rocket Internet, seems to be moving fast in emerging countries, including the USA.

Interesting times for the “sharing” economy and the ride-sharing sector in particular, where there is definitely a predatory player.

(Note: I work as COO for Liftshare.com, opinions on my own)