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Summary:

Private car hire service Uber is preparing to hit the British capital just in time for the Olympics, and the reality is that London, with its iconic black cab service, has the potential to make — or break — Silicon Valley’s latest transportation darling.

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Last week I caught up briefly with Travis Kalanick, the CEO of Uber. He was relaxed and calm — and for good reason: his car services company has quickly become one of the darlings of Silicon Valley. It’s been on a tear recently, raising $32 million last year to fund expansion and building a presence beyond its home turf of San Francisco, with cities like New York, Chicago and Paris.

But now Uber is getting ready to step up to its biggest challenge yet: London.

The company is preparing to hit the British capital just in time for the Olympics, and the reality is that it’s a venture that has the potential to make — or break — the business.

Europe is already proving tricky

The London launch has been a long time coming. Over the last few months, Uber has been quietly gearing up to open in London, staffing up and making regular visits ahead of a planned debut that could happen as soon as this week. A few test drivers are now in place, and last week hand-picked attendees at the LeWeb conference were given the chance to use the service too — presumably in order to build buzz among early adopters.

It’s definitely making progress. But the same approach was taken in Paris last December, and yet that seems to have not been a roaring success. I’m hearing that the number of registered Uber drivers is just 100 six months later; a figure Kalanick didn’t refute when I asked him about it.

And while Paris might be confusing, London is a monster. It’s a vastly complex, confusing city in which Uber will face competitive threats the like of which it hasn’t seen anywhere else. Can it stand up to the test?

An uber is not a black cab

London’s black cabs are as important to the city’s identity as yellow cabs are to New York’s, but they’re also a much stronger rival to any incomers. London’s highly regulated cabbies are legendary for their intimate knowledge of the city’s streets and while they aren’t cheap, well, neither is Uber.

Think that doesn’t matter? Customers demand a lot in London.

Plus black cabs are pretty available in central London (despite complaints) and you can flag down a black cab on the street, or order one to come and pick you up by calling up a company like Dial a Cab, which is effectively a black cab aggregator, and has developed its own app to make things easier.

And black cabs are just one of many competitors that Uber will have to best. There are more rival startups in this space than I can count, and they aren’t simply clones of the San Francisco company. Some, like the well-backed Hailo, focus on black cabs. Others, like UbiCabs, are pointed toward the lower end of the private hire (minicab) market.

There are more, too: services like Taxizapp, Get Taxi, Tweet a London Cab, London Taxi App, Taxi Square and many more.

These not only provide some competition to Uber; they add to the noise that it has to cut through. And some of them are very well connected to the driver population that is vital to making these services work. Those bonds can be hard to break.

Oh, and then there are the big dogs

But Uber’s biggest rival in London comes from neither the world of black cabs or the world of tech startups. Private hire firm Addison Lee is the most significant player in the British capital’s upscale private driver market that Uber wants to dominate. It’s been around for a while, and it’s doing well: the company’s last financial filings say it ended up with £5.5 million of profit last year ($8.5 million) on revenues of £127 million ($198 million).

Addison Lee may not be liked by all, but it is ubiquitous, connected, competitive and extremely aggressive.

Drivers I’ve spoken to suggest that their contracts with Addison Lee will preclude them from working for Uber as well — and those who care about the money they make (which is all of them, of course) are much more likely to stick with a sure thing than take a risk on a venture-funded company from California.

So what does Uber do?

The company is stuck in a difficult situation. If it’s really aiming for global domination, it can’t ignore London. With a complicated mesh of public and private services, London is an incredibly competitive and valuable market… and that combination makes it so attractive and so dangerous to new entrants.

Uber’s challenge — and it’s something that Kalanick seems to recognize, at least — is to provide black cab-style service at prices that are competitive with other private hire rivals. That’s tough. Sure, it’s got venture money to help it get there — but it’s hard to see how it can sustain massive losses in one market over a long period of time.

With the Olympics just around the corner, winning London would be a huge prize. But scooping the gold medal is going to be tough, and Uber might just have to settle for something less. But will it be happy to come home with silver, bronze — or even worse?

Kalanick seems aware of the challenge: “London is the gold standard,” he told me.

But in another conversation I had with the company recently, an Uber spokesman brushed aside the size of the obstacles facing it. He told me that he’d heard this sort of argument before — for example, when the company hit New York.

“Just get people using Uber and they’ll know what’s different about it,” was the thrust of the argument.

That’s not a strategy, that’s a prayer. It seems highly unlikely that things will come so easy.

Profile of cab used under Creative Commons license courtesy of Steve Bott; Addison Lee image courtesy of panmike1

  1. Neat, thanks for the quote!

    I think it comes down to Hailo vs Uber…

    Hailo:
    - Decent UX, most similar to Uber’s UX
    - Black cabs (have special lanes so can skip traffic, and have drivers who have taken The Knowledge so don’t have to rely on GPS)

    Uber
    - Mercedes.

    If Uber can hire ex-black cab drivers it will win. If it’s just going to stick regular GPS-addicted minicab drivers in a nice car then it won’t.

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    1. My drivers were quite good but they didn’t know about Uber. They were black car drivers but as they worked for a car agency they went through them. This agency should educate them about Uber, I had to explain to the guy what Uber was, it was a company that had just launched in London, etc.

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  2. I don’t see much opportunity for Über in London because the black cabs are everywhere, they’re good value, and they’re required to know how to get where you want to go. None of those are true in this country, which is why people are willing to try something new.

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  3. Paul Cockerton Wednesday, June 27, 2012

    I think it’s going to be quite difficult for hail a taxi apps to compete with raising hands unless, like Hailo, you have significant above the line spend to raise awareness. Even then, in my experience trying to use the app to hail a cab is difficult – by the time the cab arrives two or three others have passed you in the street. Thus repeat business may be low.

    IMHO The real competition is in the pre-booking, and the corporate market. Addison Lee do have huge presence but I agree that they seem to be disliked not only in the industry but also by many of the current paying passengers. I think because of that Uber do have an opportunity – but there’s also companies like Green Tomatoes who’re really focusing on the ride experience (Prius, Wifi in car) and as a result are getting quite significant repeat business – they’re incredibly good value too. Now that’s a good strategy.

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  4. Richard Corso Wednesday, June 27, 2012

    Uber needs an edge and I suggest they use clean energy vehicles, develops an app for booking via smart phones and promotes a multiple purchase scheme with a discount so that it ties customers to their service – good luck

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  5. Getting black cabs South of the Thames in London is still a big problem despite the number of professionals there.

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    1. Bobbie Johnson Friday, June 29, 2012

      You know the old saying…

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    2. That may have been the case, but not any more.
      Hailo has arrived the black cab app, and it’s here to stay.
      As a London cabbie I’m now picking up passengers on Hailo as far out as Norwood.

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  6. Travis looks like Buddy Hackett.

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  7. Martin Eriksson Monday, July 2, 2012

    I’ve been trying Uber over the last week here in London and think they’re on to a winner.

    Black cabs are undoubtedly the best taxis in the world, and they are my preferred option in central London but outside Zone 1 their benefits collapse quickly. The Knowledge only extends so far meaning even they need directions or GPS, they get expensive really quickly over distances and they’re frankly not comfortable for anything more than a 10-20 min journey. Ever done a Heathrow run in a black cab? It’s not very pleasant.

    My recent experiences with Uber have been exceptional – all between central London and zone 2/3. Being chauffeured around in a Merc S-Class or BMW 7-series for LESS than a black cab is amazing.

    So who are the real competition? Addison Lee comes to mind, and frankly their brand hasn’t been doing too well lately so corporate customers and people like me who take the occasional private car will abandon them in droves – IF Uber add pre-booking as an option.

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    1. As I drive the latest tx4 black cab it’s very spacious and has new independent suspension,we’re you can really
      stretch out your legs unlike that of any chauffeur driven vehicle. I had to reply to your above article just to educate you on studying the knowledge. It’s covers twelve miles of London as well as the suburbs.
      The last job to heathrow from Harrods last week on the meter £42.00, compare that to any other service and
      I’m sure they are much more expensive.
      Chris

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  8. Have you heard about the UBERTIKI promo code that gives you £20 off when you sign up for Uber London?

    All you have to do is enter promo code “UBERTIKI” when you sign up for Uber (don’t worry, it’s free) and you’ll get £20 worth of credit. So if your first ride cost less than £20, it will be a free.

    You can find out more at this post by the blogger who’s offering the deal:

    http://tikichris.wordpress.com/2012/06/29/20-worth-of-free-chauffeured-travel-with-uber_lon-and-tikichris-its-ubertiki/

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  9. The London black cab drivers are fighting back
    after years of sitting back and watching the mini cab
    Companies encroaching into our business.
    With more comfortable taxis and the use of apps
    Like Hailo, we are winning back our work that we have worked very hard for after studying the knowledge. Even the very well established mini cab companies are now starting to see the effect of apps like Hailo.

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