From Geek Street to Main Street: Ride sharing's road to a mass market
Ride-sharing apps are increasingly making a mark in the US, but can they really appeal to drivers outside of tech-focused circles?
Before San Francisco resident Kenny Liao heads to work in the morning, he makes sure to check his smartphone to see if he can pick up any strangers along the way.
"I open up the app before I need to leave, I leave it open and see if someone needs a ride, for the next 10 minutes or so. If so, great, if not, great, I'll head out to work," he said.
The app Liao is referring to is Sidecar, which lets users arrange rides in exchange for money. Liao uses it to check for potential customers, which, he estimates, pop up four out of five times. He said it's convenient, helps pay for his gas, and allows him to network with the tech-focused ridership in the area.
"It's great to meet people, great to chat a little bit with people. It makes the commute a little more interesting," he said. Ride sharing is not a taxi business to Liao, although it may be to others. Instead, it's become a part of his daily routine.
The concept of ride sharing has been around a long time, but it's enthusiastic drivers like Liao who give the modern-age movement -- essentially carpooling arranged by an app on your smartphone or tablet -- a chance to make it to the mainstream. At least, that's what ride sharing companies like Sidecar, Lyft and Uber hope.
It's a long road to becoming commonplace. Despite some regulatory success recently, ride sharing companies will have to overcome some major cultural barriers -- namely the way people think about sharing a ride with strangers.
A legitimate industry
The state of California recently set up . As a result, two ride-sharing companies made announcements Friday that could characterize ride-sharing services as a legitimate industry in the eyes of the public.
Sidecar and Lyft are finally saying -- without fear of retaliation from the state -- that drivers charge fares for rides, rather than them talking "donations." This is a symbolic gesture, for sure. Passengers, often proponents of the new ride sharing industry, have typically paid the suggested donation amounts. And, UberX, having entered the space late , has always charged fares.
But the change in language shows how California's guidelines will allow the companies to operate outside of the gray area they've been confined to. Of course, the ride sharing apps face government opposition elsewhere, something they can only overcome if the public's behind them.
For that, they'll need to convince passengers that they can get into a stranger's car just as safely as they can a yellow cab with call numbers. They'll also need to convince car owners that they can safely share their rides with strangers they pick up off the street.
In North America, the idea of sharing someone's ride has actually been around since World War II when the government asked civilians to carpool to work in order to conserve rubber for the war effort, and the practice peaked in the 1970s during the energy crisis. While the popularity of carpooling waned over time, the version of ride sharing we associate with companies like Sidecar, Lyft and Uber -- in which people pay for rides -- started rising in popularity as early as 2004.
Proponents of ride sharing say technology, including well-designed apps with accurate GPS, will play a major role in changing the minds of consumers.
Arun Sundararajan, a professor at New York University's Stern School of Business, said all peer-to-peer companies are challenged with making people relate to these new services.
"How mainstream is the sharing economy going to be? The answer to that depends on how fast -- and the extent to which -- these new consumer experiences become normal," Sundararajan said. He's long studied the "sharing economy," an economy built on peer-to-peer services, like ride sharing apps, or Airbnb and Task Rabbit.
He pointed to Uber as an example of a familiar service that helped consumers make the switch more smoothly. The company initially offered an on-demand private car service, which closely mimicked a taxi experience, before expanding into working with regular citizens who drove their own cars. Uber didn't start its version of the peer-to-peer service, UberX, untilin some cities.
Sidecar CEO Sunil Paul said the California guidelines ---- lent some legitimacy to ride-sharing apps and allowed Sidecar to push for a more aggressive expansion in the state. Sidecar says it's the first company to apply for the new Transportation Network Companies (TNC) license.
While companies will indeed have to keep advocating for lawmakers to change their minds, the real hurdle is convincing people that they can be a part of the sharing economy.
"One of the important things that it will take is simply delivery on this idea of peer-to-peer," Paul said. "Part of the promise of peer-to-peer is that the person providing the service for you, while they're providing that service they're not subservient to you. In order to get there, we'll have to lower the barriers to get on board, and we're going to have to make sure it's a great experience on both sides."
Paul said Sidecar tries to achieve this in several ways. Like many car-sharing services, there's a rating system for both passengers and drivers so that drivers don't get poorly behaved riders and vice versa. Users with poor ratings are banned. The company, like its competitors, provides extra insurance in case there is a traffic accident.
Without drivers signing up, a ride-sharing app is useless. To encourage drivers, Paul said the company tries to make it easy to become a driver. Even with a background check, on average, drivers are approved within 24 hours. The company recently introduced a "drop off" area filter for drivers, so they will only be notified of passengers who are going in the same direction as them. This is useful for drivers like Liao, who do routine commute and are casually looking for riders.
And then there are the monetary incentives. Paul said there are drivers who do Sidecar full time, earning between $50,000 to $70,000 a year. Lyft and Uber has similar stories. Liao, the San Francisco driver, said he believes it.
While Liao does not drive to make money, he says he could if he wanted to, especially since he lives in San Francisco. Liao started driving for Sidecar while going to graduate school in Los Angeles, and some of his friends living there will make the trip up north for the weekend just to drive Sidecar. He said they can make a couple thousand in a weekend in San Francisco since there are more app users in the tech-centric city than there are down south.
Outside the tech bubble
The San Francisco Bay Area, home to the Silicon Valley, is a hotbed for startups and technology, so it makes sense that ride-sharing apps do well in the area. Paul said Sidecar's drivers are slowly moving outward into the suburbs of the Bay Area by independently offering rides during their commutes. But, will these services succeed outside of Valley's sphere?
That's where the road could get bumpy. Although young tech people may be keen share their cars and rides, this mentality could change as they get older, have kids, and move to the suburbs. It's also a matter of where these suburbs are and how congested the area is. Ride sharing is more welcome in densely populated environments where there is limited parking and lots of traffic. Both Uber and Lyft have touted they have drivers available in the suburbs of LA and Orange County in Southern California.
"There's a market for [car-sharing apps], there certainly is. I'm sure it will do very well but it's not going to work everywhere," said Steve Szakaly, chief economist for the National Automotive Dealers Association (NADA). "There are going to be cities and places in middle America where it's just not going to be convenient."
While it's true people have been driving less in recent years, it's more likely from the recession and rising gas cost more than a cultural shift in attitude about driving. And that is changing, according to NADA. Since 2010, car sales have begun to creep up again (PDF).
Still, the ride-sharing movement has momentum. Companies already operate in several metropolitan areas across the US. They tout their services as eco-friendly alternatives, a message that resonates well with young professionals. While they won't disclose how many users they have, these apps have been downloaded thousands of times, andthat have become ambassadors for their services. Even if they can't get into every market, if the messaging is right, they could spread their rides to a good part of the country.