Juno, a ride-hailing start-up, wants to kill Uber with kindness
Apart from regularly interacting with its drivers, Juno CEO Talmon Marco is offering to take lower commissions and plans to distribute equity stakes in the company
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New York: Sixteen years before Talmon Marco set out to destroy what Uber Technologies Inc. chief executive officer Travis Kalanick created, the two men briefly considered teaming up to face a common foe: Napster Inc. Around 2,000, each was helping start a file-sharing company—Marco’s was called iMesh and Kalanick’s was Scour.com—and both were losing ground in the race to upend the music industry. A merger was proposed. A meeting was arranged.
The deal never came together. Marco said he barely remembers the encounter. “It might have been in California, but I’m not sure,” he said recently. “It was a long time ago.”
Kalanick also struggled to recall the details. The two men eventually connected on LinkedIn, but haven’t kept in touch. But Marco formed a pretty strong opinion about what Kalanick has been up to in the years since: “I do believe that, in its heart, Uber is truly evil,” he said.
Lots of people criticize Uber; fewer have the money to do something about it. In 2014, Marco sold Viber, an Israeli mobile messaging company he started, for $900 million. Suddenly he was a young, rich man with a lot of time on his hands. He moved to New York and set out to position himself as Uber’s less-evil twin.
Marco’s company is named Juno, after the Roman goddess, and he wants to be nearly identical to Uber with one difference: He will treat his workers better. For now, the company is only operating in New York, Uber’s biggest US market in terms of revenue (although not in terms of how many trips it provides). Taking on a company worth $69 billion that has raised over $16 billion is, depending on your perspective, either inspired or quixotic.
Uber’s relationship with its drivers has its problems. The company cut fares earlier this year, and is pushing drivers to participate in its carpooling service, UberPool, which they complain is a hit to their income. The company has been dogged by lawsuits over its classification of workers as contractors, not employees.
Juno is offering to take lower commissions and has a plan to distribute equity stakes in the company. Marco is also trying to just be nicer: He regularly responds personally when drivers contact the company to complain about disputes with passengers, and has invited some to meet with him to discuss their concerns.
What Marco hasn’t done, at least not yet, is hire Juno’s drivers as full-time employees. There are advantages to this arrangement—mostly that it gets management out of guaranteeing minimum wages or providing benefits—but loyalty is not among them. Drivers re-assess which app to use the minute their fare has stepped out onto the sidewalk.
Juno has had early success, although it is still a very small player compared with Uber and Lyft Inc., Uber’s biggest US competitor. According to the most recent data from the city’s Taxi and Limousine Commission, Juno went from non-existence in late February to having 8,300 drivers take 105,000 trips in the last full week of August. The company says it has continued to grow, and now has over 10,000 weekly drivers.
But Uber has added nearly as many drivers as Juno since Juno started, and has grown faster than Juno if measured by the number of rides per week. Nearly 35,000 drivers took at least one Uber ride the last week in August. Many drivers work for more than one company, and the average Juno driver takes about half as many rides per week as the average Lyft driver, and one-third the number of rides as an average Uber driver. In other words, drivers don’t appear to be abandoning Uber for Juno so much as they are layering a few Juno rides on top of their regular jobs.
Lyft and Uber have burned through billions of dollars competing for drivers across the globe. While Uber is profitable in New York, it lost over $100 million in the US in the second quarter of this year. If Juno wants to lure drivers by subsidizing their incomes, even in one city, it will bleed to death long before Uber does.
Juno’s challenge is to build an alternative economic model that is sustainable and also attractive to drivers. One idea is to give drivers equity, a proposition with its weakness both legally and, based on conversations with drivers, as a recruitment tool. Another approach is to provide more income stability than Uber. Marco said Juno will eventually offer full-time employment to drivers who want it, although he’s not sure when.
Other Uber critics are unimpressed with the company’s big talk. Chris Townsend is the Amalgamated Transit Union’s director of field mobilization, and is currently trying to unionize Uber drivers. He said he welcomes companies like Juno, because anything that cuts into Uber’s hold on the market is good. But until it breaks away from Uber’s model of classifying drivers as independent contractors, Townsend said Juno will end up in the same place. “It’s trying to gild a lily that can’t be gilded,” he said.
Juno’s office is an awfully opulent home for a heavy underdog. The company operates out of the 84th storey of New York’s tallest building, One World Trade Center. It might as well be the set for a movie starring Lex Luthor, although if Marco were cast in that role you’d probably put him in a suit instead of jeans and a short-sleeved Prada T-shirt. “I’ll tell you that we’re definitely losing money right now,” he said, glancing around the room. “It’s easy to figure out.”
Juno has built its business directly on top of the competition. It decides who is qualified to become a Juno driver using Uber and Lyft’s rating scales. New drivers need to have taken a minimum of 100 fares for either company, and maintained a high rating. It doesn’t conduct any additional screening, relying instead on the Taxi & Limousine Commission’s (TMC) licensing process.
Noah Forman, 35, began driving a cab in college, and started with Uber earlier this year. When he went to sign up to drive for Juno, he had to prove he was qualified. “The person who interviewed me just looked at my phone and said, ‘Can you show me your Uber rating?” he said.
This kind of piggy-backing is rarely found in other industries, said Melissa Schilling, a professor of management at New York University’s business school. “Uber spends all the money recruiting the drivers and educating the market, and as a result, later movers can come in at lower cost,” she said. “Furthermore, you can successfully enter as a small player because the drivers are having their employment needs topped off by Uber.”
Juno gets drivers in the door by offering to take only a 10% commission on fares it facilitates, compared to about 25% for Uber. This is a temporary deal. Marco said the company will re-assess its commission structure on 1 April, 2018. Presumably, Juno’s commissions will migrate towards those of its competitors. It is also offering heavy discounts to passengers, which will likely fade over time.
Uber, which is doing about 75% more rides per week than it was a year ago, seems unconcerned by Juno. “There is a lot of competition for drivers right now, which is great for them and which we view as an opportunity,” said Matt Wing, a spokesman for the company.
Forman, the 35-year-old driver, said he couldn’t consider abandoning Uber unless Juno can bring more riders on board. “I wouldn’t feel comfortable driving around just with Juno,” he said. “It’s very iffy.” If that changes, he said, he’d happily phase Uber out of his working routine.
Foreman is unenthusiastic about the restricted stock units that Juno is distributing. Interviews with a dozen professional drivers revealed similar ambivalence. They viewed the restricted stock units (RSUs) as either a nice symbolic gesture, a fantasy, or some kind of sham. Only drivers who drive for a minimum of 30 hours per week for 24 of 30 months will qualify to have their RSUs converted into stock (although currently time driving for other services counts), and Juno has to either go public or get acquired within seven years from the time the RSUs are issued for them to be worth real money.
There are also questions about whether Juno can legally pass out RSUs to independent contractors. According to the contract being distributed to drivers, they’re on the hook if the Internal Revenue Service (IRS) decides down the line that the RSUs are taxable, and they get nothing if any government body decides the idea is unworkable.
Marco has heard skepticism from drivers. “Well, it’s not cash in hand, right?” he said. “It’s a dream.”
Juno isn’t the first ride-sharing company to describe itself to drivers as a friendly co-conspirator. In the idealistic vision of the sharing economy peddled by many companies over the last several years, driving strangers around, cleaning their houses, or letting them crash on the couch would provide an emotional benefit as well as a financial one. In ride-sharing, Lyft leaned particularly heavily on this image, asking its drivers to adorn their cars with goofy pink moustaches, and to greet passengers—who sat in the front seat—with fist-bumps.
That vision faded. As Lyft has struggled to catch up with ever dominant Uber, the passenger experience has become increasingly similar. For Marco, this is a cautionary tale. “I don’t think Lyft necessarily went to the dark side,” he said. “Lyft couldn’t figure out a way to build the business on top of the concept of being a good social player. So they resorted to the default.”
Alexandra LaManna, a spokeswoman for Lyft, disputes this narrative. She said the company has incorporated tips into its app, unlike Uber, and gives them more options about how they get paid. “For Lyft, treating drivers better has always been a principle, not just a business strategy,” she said. The company notes that it refunds its commissions for its most prolific drivers, making full-time work with Lyft a better deal than a 10% commission.
Of course, making a play to be the company that treats drivers better is entirely meaningless in a future without drivers. Uber has invested considerable resources in planning for this next phase. Brishen Rogers, an associate professor law at Temple who has studied Uber, thinks there will be a firm line drawn between companies with the data and competence needed to run fleets of robot taxis, and those without. “It’s a form of monopoly power that is going to become more and more important, and can have negative social effects in the long run,” he said.
Marco said he isn’t worried about any of this. He ridicules Kalanick’s fixation on autonomous vehicles, which currently require several humans to be present. “I don’t know if the objective of their self-driving cars is to self-drive or to deliver PR,” he said.
Juno won’t need to build its own cars any more than it manufactures its own smartphones. By the time automation has become a reality, he said, the company will have significant traction in the form of technology and a rider base. What it won’t have is a fleet of drivers, although some of those who love their jobs will get a severance in the form of their equity stakes.
A stark, robotic future isn’t something that Dhruv Kumar worries about. Every morning he drives to the border of Queens from his home on Long Island, pulls over, and turns on Uber, Juno, and Gett, another ride sharing app. He takes a ride from whatever service finds him a fare the quickest.
Kumar would prefer to drive for Juno, because he likes the lower commissions and thinks the RSUs are a nice gesture, but often ends up using Uber because it keeps him busier. He can’t fathom a future where the couple hundred RSUs he’s amassed become anything more than a fantasy. “I don’t know whether they’re going to be sustainable,” he said of Juno. “But to me it’s not a long-term goal to drive people from Manhattan around, so it doesn’t matter.” Bloomberg