Back at Halloween time, I became a convert to Hailo, an app that connects taxi drivers and people looking for cabs via smartphone GPS. Ever since, I’ve been taking more taxis than ever before, simply because the app is so slick, convenient and easy to use.
The company behind the app was started just 18 months ago in London by a sextet of founders: three cabbies and three financiers and tech experts. Hailo has been growing explosively since then, first expanding to Dublin and then Toronto as its first North American city on Sept. 26, with Boston and Chicago following soon thereafter.
Ahead of New Year’s Eve, the busiest night of the year for taxis, I sat down with Toronto president Justin Raymond to find out more about the company’s impressive growth. Here’s an edited version of our conversation:
How did Hailo choose the cities it did?
They’re big cab markets. They look at the regulatory environment as well to see if there’s an opening for us to get in. We don’t like to barge in and not be licensed, we like to work with the regulator to help the city create a better transportation matrix. Toronto is an amazingly sophisticated town, it has a number of different transportation options, but it when it comes to taxis it’s antiquated. It’s ripe for change, which is the reason why it was the first foray into North America. It also comes down to having access to the right people.
So you have to have a pool of technically competent people to make it work?
The way we go to market is to find three cab drivers in each city–influential thought leaders in the taxi cab space because, as much as I wish that I’d be a great taxi recruiter, I’ll never be as good as a cabbie. I don’t speak cabbie and they do. They have mutual respect for each other and they listen to each other.
How did you get involved with this?
I was approached by Jay [Bregman, co-founder and chief executive]. I’ve started other companies that have touched on the taxi industry in Canada. I started TaxiGuy, which is a national network of 400 cab companies that was really cool 15 years ago because they were linked together through a toll-free phone number and now it’s moved to an app system. I also started #Taxi [through CellWand], which is on 250 million cellphones right now.
How do the regulations work?
Anybody who dispatches or connects a passenger and a taxi through any means in Toronto has to be licensed. There’s no room for interpretation. I went and sat down with the regulators and said, ‘This is what I want to do, what do I need to do to make it official?’ So I jumped through the hoops. The existing system is focused on the vehicle or the plate, whereas Hailo is focused on the drivers, so it basically turns the industry on its head because you focus on the independent contractors who bring the value. You don’t have to worry about all of the other issues with plates and garages and maintenance and all the other things that come with the old standards.
How does Hailo make money?
It’s a pay-as-you-go model, which is also unique. We take 15% commission [on each fare] and inside of that, we guarantee that all credit cards are accepted and we pay for all of the back-end of the transaction costs.
And that commission is lower than what traditional dispatchers charge?
Our model is working directly with drivers. So we send you a job through your phone, you take the job and take 85% of the total, we take 15%. Drivers on the other model go and pick up their car every day at a garage and they have to pay a weekly fee up front for either the day shift of the night shift. They pay between $550 and $700 for that weekly shift and for the opportunity to work themselves out of that hole over the course of the week. On top of that, they also pay 7%-10% on credit card charges that they process, they have to pay for the terminal rental and 7%-10% on any corporate charge accounts that they accept.
The garages end up paying the brokerages for the terminals that are in the cars, the radios and computers. When you net it all out at the end of the day, between 35%-40% of all the money [drivers] make goes to pay for all those services.
Do you have corporate-owned taxis? I’ve seen some with your branding plastered on them.
Those vehicles are operated by Ambassador drivers. There are about 1,500 Ambassador plates issued by the city, which is one car, one driver. They’re more often than not seasoned drivers who have been around for a long time and they have control decisions over that car. A lot of the guys in the Ambassador program work with Hailo and are enthusiasts and they let us wrap their cars as an advertisement.
You seem to have rubbed some traditional taxi companies the wrong way. How do you view this issue?
They just don’t really know how to react. We came to the market pretty fast and have grown our driver network very quickly. The old incumbents don’t really want to admit or recognize that drivers aren’t necessarily as happy as they think they are. The drivers are open minded to a new way of doing things, which is the foundation of innovation. If you can bring a model that is efficient, that creates no losers, it’s going to be successful, especially when it comes down to this industry, where drivers just want to be treated fairly. Our model is resoundingly being accepted as being fair to the drivers, to the company and to the passengers. I think it’s a period of adjustment for [traditional companies] and it’s interesting to see how it’s being accepted.
How are you positioned for growth?
London just celebrated its first anniversary and when they launched, they started with 600 taxi drivers. One year later, they had just under 10,000. Hailo is doing a job every seven seconds around the world. It’s amazing growth with amazing uptake and markets around the world are clamouring for it. The roadmap is already built for 2013. We’re launching in Madrid, Barcelona, Tokyo, Washington D.C. and New York City will be a big one. We’re also going to test some smaller satellite markets to see if it can be self-fulfilling.
Anywhere else in Canada?
Yeah, we’re doing the research now and are looking at several markets: Vancouver, Calgary, Ottawa, Montreal and some satellite communities as well, like the entire Greater Toronto Area.
What sorts of numbers are you seeing for Toronto?
We have over 600 drivers now that have the app and are trained and are actively using the system. We have over 30,000 downloads [on the user side]. The real indicator of growth is that word of mouth is really happening, people are becoming advocates of our system. Drivers love it, they love coming here and they feel welcome, like they belong. Technology can’t do anything unless you have the supply side.
There’s 11,000 licensed taxi drivers in Toronto, but a lot of guys use it as their secondary source of income. In reality, there’s probably about 8,000 or 9,000 who are really making it their primary source of income. Smartphone penetration among drivers is pretty low. There’s the smartphone chasm where drivers have to get across in order to join Hailo. We don’t believe in providing them with a smartphone because that’s not a sustainable business model and we want them to put a bit of skin into the game. I think by this time next year, I wouldn’t be surprised if we had 2,000 drivers.
What’s your estimate on smartphone penetration among drivers?
From our research, I’d say it’s about 20%-30%.
Will traditional taxi companies have to try to out-innovate Hailo in order to stay in the game?
They [Beck] have an app. It’s a different system and it doesn’t do everything that ours does, but they are attempting to innovate. This is going to be a pretty intense competitive environment.
One of the things that drivers love about our app is that distribution of work is fair, it’s not based on picking and choosing, it’s based on GPS proximity. Some of the old traditional brokerages have been accused of playing favourites, like sending the good airport jobs to their friends and holding back opportunities for others. With Hailo, it’s the closest taxi gets the job first. They have 20 seconds to accept the job [after which it goes to the next closest].
You recently announced a deal with Molson Coors. How is that working?
We’re underwriting the $1 million [in fare discounts] and what Molson’s is doing is putting the actual promotional cards into licensed establishments around Toronto. Those people there get trained in the app and they distribute the cards. It’s a promotional code so you just go into your profile on the app and punch it in and you have $10 instantly come off your next ride.
How do you think this sort of thing is going to fit in with robot cars, which are now street legal in several U.S. states?
We talk about that and it’s fascinating. I love all of the environmental benefits that come with it… but do we see ourselves becoming part of that? It’d be interesting to be part of a test, but the fundamental part of Hailo is actually the drivers. So if you replace the drivers with someone with no personality, you’re sort of taking away from the overall experience.
But it’s funny because with the advent of systems like Hailo, you start to see what’s possible. We’ve taken all of the human error element out of it. It’s not like eliminating jobs is a priority but creating efficiencies is, and sometimes that’s just the reality of business.