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If you don’t live in New York City, you probably haven’t heard of Juno. It’s the city’s newest ride-hail service, and just a matter of months after launching its beta program in May, Juno now performs 20,000 rides a day. By September, the company had performed a million rides.
That’s no small feat for a company that has been operating for six months in one of the toughest ride-hail markets in the country and has yet to formally advertise its service. As a point of reference, Lyft — which has been in New York for a little over two years — performed about 40,000 rides a day as of September.
The key, according to Juno CEO Talmon Marco, is appealing to drivers by giving them 90 percent of each fare and offering equity in the company.
But Juno, a late entrant into the ride-hail industry, is also beginning to build its business at a time when players in both the auto and tech worlds increasingly have their sights set on the next frontier: Getting self-driving cars on the road. That’s why the company expects to begin looking at how to incorporate self-driving technology, which makes sense if a ride-hailing business wants to stay relevant.
Marco says the company will likely begin to make the initial push into the self-driving arena within five years.
“I think everybody in this industry is going toward self-driving,” Marco said.
But how does a company hitching its wagon to treating drivers better attempt to replace them with robots? According to Marco, by giving them a stake in the company’s success.
“The only difference between Juno and everyone else is, because of our equity structure, drivers will become shareholders of the future enterprise,” he said. “We will not drop the drivers.”
Drivers’ shares depend on how much they earn. Every quarter, Juno releases 25 million shares of restricted stock units that are prorated based on the earnings of each driver.
Marco, who sold Viber to Rakuten for $900 million in 2014, is operating the company on the theory that treating drivers well (both economically and interpersonally) is the best and arguably the more sustainable way to grow his business. That’s why the company only takes a 10 percent cut of drivers’ earnings (compared to Uber and Lyft, which take 25 percent to 30 percent) and has reserved one billion of its shares for the drivers.
How is that more economical?
“We’ll find it easier to attract drivers, which is going to reduce our driver acquisition costs, and drivers are going to have much better retention,” Marco told Recode. “They will be motivated to attract riders, and then riders will have a better experience, which will motivate them to tell their friends.”
“The more you earn, the more value you offer the company,” he said. “So what you’re getting paid has a direct correlation to what you bring, so you get more equity.”
Drivers have been flocking to the company. As I reported earlier, while on either an Uber or Lyft trip, colleagues and I were approached by a number of drivers who were advertising the service.
On the rider side, at least initially, it was an easy sell: All trips were 35 percent off. But given the low commission Juno gets from each ride, as I mentioned in my earlier story, it’s unlikely the company will be able to sustain that level of subsidy.
It’s a battle ride-hail companies around the world are fighting: How to build a sustainable business while also attracting riders and drivers away from the competitors through subsidies. But once embroiled in subsidy wars, it’s difficult to pull away, because both riders and drivers typically use the service with better fares. That’s why Uber ultimately pulled out of China.
So in September, Juno brought that discount down to 20 percent. Marco said it’s likely that the discounts will gradually go away. But he is heartened by how few riders stopped using the service after the company dropped the discount.
“There’s no doubt that discounts or any kind of promotions will help you attract people into the service,” he said. “There’s always going to be a drop. But it was very small.”
There’s still a lot to do before Juno begins exploring its role in the self-driving ecosystem. Marco aims to expand into most major markets in North America and expects to raise more capital.
Juno would not comment on how much funding the company has raised.
While playing nice may not seem like much of a strategy for competing against Uber, the company has a singular advantage: Juno gets to learn from Uber’s mistakes.
“I think we are innovating on top of [Uber],” he said. “I doubt we could’ve done it if it weren’t for Uber. We didn’t have to pitch to people to become a driver, that pitch has been made by Uber. We don’t have to figure out who the good drivers are, we just use Uber’s ratings. But there’s room for Uber, and Lyft, and us and maybe others. And I think we have the right angle.”
This article originally appeared on Recode.net.
