New York’s newest ride-hail app is feeding off drivers’ desperation

New York’s newest ride-hail app is everything drivers have ever wanted: A partner, a good listener and — just maybe — a steady stream of cash. But it’s unclear how long the founders will be able to sustain this uber-driver-friendly service.

Juno, which has yet to set its official launch date, may still be in beta mode but has already amassed 9,000 drivers since May, according to the company. Now, drivers are aggressively recruiting riders they come across while operating on Uber and Lyft’s platforms.

On two occasions in the last week, an Uber and then a Lyft driver asked me to sign up for the service. A coworker who is just in town for a week also came across an Uber driver-turned-Juno-recruiter. Their spiel was simple: Juno is better for drivers because the company only takes 10 percent commission (compared to Uber and Lyft which take more than 25 percent); the company actually listens to their suggestions and concerns all while offering riders cheaper fares. It’s a win-win-win.

Side-by-side comparisons of rides on Juno, Uber and Lyft verify the claim that the fares are cheaper. One ride from Recode’s office in midtown New York to Brooklyn Heights, for example, was estimated to be between $14 and $17 on Juno, while on Uber and Lyft the ride was estimated to cost between $19 and $29. The company also claims hundreds of drivers come into their offices every day, and it engages frequently with drivers on online forums like Uberpeople.net.

But before even officially launching, Juno has poured considerable resources into its operations. For one, drivers receive $15 the first time any person they referred to the app takes a ride on Juno. It’s a smart tactic and is likely why drivers are being so forward about referring riders. Drivers were also being paid $50 a week simply to be on the app before there were any riders.

On top of that, the company has reserved one billion of the company’s shares for drivers and plans to issue 25 million shares per quarter depending on how much each person drives for Juno. The company, founded by Viber co-founder Talmon Marco who sold the company to Rakuten for $900 million, has also nabbed 10,000 square feet of office space on the 84th floor of One World Trade Center, where Marco is paying at least $750,000 for a year-long lease.

Add to that the $50 a week Juno was paying its thousands of drivers, which let’s say on the low end is 5,000, to simply be on the app. If we account for just one week of the driver promotion and an approximation of the lease alone, Juno has shelled out (or at least is contracted to shell out) at least $1 million before even launching. That’s being conservative. Since the company launched in beta in May, at the very least the promotion has been running for four weeks. With 5,000 drivers the company would have paid out $1 million in just driver promotions.

One Uber driver who has been using Juno said he hasn’t had a single request yet. Even so, all rides are currently 35 percent off. So with the few rides Juno drivers may be performing pre-launch, the company is making 35 percent less than the standard fare on each and will only be taking a 10 percent cut of that. On a $17 ride, which Juno estimates would typically be between $21 and $25, the company is only making $1.70.

At launch, the company will have to make at least $1 million (and that’s without counting the rider referral bonuses, the costs of things like the phones and swag Juno has given out and other operating costs) to break even.

But drivers we spoke to are convinced Juno is the answer to their frustrations of working with Uber and Lyft. Drivers are clinging to any signs of being heard, getting to keep more of their money and being treated as actual partners. To Juno’s credit, treating drivers better is built into the app: For one, drivers can rate and ask never to be matched again with a specific rider.

That motivation to treat drivers better was, at least in part, financially fueled. In an interview with Vanity Fair, Marco said after speaking with drivers he saw that the driver-friendly angle was the only way into the ride-hail industry. But what if it stops being financially viable?

I asked drivers if they thought what Juno was doing was sustainable and their answer was that the company really cares so they’ll keep treating the drivers well. Even in mentioning that Uber and Lyft, too, launched in New York with higher fares and met with many of the first New York drivers, drivers were unfazed. Juno was better, they were convinced, and this will last.

Of course, there’s still the very real possibility Juno will be able to continue being the driver-friendly app. According to unconfirmed reports, the company is in the middle of raising a $30 million round of funding which would certainly bolster its efforts to pour resources into driver and rider recruitment. The company also said they have 23,000 customers waiting to sign up for the service.

But at this spend rate and with these low margins, it seems unlikely the company will be able to sustain its operations. Eventually, it may have to either raise commissions or raise fares. Raising commissions might hurt the company’s driver retention but raising fares means they might lose their riders and take a hit to their revenue. Not to mention, both Uber and Lyft are relentless and at times merciless opponents. Remember Sidecar?

This article originally appeared on Recode.net.

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