Aleksey Lazorenko: Ridesharing Marketplaces and the Future of BlaBlaCar in Ukraine

The person to talk about ridesharing marketplaces format is Aleksey Lazorenko, the founder of the company Podorozhniki and the head of BlaBlaCar in Russia and Ukraine. The expert shares his experience of creating a startup company in Ukraine, speaks about merging the companies and explains the prospects for the business.

The leader of European ridesharing, BlaBlaCar, joined Ukrainian market in February 2014, when the company bought a successful Ukrainian startup Podorozhniki. The business had been launched 2 years earlier by Aleksey Lazorenko and his team.

There were 3 people working on Podorozhniki: Aleksey was managing the business and his colleagues were designing and developing the website. After the merge, Aleksey became the Head of BlaBlaCar service in Ukraine and Russia.

BlaBlaCar is the main ridesharing service in Europe. The company is operating in 22 countries with the Head Office in Paris and is the main travel companions community. In 2014 it was launched in Ukraine.  

Podorozhniki was a Ukrainian startup, founded in 2012. The platform gathered drivers and passengers travelling to the same destinations. In 2014 the business was bought by the French company BlaBlaCar.

The starting point of the ridesharing in Ukraine: Podorozhniki startup

The idea came very simply. I was going to work, driving an empty car, I got stuck in a traffic jam and spotted a group of people at the bus station. I had 3 empty seats and could pick someone up, but I realised that my offer won’t seem appropriate to others. That’s when I realised that there was no marketplace where one could share the information about the itinerary, pick up fellow travellers, and by doing this, add a bunch of benefits to the society, to the transport infrastructure, to the environment and to their own wallet.  

It took us 3 months to create the MVP, considering that we developed it at night time, without breaking from our main day-to-day jobs. The team was aiming to create a new niche by introducing a unique selling proposition to the market.

We realised that we were providing people with an opportunity to save money, and that became our main message. Our indirect competitors were other players on the transportation market, such as railway and bus services. We analysed them to understand the volume of the passenger traffic in the country: what would happen if we won 1% of the market, or 2%, how much money we were going to get. I learned by heart almost all the public stats in Ukraine and Russia. The analysis of different types of passenger transport made it clear there was the potential for our business.

I hadn’t even heard the word startup at the time we started. We had an almost impossible task for a team without resources  to create enough supply and demand on the vast territory, considering that the offer (the ride) had a short shelf life.

The best practice for us to gather the critical mass was to partner with big music festivals (Kazantip, Nashestvie, Global Gathering, Jazz Koktebel etc.)

We strengthened festivals as we allowed the participants to save on their travels and, therefore, to have more money to spend during the event itself. In addition to that, they could get to the place in a company of like-minded people. The value we got from the festivals for free was their massive communication capabilities.

BlaBlaCar map

Business models for the ridesharing service: search for the most suitable idea.

Back to the time we were launching Podorozhniki there were tens of ideas regarding the business model (the paid subscription, paid text messages that allowed users to change the status of the journey, the top advertising, etc.). Eventually, we chose the fairest one, in our opinion. We decided to add a fee for booking the seat. It hadn’t been implemented yet.  

At the same time, the company had an opportunity to try a B2B model.

There was a model that we haven’t considered initially. The corporate sector got interested in our service. We worked with Ciclum in Ukraine and with KROK in Russia. Those big organisations reached out to us, ready to pay for the corporate ridesharing solution.

Partnerships became our second business model. When merging with BlaBlaCar, however, we made a decision to stop working with the corporate sector. In fact, BlaBlaCar itself, before becoming a C2C (P2P) service, tested and abandoned around 7 different business models, including the corporate one, and decided to stick to the booking fee. There is a progressive scale designed to calculate the fee, which includes various factors, such as the cost of the ride and the distance. The total commission is about 12-20%

BlaBlaCar business models

Podorozniki and BlaBlaCar went through a similar process of searching for the right business model. At the start nobody took the idea seriously in Ukraine, the same situation was with BalBlaCar in Europe. When BlaBlaCar was looking for the first investments, everyone was saying that even if we had 100,000 people, that would be a massive success. Today we have almost 40 millions of customers and we grow faster and faster every year.

The traffic heavily depends on the maturity of the service on the particular market. During the first months, we mostly receive it from SEO, contextual advertising, SMM, partnerships and other classic marketing channels. We are integrated into almost every A-to-B service (e.g. online travel agencies and metasearch engines), like Rome2rio, kelbillet.com, goeuro.com, Tickets.ua, Yandex.Schedules, Marshruty.ru, etc. These are the websites with the relevant content and the high clickability (CTR), visited by millions of users on a daily basis.

We increase the value of these services by offering an alternative way for passengers to get to their destinations. From partners’ side, we receive high-quality users, which we are relevant for. Apart from that, we continue partnering with events. It’s worth mentioning that BlaBlaCar has a high virality — as soon as there is a critical mass of supply and demand, the organic growth immediately starts to beat the paid sources traffic.

How and when BlaBlaCar is monetized in different countries

BlaBlaCar has around 500 employees. The Head Office in Paris is dealing with planning and development, whilst in every one of the other 22 countries, there is a local team and the manager, responsible for their own region. Today BlaBlaCar is a truly global service: it can be used in the whole Europe, Turkey, India, Brazil, Mexico, Ukraine and Russia. Europe up to Poland and Russia are already monetized, in the rest of the countries we are not charging the booking fee yet.  

Which basic metrics we are looking at in the countries, where we are not yet monetized:

  • The cost of attraction of an active driver;
  • The cost of attraction of an active passenger;
  • Gross Merchandise Volume.

What else we calculate in the countries, where the service is monetized:

  • LTD (Lifetime to Date) — we compare the cost of attracting a customer and the profit we get from them over a specific period of time;
  • Retention rate — the ability to keep customers;
  • FUR (Fill up rate) — the ability to fill up the vehicles.

When the market is formed, when you have a sufficient marketplace, which is alive, working and organically growing, then you can think about monetization. This question is relevant for Ukraine at the moment, although it’s not on the agenda yet. In 2016 we started monetization process in Russia, where the market was already tremendous. More than half of registrations there are organic ones at the moment. In Ukraine we are getting close to such indicators.

On average, monetisation of a country comes in 1,5-3 years. It is important that people realise that they are getting a quite specific tangible value that can be measured. It is very important for people to understand what they will pay for.

In addition to the liquidity of the market, there are the internal processes related to the preparation for monetization. It is not that easy to start the process in the country a year earlier, even if it is already possible in terms of market readiness. It is important to choose the right partners, to integrate the payment instruments, to set everything up and test 10 times, to develop a proper communication strategy, to prepare the support process, etc. All of it takes time and the team effort.

BlaBlaCar metrics

To start the monetization, we analyse the performance of the marketplace and the situation in the country.

Indicators of the site in the country:

  1. The ratio between the number of registered and active users and a total population of the country;
  2. The depth of penetration;
  3. The formed liquidity on key routes, supply and demand balance - whether the drivers successfully find the co-travellers;
  4. The amount of liquid routes within the country on our service;
  5. the number of proposals for the popular destinations (for instance, in France it is Paris/Lyon, in Russia — Moscow/St. Petersburg, in Ukraine — Kyiv/Odessa, etc.). There is no number X, that has to be achieved. We compare our passengers traffic with the alternative means of transport. For example, on this route we have 400 proposals for the upcoming days (2-3 free spaces in each car), and therefore, we can bring about 1,000 passengers to their final destination. To transport that many people by train, you need around 30 compartment carriages.

Factors of market readiness for monetization:

  • The sufficient liquidity and depth of penetration,
  • The availability of online payment services,
  • The willingness of people to pay online,
  • The absence of legal obstacles.

Improving BlaBlaCar marketplace conversion

We are working on improving the conversion within 3 directions:

  1. Conversion from advertising platforms — the most relevant advertising (banner ads, referral links from partners, media product placement) with the right targeting.
  2. Landings conversion — users click on the ads and get to the landing page. They are different for different channels. There are landings for drivers, for passengers, general ones and specific pages for partners.
  3. Conversion within the marketplace: publishing a trip, finding a trip, the contact between a passenger and a driver through the messaging system, bookings, writing reviews — at every step, we are trying to continuously optimise the conversion.

Let me give you an example. The drivers had an option — to confirm the reservation automatically or manually. With the automatic confirmation, they received more passengers, as they reacted faster and fellow travellers didn’t have to look for a different car.

Therefore, we wanted more drivers to choose the automatic option.

This is what the booking screen looked like:

BlaBlaCar offer a ride window

We assumed that drivers only glanced at the window without delving into the details of the message, therefore they didn’t have a clear understanding of the choice they were offered to make.

To make it simpler for them, we decided to rephrase the question so that it required a Yes/No answer. This is how it works at the moment:

BlaBlaCar offer a ride new window

The A/B test had shown that 37% more drivers started to choose the automatic booking confirmation.

Desktop vs. mobile versions

Regarding the conversion optimisation, I’d like to add that we are now focusing on mobile users. In most of the countries, the mobile version of the service is dominating on the market (the major part of registrations, published routes and travel bookings come through the mobile app). We predict that in a few years time, 80% conversion will be from mobile devices.

There are some nuances to that. For instance, in India, there are a lot of smartphones which, however, have little memory. At the start, we had to make a light version of the app for that market. There is another example: in the central part of Russia, the audience is more mobile-friendly than in Moscow and St.Petersburg. It may be the case because it is cheaper to buy a phone, than a laptop or a PC, but it is an assumption. In Ukraine, with the advent of 3G internet, the mobile audience began to dominate too. Before the 3G the part of desktop users was more than 80%.

BlaBlaCar and the potential of the ridesharing

Governments around the world react to ridesharing in different ways: either they don’t and so we work within the existing legal field, or our activity gets legalised, as it happened, for example, in France. Besides the legal issues, there is a question of technology.

The Internet, social networks, smart phones, mapping and navigation services — all of this helps us to match the drivers and passengers more accurately and on a bigger scale. In the future, this type of matching will improve further, to the point of comparing the psychological portraits. Thus, travel companions will get an exclusively positive experience of joint travel from door to door.

Despite the fact that ridesharing is growing exponentially, it is clear that today it is far from being a dominant form of long-distance travelling. The potential for a quantitative, and as a consequence, a qualitative growth, is still huge.

Certainly, sooner or later, strong direct competitors will appear on the market. Whether it will be Uber, or Google, or Facebook, which also mentioned ridesharing ideas. What is the point of being afraid of it? We must simply be ready to face the competition by growing and improving every day.

Header photo: SergeyNivens / depositphotos.com

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