P2P Ridesharing Services Are Booming

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Ride sharing, which has created a new, affordable and social way to travel, underscores the growing trend in consumers’ willingness to share goods and services for a fee. Such services are made possible via the modern-day equivalent of credit scores: on-line reputation ratings given via various social networks that encourage people to trust and do business with those they don’t know. In Europe, the services are proving especially popular with people in their 20s — not just students but first-time earners on tight budgets. BlaBlaCar’s service, which has more than three million registered users, is among the fastest expanding in Europe.

When Julia F., a 28-old PhD student studying in Hamburg, recently set out to visit her grandfather in southern Germany, she opted not to take a train. Instead, she decided to drive her own car and offset the price of gas by giving a ride to a stranger she connected with via BlaBlaCar, a pan-European ride-sharing service. It wasn’t the first time she used the service and it won’t be the last.

Her reasoning? “It is cheaper, it allows me to take more luggage and be more spontaneous about when I leave and it makes absolute sense to share the costs, it is silly not to,” says Julia, who asked that her last name not be used. “I’ve discovered that many people want to take the same route on the same day and offering the free space you have is very easy. Besides,” she adds, “it is fun meeting new people.”

Julia filters queries from prospective travelers by checking out their Facebook profiles and by talking to them on the telephone. And, to ensure her safety, she only give rides to other women. She is one of millions of Europeans who are taking advantage of P2P ride-sharing services that connect drivers with empty seats to paying passengers.

Ride sharing, which has created a new, affordable and social way to travel, underscores the growing trend in consumers’ willingness to share goods and services for a fee. Such services are made possible via the modern-day equivalent of credit scores: on-line reputation ratings given via various social networks that encourage people to trust and do business with those they don’t know.

In Europe, the services are proving especially popular with people in their 20s — not just students but first-time earners on tight budgets. BlaBlaCar’s service, which has more than three million registered users, is among the fastest expanding in Europe. The web and mobile platforms are engineered to create a trust-based community using ratings. The site even allows you to decide how chatty you want your driver or passenger to be. Members specify how talkative they are on the scale of “bla,” “blabla,” and “blablabla,” hence the name BlaBlaCar.

BlaBlaCar was born in France when Frédéric Mazzella, a student at Stanford, wanted to get home to his family in La Rochelle for Christmas. He had no car and the trains were full. Meanwhile, the roads were full of people driving in his direction, many alone in their cars. He wanted to try to find one of the drivers going his way and offer to share the cost of gas in exchange for use of an empty seat, but there was no way to reach out. Mazzella created a site to do just that and the community began to grow organically. He then met co-founder and engineer Francis Nappez. After completing his MBA, Mazzella worked on a plan with fellow student Nicolas Brusson, the third co-founder, to finance and scale the business in Europe.

The three raised €600,000 in angel funding to prove the model in France, followed by €1.25 million from France’s seed investor ISAI; they then closed a $10 million round from Accel Partners and France’s ISAI in January 2012 for European expansion. BlaBlaCar now operates in 11 European countries, including France, Germany, UK, Spain, Italy, Poland and Benelux.

“The vision is to build an alternative pan-European transport network,” Brusson, a scheduled speaker at Le Web London 2013, said in an interview with Informilo.

BlaBlaCar doesn’t have the market to itself. Munich-based carpooling.com, which has raised funding from EarlyBird Venture Capital, connects drivers and paying passengers in over 40 countries. The company says its services have resulted in thousands of friendships and 16 weddings. Since its launch 10 years ago as a student project 40 million rides have been shared. Two million users are served every month and each day the site offers access to 750,000 rides. In 2012 the company raised a Series C round from Daimler to expand into the U.S.

To date, ride-sharing services are proving more popular in Europe than in America, for economic, geographical and cultural reasons, says BlaBlaCar’s Brusson. Gas prices are not as high in the U.S., giving drivers less incentive to take on strangers as passengers. It is also easier to do the first and last mile with public transport in Europe, making it practical to tell someone that they will pick them up and drop them off at train stations in different cities, for example. “It is one thing to connect cities but for this to work efficiently we need the cities to have strong public transport,” he says. Safety is another issue. Americans tend to be more nervous about sharing rides than Europeans.

That said, U.S. ride-sharing services are starting to attract serious venture capital. In May, U.S. ride-sharing service Lyst (formerly known as Zimride), which allows customers to book rides from a network of screened drivers and pay via a smartphone app, raised $60 million in venture capital from Andreessen Horowitz. A similar P2P ride-sharing service, called Sidecar, is backed by investors that include Lightspeed Venture Partners and Google Ventures. Uber, a Benchmark Capital-backed competitor which makes efficient use of idle town cars in direct competition with taxis, operates in cities across the U.S. as well as overseas. The service has met with legal challenges in New York City and elsewhere.

In the case of BlaBlaCar, drivers don’t make a profit; they just offset their costs, so they are not considered traditional taxi drivers, avoiding insurance and legal problems, says Brusson.

U.S. competitors who try to come to Europe will find it hard to replicate the kind of pan-European services that BlaBlaCar has already built. “By the time most European companies go international it is too late,” says Brusson. “We decided to go very early into different European countries — adding a local team each time — before proving the business model, something very few players do.”

The strategy appears to be paying off. “A year ago we had a community of 1.5 million people,” says Brusson. “Now we are over three million and are still growing. We are transporting a half a million people per month. Eurostar transports 900,000 monthly. If we keep growing at this rate we will be transporting more people than Eurostar by 2014.”

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