Business in digital economy. Blablacar PDF

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BUSINESS IN DIGITAL ECONOMY

Marta Beatriz Enrique Guillén

COMPANY OVERVIEW

Blablacar is a French car-sharing service that makes it possible for people who want to travel to the same city at the same time to organize a travel together. It allows to share the specific expenses of the trip (fuel) and to avoid the extra emission of greenhouse gases, by allowing greater energy efficiency in the use of each vehicle. Essentially, BlaBlaCar is a marketplace that connects riders with empty seats with passengers looking for inexpensive travel especially at the last minute. It is like the Ryanair of Road. The objective is car sharing easily, efficiently and reliably with the goal of sharing costs with travellers. Blablacar aims to position itself as a leading company in the sector (car sharing), guaranteeing traveller confidence by improving the characteristics of the service. The service carries in its name a rating for drivers' preferred level of conversation in the car: "Bla" for not very talkative, "BlaBla" for someone who likes to talk, and "BlaBlaBla" for those who cannot stop talking. The company does not own any vehicles, it consists in earning money with commissions in each booking. BlaBlaCar takes a small commission (15-20 percent) on every ride. It also offers transparency and predictability on prices. The idea of connecting people who want to travel together emerged in France in September 16, 2006 by Frédéric Mazzella and thanks to the development of social networks via the Internet. The social network exists in 22 countries: France, Spain, Italy, the United Kingdom, Portugal, Poland, Benelux (Belgium, the Netherlands and Luxembourg), Germany, Ukraine, Russia, Turkey, India, Hungary, Romania, Croatia, Serbia, Mexico , Brazil, the Czech Republic and Slovakia. This social network that was initially called Comuto, was renamed Blablacar, highlighting the aspects of socialization and conversation during the journeys. Through the interconnection of users, thousands of trips are agreed monthly, counting in 2019 with 70 million registered users in the world. See how Blablacar works in a short video: https://youtu.be/0hKH4zmTX2U

MARKET OVERVIEW We can classify Blablacar in the transport market to understand the position of the company on it and how it can perform its function correctly. Competition is an incentive to improve and try to provide better services for users and we can tell as competitors companies like Uber, Taxi, Bus (like Flixbus), Train (like PKP intercity in Poland), Amovens, Social Car, Mambocar, Shareling… I explain now why I classify Uber and Taxi as competitors. Imagine a trip you want to go from Wrocław to Kraków. If you use Blablacar, it will cost like 40 PLN. If you use Uber, it will cost like 800 PLN. And if you choose taxi it will be like 1000 PLN. So, it looks like obviously that you always take Blablacar, right? But let’s think about an old person or an unsafe person. This kind of person will always prefer professional drivers and professional atmosphere, it does not mind the price. Despite there are a lot of differences with Blablacar (Blablacar is for long trip, the others short trip; Blablacar drivers are not paid by the app when Uber does…), we have to include Uber and Taxi in competitors.

So, Blablacar has as the most powerful competitors Amovens, bus (we use flixbus as the strong competitor example) and train (we use PKP group for Poland).

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I compare Blablacar with Flixbus and ICCC because thinking like a passenger that want to travel, you can choose bus and train transportation too. But what differences Blablacar is that it is instant, cheap and fast. If you need to go to another city, just open the app and many people posted their travels in Blablacar. In bus and train you have

schedules, not every moment you can go travelling. This is why I include them as strong competitors.

Amovens: It was born in 2009 as a shared travel community for companies and universities. Today it has become one of the main competitors of Blablacar. Flixbus: It is originally a German company that operates in long-distance transport and offers a wide variety of trips which is changing, since 2011, the way of traveling in Europe for millions of people. Low cost bus travel in Europe with more than 100,000 daily connections to 800 destinations in 19 countries. PKP Intercity: It is a company of PKP Group responsible for long-distance passenger transport. It runs about 350 trains daily, connecting mainly large agglomerations and smaller towns in Poland. The company also provides most international trains to and from Poland. Other example:

Clients You can travel all over Europe with Blablacar and it is normally for long routes. Each client (drivers and passengers) has a profile account on the website / application in which they offer the trip they are going to make. It includes the date and time, as well as your music preferences, whether smoking is allowed or not, pets allowed or not, and whether you like to talk a lot or a little. The passenger sends a request to the driver of his choice and he can accept or reject the offer. Safety and reliability The social network, which has two million monthly users, is based on trust, since data records are reliable and certified, and users publish opinions, both of drivers and passengers, knowing in advance who they are with. is going to travel. After the trip each

user receives a "positive" or "negative" rating on a scale of 1 to 5. 96% of the opinions are positive.

People who have abused the price, occupation or any other negative circumstance that goes against the general conditions of use, are expelled by the platform itself.

In the event of any unforeseen event, the social network allows cancellation within 24 hours ( both of the trip by the driver, and of those who have reserved a place) , by means of the full refund of the amounts to be shared and the management costs.

If the passenger cancels his reservation after 24 hours prior to the scheduled departure time of the trip, a percentage of the amount of the trip is refunded (without counting the commission), a percentage that varies depending on the time remaining for said departure. If the reservation is cancelled within 24 hours prior to the estimated time of the trip, in no case will the management fee be refunded.

Institutional environment The website allows calculating, based on vehicle mileage and occupancy, the amount of greenhouse gases that are no longer emitted, allowing each person to know the ecological footprint of their trip.

The social network has allowed greater energy efficiency of the cars that travel, as occupancy has increased, with the average occupancy in Europe being 1.7 people per vehicle, and through Blablacar's shared car, the average occupancy is 2,8 people per vehicle, it helps to reduce traffic and emission levels. This has saved 700,000 tons of CO2 until January 2014.

Legislation As they are private vehicles, in which the variable expenses of the trip are shared, there is no remuneration to the driver, following Law 17/1987 on the Organization of land transport which prohibits the remuneration of transport in private vehicles, not existing no type of unfair or similar competition with respect to platforms such as Uber, which does allow the use of private vehicles.

1. Are network effects important on this market? Explain.

Network effects are important in the market of share transportation. The network effect which appears in this case is indirect and therefore, positive. In the case of Blablacar, there are two users groups exchanging value with one another: drivers and passengers. The more users on the network, the more valuable that network is to Blablacar app. The more people use it, the more rides one will find. There are positive indirect network effects of drivers on passengers. More drivers implies more trips offered. Also positive indirect network effects of passengers on drivers. More passengers mean more demand. People who are looking for carpooling want to find at least one offer with the route and date they plan to travel. Then, drivers should offer seats for potential passengers. So, passengers looking for a driver and drivers looking for passengers are linked. Transport platform like BlaBlaCar have disrupted traditional transport companies that benefited from an absence of network effects (like taxi) or smaller network effects (like railways and bus companies).

2. Are switching costs important on this market? Explain. Respecting to switching costs for BlaBlaCar, we can see how is the effect in each user, for drivers and passengers. For drivers, there are important switching costs. For example, if he changes to another app like Amovens, he has to sign up again. He also has to wait to verify his car again, accept all conditions in the new app, he has no score or opinions on the platform and people do not trust on him. So, it is starting again from the beginning. For passengers, it is like the same. They have to download a new app, create a new profile account, look for the trip you want. Maybe there is less possibilities/options to travel or it can be more expensive.

3. How does the typical pricing strategy look like in the company you picked? Explain the revenue model. What is the monetization logic of the car sharing service app? It is important to say that the pricing strategy of the company is part of the revenue model, which in turn is part of the business model which I will explain later. In order to know the pricing strategy of the company, is also important to get the revenue model as well as both are part of the Monetization Logic of the company, or in other words: How does BlaBlaCar make money? BlaBlaCar generates revenue by taking a commission on fees paid by passengers to BlaBlaCar drivers. For every payment made by passengers to cover the travel expenses of their driver, BlaBlaCar takes a cut of 12%. Under this transactional business model, drivers set a price per seat onto which BlaBlaCar adds a small amount to cover its 12% fee. While the Company does not disclose its annual revenue figures, it has claimed that it has 2 million customers who use its services every month and that the average ride charge was around $25. Using these figures Business Insider estimated that the Company could generate as much as $72 million in annual revenue, assuming these regular users take one trip per month. The models that most resemble to make revenue are Fee-for-service model (R) and Commission model (R). How does BlaBlaCar maximize money? It is actually a free platform for all users, they do not need to pay anything to use the platform. But it follows a flexible pricing (Pricing strategy). It means that the service final price is open for negotiation. A driver, for example, charges the passenger according to the amount of money he adjusts for petrol and the profit margin he wants. On the other hand, a passenger adjusts his budget according to the trips he finds, being able to choose between several trips of different prices. Customers subsequently negotiate the price according to their understanding of the market. It may also refer to adapting one’s prices more closely to market forces. Market forces are the forces of supply and demand.

4. How does the typical product strategy look like in the company you picked? Explain.

 Main idea BlaBlaCar is a French carpooling service that enables people who want to travel to the same place at the same time to organize to travel together. Various users can publish their next trips they will take, so that all people with the same destination can share the car. BlaBlaCar does not want the driver to have monetary benefits —there is a point that it is not a taxi service — but that he and his companions save significantly by sharing the costs of the trip. Finally, to maintain the security of the service, users (both passengers and driver) will be successful in the experience of sharing the trip, all to highlight the best partners to travel.  Clients Users can register and set up an account through the Company’s website, or via its mobile apps, without having to interact directly with BlaBlaCar representatives. Once registration is to complete users can access the platform’s full suite of options, searching for rides and passengers, rating other users, and recording payment details. The Company provides support to its users through FAQs and online contact forms. The Company also keeps its user updated with developments to the platform through its blog, and enables its customers to interact with BlaBlaCar representatives directly through its Facebook, Twitter, Google+ and YouTube accounts. As I said before, each client (drivers and passengers) has a profile account on the website / application in which they offer the trip they are going to make. It includes the date and time, as well as your music preferences, whether smoking is allowed or not, pets allowed or not, and whether you like to talk a lot or a little. Also the future passenger can see the brand of the car and how much weight can be loaded inside. There are ratings and comments about previous trips of each user. The passenger sends a request to the driver of his choice and he can accept or reject the offer.

 Experience Level of Users When you share a ride on BlaBlaCar, you travel with a member of a trusted community. Every member has an Experience Level that evolves with time and activity. Levels help you choose the right co-traveller for the ideal BlaBlaCar journey. There are five Levels:

In the case of drivers, receive an additional evaluation on their driving, voluntary for the passenger. Maintaining a good reputation is key to encouraging passengers to go with you. It is believed that drivers normally strive to "be good", without running or overtaking on the right, etc. There are five driver levels on the web: Beginner, Intermediate, Advanced, Expert, and Ambassador. The more trips have been offered, the seniority and the more points have been obtained, the more level, the easier it is to occupy the free places. Passengers may seek to go only with ambassadors, or women who only want to go with women. In the future, identity verification by optional DNI will be added, for the moment what makes each user unique is the telephone number, associated with a DNI for years. It is very easy therefore to track someone if necessary, and if we start to think badly.

 How can a passenger pay?

Whether you access BlaBlaCar from the website or if you do it with your mobile app, payment is made securely through the same platform. Thus, a driver will never have access to any of the data on your card. With a credit card it is possible to make the reservation of your trip by car. At the end of the process you will be asked for the following information:

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The credit card numbers (they are 16 in total)

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The CVV code on the back.

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The expiration date of the card.

Paypal Blablacar also allows you to choose this option. From my point of view, it is an even safer way to make any online payment, not only on this website. In order to use it, you must enter your Paypal account from the web (by choosing the Paypal option, the option will be opened) and certify it.

Payment in cash The platform also allows the option of cash payment. Not all drivers allow it. This occurs when you do not see the option to "book online". In this case, you must give "contact the driver" and thus you will get in touch with all your data. Payment by hand will be made once you meet face to face in the vehicle.

 How can a driver receive the money? Within Blablacar you can choose your preferred method of payment (just as passengers choose payment). There are two ways:

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Direct payment to your Paypal account: it takes a few minutes for the money to be deposited into your account from the moment you request it.

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Payment to your bank account: the total amount takes between 1 and 5 business days to reach you.

Payments to drivers are automatically sent two days after arrival (48 hours). When paying and making the reservation online, passengers are who pay the management fees, as well as VAT. These management costs depend on the amount of the place, and how much BlaBlaCar charges. BlaBlaCar earns more or less 10-12% of each trip.  Can a passenger cancel a trip? The answer is yes, from the Reservations page. However, the policy of refunding and canceling reservations varies according to the advance with which you do it. If you have to cancel, the sooner the better: 

Cancel the trip more than 24 hours in advance: the amount of the place is returned, but not the management costs.

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Cancellation of the journey 24 hours before the trip: you are paid half of the amount (management fees not).

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If, for any reason, you do not show up for the trip, the driver will still receive the full amount of your place and you will not recover the money.

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If the reservation is canceled by the driver, you will receive all your money back.

5. Which standards play an important role in the operations of the company? Does the company actively take part in the creation of some standards? How does the company utilise standards as part of its strategy? BlaBlaCar is a company which is trying to expand and defend an already dominant position in a digital market, Insurance companies have not wanted to lose their opportunity. AXA announced a year ago an alliance with the automobile platform sharing BlaBlaCar, for which it offered travel assistance coverage and a destination guarantee for BlaBlaCar users. In France, BlaBlaCar has an agreement with the Vinci highway construction group that contemplated the creation of an electronic toll service for platform users and the creation of 1,500 parking spaces.

The manager of the platform indicated that with the alliance with the French railway the two companies are seeking "to advance in the combination and digitization of the different modes of transport.’’ By virtue of the operation with the SCNF, BlaBlaCar buys the bus company Ouibus from the French railway company that, on its side, enters the capital of the social network by resorting to the capital increase of 101 million euros. On the other hand, the alliance between BlaBlaCar and Google Maps will be in force in Ukraine, Belgium, Poland, Spain and France. It will basically work like the other transportation options when searching for a route within the Google Maps app. Thus, after offering the options of routes by car, on foot or by bicycle, it will show us transportations such as bus, metro, train or tram and from now on the possibility of using BlaBlaCar will also be indicated. When selecting BlaBlaCar as the means of transport to make this journey, Google Maps will indicate the time it would take us to reach our destination, the number of trips available by this means and the cost in the respective coin. Users who already have the BlaBlaCar app installed on their mobile phones, will be automatically directed to the app where the results will be displayed according to the desired route, and those who do not have it installed, will be redirected to Google Play or App Store to obtain it in a free way. With this alliance, the visibility of BlaBlaCar increases considerably, and for its part Google will obtain a small reference rate. This is the way that BlaBlaCar is trying to extend their offering from other dominant positions right now.

6. What is the business model the company you picked uses on the market? Why such business model was chosen? Were there any other possibilities? Do yo...