Transportation

Can Austin’s Homegrown Ride-Share App Compete with Uber, Lyft?

RideAustin had carved out a healthy customer base in the city, until larger companies moved in. Now, after a reorganization, the app-driven ride-share is hoping it will survive.

by Sebastian Herrera, Austin American-Statesman / May 4, 2018
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(TNS) — AUSTIN, Texas — RideAustin will need people like David Goss if it’s going to survive.

Every weekend, Goss, a 42-year-old sales engineer at Dell Technologies, opens his RideAustin smartphone app to hail a ride to the bars and restaurants that line Rainey Street Historic District downtown.

Goss has been using RideAustin exclusively since the ride-hailing service began operating here in 2016. He’s become a fan of the app’s local feel, as well as its status as a nonprofit organization. And he says the service has been equal to that of Uber and Lyft.

“I wanted to support something local,” Goss said. “They are connected to the city of Austin.”

Uber and Lyft’s return to the local market last May rocked the other ride-hailing services that were operating in Austin. Within the past 11 months, at least three of them have left the Austin market.

The past year has also been a battle for RideAustin, which gained notoriety as a locally run alternative to Uber and Lyft that has operated as a nonprofit, letting riders donate to local causes through its app.

RideAustin’s ridership has plummeted by more than 70 percent since Uber and Lyft came back. In two weeks, the nonprofit lost roughly 37,000 users, and it has yet to be profitable.

In response, RideAustin has restructured and focused on what helped made its app popular in the first place — its local roots and its status as a nonprofit substitute to Uber and Lyft.

“Uber and Lyft were able to come into the market and command it, as well as throw around a lot of dollars to go win back (market) share. All of those actions drove (other’s) decline,” RideAustin co-founder and CEO Andy Tryba said. “We made a bunch of changes.”

Battling Uber and Lyft

Tryba, an executive at other Austin tech firms such as Crossover, created RideAustin with other local tech leaders in June 2016, weeks after Uber and Lyft left Austin following a battle with the city over background checks for ride-hailing drivers.

RideAustin initially saw strong demand, as residents embraced the organization as a local brand that followed the city’s background check rules.

But the demand wouldn’t last.

The Texas Legislature passed a statewide ride-hailing law in May 2017 that superseded the Austin ordinance and cleared the way for Uber and Lyft to return to the market. The consequences were drastic for other ride-hailing services.

In the week before Uber and Lyft returned, RideAustin completed about 59,000 rides. The following week, that dropped to 26,000 rides, Tryba said, and then to 22,000 riders a week later.

Phoenix-based competitor Fare left the market last June, saying it couldn’t “endure the recent loss of business.” Austin-based GetMe was next, suspending its service in December. In March, Boston-based app Fasten announced a sale to Russian-based transportation network Vezet Group, ending the company’s service in Austin. That left RideAustin and Wingz — which mainly services airport-related trips — as the primary non-Uber and Lyft ride-hailing options.

Many customers who had begun using other companies when Uber and Lyft discontinued service appeared eager to switch back.

In a recent study by Texas A&M University, the University of Michigan, Columbia University and other institutions, researchers surveyed more than 1,800 Austin-area residents online to find how customer behavior had shifted when Uber and Lyft departed from Austin, and after they returned.

Out of a smaller sampling of that group that had transitioned from using Uber and Lyft to other firms, 42 percent of respondents said Uber and Lyft provide better service than other ride-hailing entities.

“Other (ride-hailing firms) haven’t been around as long, so they haven’t had a chance to refine their model,” said Chris Simek, a researcher at the Texas A&M Transportation Institute and co-author of the report. “If they had a chance, maybe more people would be satisfied. A lot of these companies have fallen out of the market, so we’ll never know.”

Uber and Lyft’s brand recognition, as well as discounts the companies were offering when they returned to Austin, made it difficult to compete, RideAustin’s Tryba said.

“We anticipated a large drop (in ridership),” Tryba said. “But I think it happened faster than we anticipated.”

As its ridership dropped, RideAustin reorganized to meet its current weekly demand, which has for some time now averaged 10,000 to 15,000 rides per week, according to Tryba. Uber and Lyft have declined to disclose their ridership averages for Austin.

RideAustin cut its full-time staff in half from a peak of about 25, Tryba said. Its weekly driver pool is also half of what it once was, he said, with roughly 2,000 to 3,000 drivers working per week, depending on demand.

Additionally, RideAustin has pulled back on marketing efforts and rebooted its cost model.

Around the time when Uber and Lyft returned to the market, RideAustin closed an office in downtown Austin. Most employees have been working from home.

‘Operate in a different way’

While RideAustin has seen a sharp decline in users, Tryba said his organization doesn’t have any plans to shut down.

RideAustin is counting on user loyalty to keep its current ridership steady, Tryba said.

“Local Austinites like to be able to support folks that are eager to support local charities and nonprofits,” Tryba said. “People are loyal to RideAustin that love that cause and direction. If you’re in the rideshare business, and you’re not different … it’s pretty difficult to be able to compete.”

RideAustin has not filed federal tax documents for its 2017 fiscal year because those are not due until May 15, but Tryba said the nonprofit would record another operating loss for last year after losing about $6.3 million from May to December 2016. RideAustin ended 2016 with $5.6 million in assets, according to federal tax records, but that was because the nonprofit received $12 million in grants and donations in addition to its operational revenue. RideAustin’s top executives received no pay that year, according to tax documents, and Tryba said that policy has continued.

Tryba said RideAustin expects to break even on an operating basis for its 2018 fiscal year if it maintains its current ridership average.

Aside from its feature of using its app as a donation box for local charities, RideAustin includes options that allow female customers to request female drivers, and customers can also request favorite drivers through the app. RideAustin is also working on a model where drivers could also donate to charities, and is talking with Austin’s Capital Metro transportation system on some type of partnership that could involve first and last-mile service.

For RideAustin to survive, Tryba said, it will have to continue to strengthen its ties to the Austin community.

In 2016, RideAustin donated more than $43,000 to charities, nonprofits and community organizations, its tax records show. Last year, the nonprofit joined Travis County’s Community Care Collaborative and the University of Texas Dell Medical School to pilot a program to give low-income residents rides to and from medical appointments.

“If we don’t have great ideas that we can partner with the city on, and we are just like every other rideshare, then there is no point of RideAustin,” Tryba said. “We have to operate in a different way.”

©2018 Austin American-Statesman, Texas Distributed by Tribune Content Agency, LLC.