Hailo represents an “exemplar” matchmaking business model in the transportation industry that mobilizes mobile and location technology. Hailo has developed an app for mobile phones along with the supporting infrastructure that links (a) people wanting a taxi (they have the app on their phone) to (b) individual taxi drivers supplying taxi services (who also have the app on their phone). As a matchmaking business model, Hailo facilitates the connection of these two groups, although they can relatively easily (and do) bypass Hailo’s intermediation. Hailo’s app not only mobilizes mobile phone technology, but also satellite location technology because it pinpoints both customers and potential taxis on the mobile phone display.
This London-based firm was founded in November 2011 by three London taxi drivers with a personal interest in deploying technology to improve taxi service in and around London. The company, which has about 200 employees, had annualised sales of over $100 million, and has raised about $90 million from investors as of April 2014. It operates in 6 countries and 16 cities, with over 1 million registered passenger customers. In London, in 2013, it served 5m passenger journeys through 14,000 black cabs.
Hailo was neither the first nor the only important firm that offers this taxi location service: others include Taxipal, Uber, Get Taxi, Lyft and Gett, all of which have slightly different competing offerings. Easy Taxi is the most similar company to Hailo, but it operates in the Latin American and African markets. Hailo is singled out as a useful exemplar because it built an app that addressed drivers’ concerns, and built a community of cab drivers to support it, in the face of rising competition to taxis from companies like Uber.
The business model represented by Hailo connects two groups of customers – (1) people (consumers) needing a ride “immediately” with (2) available taxi drivers. The customer base is currently limited by the geographical presence of Hailo and by the requirement of customers to have the app installed on their phone. In the cities where Hailo currently operates – London, Toronto, Chicago, Barcelona, and, as of this year, New York – it has a large potential market.
Learn more about the Matchmaking Business Model
You identify two or more customer groups and brings them together in your marketplace.
Engagement — Value Creation Proposition
The value proposition is to connect potential passengers with empty cabs faster and more efficiently than rival methods such as calling for a cab on the telephone, logging onto a website, or hailing one on the street. Hailo allows the potential taxi driver and passenger to communicate directly with each other, and ascertain things such as waiting times, and capacity in the overall system. The speed and reliability of the system is potentially better than other systems.
The taxis benefit when there are more passengers on the system, and the passengers benefit from having more taxis on the system. Currently there are some “direct network effects” – passengers do not directly benefit from seeing others on the system (for instance, there is not yet a system that allows customers to rate drivers), and likewise drivers have few direct benefits apart from sharing live traffic information between themselves. Additional direct network effect benefits may develop in time: for instance the customer rating systems.
Delivery — Value Chain
Hailo has produced and maintains an app that runs on a smart phone to connect those needing a taxi with taxi drivers, backed by a website. When a customer launches Hailo on their phone, they automatically see on the map where Hailo-connected taxis are. The “hailing” takes place by clicking “Pick Me Up Here,” at which point drivers are offered the opportunity to “Accept Hail,” get your location information, and pick you up. The mechanics of Hailo’s operation run on a complex algorithm that takes into account the taxi’s location in relation to the would-be passenger, how long (including traffic) it would take to get there, and other data.
A taxi driver can sign up through the website for free, and after downloading the app his or her phone becomes embedded in the network of Hailo users. As well as receiving passenger hail requests they can also see bursts of passenger activity and traffic conditions in map view, useful information created by the Hailo taxi driver community. The app and website have been developed in-house by Hailo’s engineers, incorporating GPS location feeds and utilising mobile smartphone handset technology. From a marketing perspective, raising awareness of the service has been key. This has involved stunts like using key investor Richard Branson to celebrate 3 million London journeys and applying entertainment marketing to taxis, which hasn’t been done before.
Monetisation — Value Capture
In London, Hailo takes a 10% commission of the total fare including any tip, with a minimum commission, which varies by time of day with a minimum fare of £10 at evenings and weekends. The current minimum commission varies between £0.80 and £1.50. The pricing model is different depending on the market. For example, in Ireland the driver pays 12%, in the US, where cabs typically are cheaper, the passenger pays a fee to use Hailo and in Japan the taxi fleets pay.
Disclaimer — Written by Stephan Newbury and edited by James Knuckles under the direction of Prof Charles Baden-Fuller, Cass Business School. This case is designed to illustrate a business model category. It leverages public sources and is written to further management understanding, and it is not meant to suggest individuals made either correct or incorrect decisions. © 2016 Published 20 April 2016