Sao Paulo, Brazil—This city, where I spent the last week, is massive—much bigger than New York. Traffic can be terrible, from the main thoroughfares to the winding and complicated back alleys even locals struggle to navigate. Cars are extremely expensive, and mass transportation is underdeveloped.
So logically, transportation and delivery apps are hot topics of discussion and development in the city. After several conversations with locals and people in tech, three major themes are stuck in my mind.
First, the wars among technology companies over mapping services aren’t over. Waze is more popular here than any other city I have ever visited, and Google maps feels like an afterthought. The extent of the demand, and the new uses for digital maps as delivery expands, show there’s a lot of room for improvement.
Second, Uber, which is still marginal here, has a lot of competition. Taxi apps like 99Taxis are massively popular; the extreme cost of cars makes not needing to own one even more appealing. And it isn’t clear from local trends that Uber is sitting on a natural global monopoly.
Third, taxi services for transporting people are emerging as a service market from on-demand delivery providers. Delivering things is not the same as delivering people, which seems obvious for reasons including the fact that motorbikes are less expensive and faster than cars.
Mapping
San Francisco is generally small enough that experienced cab drivers know how to get around, and newer on-demand workers learn pretty quickly. Most of New York is a logical grid, making navigation easy, even as an outsider. Sao Paulo is a different ballgame.
Unless you are going to a true landmark, cab drivers instantly take out a GPS device and most rely on Waze. (During a test at 3 pm on a Sunday, the app said there were 20,000 Waze users nearby, and I have seen as many as 90,000). If a cab driver isn’t using Waze, locals turn on the app themselves and direct their drivers.
Two aspects about this fascinate me. First, there is still plenty of room for improvement in services that reroute you based on traffic and other factors. In San Francisco, this is an occasional use case around picking the short highway based on traffic. Here, riders are much more reliant on rerouting and current services still get ETAs pretty dramatically wrong and take riders through dangerous parts of the city.
Second, it’s obvious to see how digital maps will change physical commerce; they’ll make back alleys viable storefronts, and services that accurately locate a broad group of local—and maybe transient—businesses will win.
The growth of digital maps has been a big part of why lower Manhattan (which is more complicated to navigate than the grid above it) has become accessible to tourists—and driven the cool-kids out to Brooklyn. As maps get better and better, people will change where they spend their time and retailers will be able to decouple themselves from fixed locations and the rent premiums that come with premium addresses. The back alley, and the second story are going to become viable storefronts—if services can reliably find them. Reliably finding these businesses is a big opportunity for new services.
To be sure, mapping is insanely hard to break into as an application. Services that attempt to democratize mapping like Open Street Maps are still spotty, and with the exception of Apple and Google, the base maps providers are slipping in data quality as they fail to keep up with the massive investment necessary to make great maps globally. Uber believes that mapping may be a critical competitive advantage for the company over time, and clearly has the access to cheap capital necessary for a big investment in the space. But this is more concept than reality so far. It isn’t clear how this game will play out, but spending time here makes me interested in the area again.
Ride-Hailing Services
People love ride-hailing services in Sao Paulo. Cars are massively expensive compared to the U.S., and driving is a pain. The growth of such services is already changing ownership trends. One person told me that he sold his second car. So, macro picture, it is easy to see ride-services dramatically expanding the existing taxi market in the city.
The question is who is going to win, and what will winning be worth in practice after the government takes its pound of flesh and given competitive race-to-the-bottom’ dynamics.
Uber entered Brazil last summer and is still of questionable legality in Sao Paulo. Some argue they exist in a legal vacuum, operating only with licensed black car drivers with a new form of dispatch and not as a public service. Others argue they violate several laws.
When I first arrived, I took several Ubers around town; the local technorati use it and love that it is meaningfully cheaper than taxis for many trips.
But their default appears to be 99Taxis—and to a lesser extent Rocket’s Easy Taxi, with which normal cabs integrate and in which Tiger Global recently invested. The availability on 99Taxis is much better than Uber. Not even close honestly. Several times, I saw people open Uber and switch right to 99Taxis because there was a slight 1.5X surge pricing or a car would take too long.
This is despite the fact that Uber is “premium,” which here means Toyota Corollas not towncars. Still, the prices they are charging and the class of service are comparable enough that people happily switch between taxi providers for availability.
I’ve written a lot about how much I admire Uber. But my experience in Sao Paulo reinforced my view that the company isn’t necessarily a natural global monopoly and that investors should value them as a company that will dominate markets where they are already entrenched, like the U.S. The local complexities of regulation, especially in countries with complicated labor laws like Brazil, make cracking new markets a lot harder than for companies that operate virtually. It will be much harder than for, say, social networking, which went through a similar locally fragmented point in history before consolidating on a handful of platforms.
Delivering Goods
Watching this city, it is even more clear to me that good delivery and ride-hailing services should and will operate separately and different winners will emerge for each. There are different dynamics around shipping goods versus people. As such, I am more and more bullish about services that specialize like Shyp in San Francisco and motorbike couriers like Loggi in places like Sao Paulo.
Here is why. First, motorcycles are just much faster than cars in crowded cities. Second, how you distribute and command delivery agents versus car passengers are different.
These motorcycle delivery networks are already enormous in Sao Paulo and many other places in the world where infrastructure is less developed and let’s be honest, traffic laws are more enforced. Moreover, the impact of good apps and efficient routing might even be greater than it is for passenger vehicles because the dispatching has historically been less advanced. And they’re improving quickly. Anecdotally, locals say they have become twice as fast.
So, if you are impressed with the stats about how on-demand ride services have grown the market for taxis in some markets, just wait until you see how much newly efficient motorbike networks should likely grow the economies of big cities. It almost feels like another case of international leapfrogging, just as many parts of the world skipped wired phones and went straight to cell, or how most of the world is in the process of skipping desktop computing.
This trip has underscored that a lot of the trends that people are excited about in Silicon Valley are actually more interesting outside of the U.S. In some cases technology conquers all. It is always a bad idea to bet against companies that have access to the greatest nexus of technical, product and design talent in the world; however, there is a lot going on regionally here that feels quite powerful.