Network Effects

While MaaS is a convenient booking app, it is not clear at this stage whether Whim by MaaS Global will trigger the indirect network effects that ignite a platform. Convenience is a common trait for mobile apps, but it is not the main reason behind their success. In order for platforms to succeed, they must trigger network effects in a way that reduces costs, and such cost reduction must be properly distributed across the ecosystem.

MaaS certainly reduces transaction costs, as most local transport services can be contracted in a single app, either for each service or for a flat monthly fee. MaaS reduces the hassle of constant micropayments for each ride. The journey planning tool provided by Whim is also useful and reduces search costs.

It is too early to tell whether the incentives for all the members of the ecosystem have been properly defined. In particular, it is well known that flat rates for users are often non-sustainable when the platform must pay a fixed fee for every use of the service to the service provider. This was particularly the case of taxis and car rental services in the Whim offer. The flat rate proposed by Whim might face the same challenge as ClassPass.

ClassPass was launched in New York in 2013. It became popular, as it allowed users to select an unlimited number of classes in different gyms for a flat monthly rate. The flat rate attracted heavy users who attended a high number of classes. They would always pay a flat rate, but the platform had to pay gym owners by the class. ClassPass was spending heavily on customer acquisition, but it had the resources because investors had provided substantial capital. After a certain point, heavy users were not allowed to contract the flat rate, and at a later stage, such a rate was dropped in favor of a pay-as-you-go pricing model. On the other side, when the number of users was low, gyms benefited from extra revenue to fill the empty spots in their classes - an interesting proposition. However, users started to drop their monthly payments to their favorite gym in favor of contracting directly with ClassPass, as it allowed more flexibility and attending different gyms. Gym services were commoditized and providers faced more competition. The most popular gyms can survive without the platform, but regular gyms cannot, even if this new business model puts strong pressure on their finances.

The flat rate proposed by Whim might face the same challenges as ClassPass. Heavy users of the more expensive services (taxi and rental cars) might pose an excessive financial burden on the platform. The unlimited taxi rides initially provided were later substituted with a cap of 80 rides per month.

However, it is not obvious how Whim by MaaS Global, at this stage, triggers cost reductions derived from network effects. There is not yet an algorithm that optimizes the interaction of passengers and mobility companies. Whim does not automatically match passengers and service providers. From the demand perspective, the platform does not identify and actively propose the best traveling option for passengers. On the supply side, service providers are not benefiting from new passengers in off-peak times or avoiding empty runs.

At this stage, the value in Whim’s proposition is to substitute private vehicles with a more convenient aggregation of collective and shared mobility services. By giving a flat rate and access to a diversified set of mobility options, individuals can more easily drop their private vehicles. This is high on the political agenda of most cities, so MaaS often has the active support of the local government where it is active.

In any case, MaaS has the potential to evolve into a far more effective proposition, creating powerful network effects as it is transformed into the network of networks.

 
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