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BlaBlaCar Company’s Business Model Essay


Introduction

BlaBlaCar is a web-based carpooling service that uses a revenue-sharing model. The resource allows customers to save on the expenses associated with long-distance trips by finding passengers who intend to travel via the same route and are willing to provide a share of costs. Unlike its better-known competitor, Uber, BlaBlaCar is not intended for generating revenue by the customers and serves purely for saving purposes. The company experienced impressive growth in recent years and is currently introduced to more than twenty countries. One of its strong points is the implementation of social network functionality, which makes shared rides not only a profitable but also enjoyable experience. The company also gained the considerable trust and praise from a wide array of customers. The following paper aims at analyzing the causes and critical components of the company’s success by identifying its business model, analyzing revenue streams, and determining the role of the informational technology (IT) on each stage of its functioning. The resulting analysis is intended to demonstrate the role of IT in the agility and attractiveness of contemporary business models and identify the overall value of the used business model in the context of the Arab world.

Business Model

BlaBlaCar utilizes two business models depending on the state of market penetration in a given country. For the countries where it is well-represented and has sufficient audience for scale, the company charges a percentage of the total fee determined for each specific ride. All the communication and agreements between the customers are made through an online portal that has characteristic features of both a social network and a booking service. A person that has vacant space in the car and wants to save on the cost of the trip creates an offer which calculates the approximate expenses based on the available details. The customers who find the conditions suitable opt-in on the cooperation and supply their share of payment to the service. After the trip is complete (which is confirmed by the participants), the provided payments are transferred to the driver with the deduction of percentage for the services offered by the company. It is important to note that the process does not generate revenue – the amount of payments does not exceed the cost of the trip. Nevertheless, both the driver and the passengers benefit from the operation since the expenses are shared and, therefore, reduced. This detail allows for a much wider audience coverage as it does not require owning a license for commercial ferrying of passengers. In essence, the company monetizes its services of coordinating a shared ride.

In the countries where BlaBlaCar is in the early stages of development, it operates under the free model. This model generates no revenues and ultimately serves the purpose of obtaining the critical amount of customer base in a short amount of time. The company also uses ad monetization as a source of revenue, but it does not serve as a primary source of income. Simply put, this phase is similar to the promotional stage to raise awareness and gain the trust of the customers.

Business Processes

All business processes associated with creating value for customers are based on the use of information technologies. Operational processes are central to the company as they essentially create the foundation for the company’s functioning. Placement of the initial offer by the driver (termed “ambassador” within the service) is done either through the online service or using a mobile app, which makes it easier and more accessible. The search for a suitable ride is made more convenient due to the processing capacity of web search engines and can be customized via multiple filters. Most importantly the social network component allows for the aggregation of information for both the drivers and passengers. The information on previous experience, feedbacks of other members, and the inclusion of preferences (e.g. the musical tastes of companions) create an encompassing experience and facilitates customer satisfaction. Finally, the possibility to review individual account details and establish a reputation through actions provides additional clarity and transparency to the service and facilitates trust between the users and, by extension, to the company. It is important to understand that the concept of carpooling (ride sharing) is at least several decades-long and was present as a business for several decades. Nevertheless, the commercial form gained momentum primarily after the introduction and popularization of the Internet, confirming its importance for the processes.

The support processes are similarly allocated to the informational domain. All of the technical support, consultation, and recruitment is made through online functionality. Most importantly, all of the transactions are web-based, which adds to the security of the service. Since most of the time, the passengers are expected to ride with unfamiliar people, and there is no legal obligation to obtain payment other than the legally informal agreement, transacting through the service guarantees the delivery of payment as well as a refund in the case of agreement termination.

Finally, the management processes, such as strategic management and corporate governance, are executed conventionally and involve IT only for marketing purposes.

Innovative Products and Services

The main service offered by the company is the opportunity to find a suitable partner easily and conveniently. As was detailed above, the service is based entirely on the functionality offered by the Web and the computational capacity of the IT industry. The convenience and speed of the service are provided chiefly thanks to the enormous popularity of the informational technologies among regular consumers. However, the company provides a range of additional services meant to enhance functionality and increase customer satisfaction. First, the service offers free additional insurance which is a result of the partnership with AXA (Tardy 2015). The insurance is designed specifically for BlaBlaCar and covers issues pertinent to long-distance travel (the focus of the company’s offers). Specifically, it provides cover for the costs of towing the vehicle to the nearest workshop in case it breaks during the trip and cannot be repaired otherwise. Second, it guarantees the passengers a reasonable transportation alternative if the car is damaged beyond repair or stolen. Finally, the insurance accounts for situations where an incident occurs when the passenger was asked to replace the driver. In case an excess payment is required to cover the discrepancy between the passenger’s and the driver’s insurance claim, AXA refunds the difference. Most importantly, the service is provided free of charge to customers, which improves both trust and satisfaction.

Another important service that utilizes the recent advantages offered by the IT industry is the implementation of big data analysis provided by HP Vertica, an analysis platform from Hewlett-Packard (Cairns 2015). Its data processing capabilities allow BlaBlaCar to obtain more precise and reliable information on customer behavior patterns, which can be then used in two ways. First, it raises the effectiveness of the company’s web-based marketing campaigns by improving targeting and data manipulation. Second, it increases the predictability of the internal processes and thus provides individual users with more relevant search results by improving the responsiveness of the web portal.

Innovative Business Values

BlaBlaCar lists several values that are relatively standard for modern businesses. However, some of them are prioritized and taken to the level that makes them stand out among similar services. For instance, trust is a necessary condition for a successful business and is therefore expected as an essential component of the set of values. For BlaBlaCar, the trust between customers is an absolute requirement for the service to take off. It is therefore ensured via several verification procedures and constantly maintained using providing the possibility to leave feedback and influence the rating of peers. Also, the company constantly seeks partnerships that would increase customers’ trust in the platform, such as free additional insurance from AXA described in the previous section.

Focus on the customer is another important aspect of the company’s values. Unlike most of the for-profit firms, the company takes a customer-centered approach as a core premise. In other words, instead of providing a new product and promoting it to create demand, it essentially serves as assistance to the already existing needs of customers and, therefore, offers a product that already is highly sought for and desired by the audience. The incorporation of big data in an attempt to improve the efficiency and precision of the service indicates the readiness of the company’s management to go the extra mile in pursuing the said value. It also serves as proof of passion and innovation as the main driving force behind the actions of the BlaBlaCar team, also listed among their business values.

Finally, three separate values identify the importance of evidence-based practice and systematic approach to the evaluation of the implemented practices. The company uses IT to attain new ways of optimal performance and uses drawbacks and barriers to sustain continuous learning and innovation (Schneider 2014).

Revenue Streams and Revenue Model

The revenue streams used by BlaBlaCar are transaction-based, which means they depend on sales of services. Importantly, the company serves as an intermediary in that it is involved in the transaction but only withholds a certain percentage while the majority of funds are intended for and eventually passed to the ambassador. However, it should also be pointed out that the ultimate scheme does not provide a profit-seeking model and should be viewed as a revenue-sharing model instead. The method by which revenue streams are created involves giving access to a service and an opportunity to use its features to reach the desired result. Essentially, the method can be described as lending the functionality of the platform and charging the customers peruse after the completion of the transaction. Therefore, the company uses a commission model (Schneider 2014).

The combination of an attractive model and security measures described above generates highly robust revenues. For instance, the publicized data suggests that roughly two million customers successfully use the service every month. An estimated average cost of a ride is around $25. Thus, a standard fee of 12% amounts to $72 million in monthly revenues (Cook 2015). The robustness of revenue streams is indirectly confirmed by the fact that the company reportedly raises significant funds, with the latest round of funding resulting in the value of approximately $1.5 billion (Cook 2015). While such amounts are relatively modest in comparison to major players such as Uber, it is important to acknowledge the revenue-sharing nature of the transactions, which significantly raises the bar.

Important Technologies

There are two categories of technologies that play an important part in the business model. The first includes the use of modern analytical capabilities of the software that enables the service to provide outstanding search capabilities. In addition to the big data analysis that increases the precision of the results and allows for more targeted marketing, the company can optimize its operations by tracking the recurring patterns in customer behavior and thus redirect and deliver offers to the areas where the greatest demand is expected.

The second category includes the consumer-oriented technology that is both ubiquitous and popular in the contemporary setting. For instance, the company makes extensive use of personal mobile devices capable of the Internet connection. The company was initially oriented towards browser-based experience and introduced the mobile-based counterpart in the later stages of development. The move led to the generation of a large amount of the mobile acquisition sources and was accompanied by significant cuts in expenses associated with service functioning: a 20% decrease in the sign-up costs as well as a 35% decrease in the cost of trip offer publication (Addict Mobile 2015). Currently, at least half of the transactions originate from mobile sources, which is understandable considering the popularity and convenience of the platform. Another aspect of the consumer-oriented technology that facilitates the success of the firm is the implementation of social media functionality. The most obvious example is the possibility of choosing the partner by desirable traits such as the readiness to chat during the trip (the bla-bla measurement which is responsible for the service’s name). This option is consistent with the functionality offered by modern social networks and is, therefore, attractive to people who are used to it and seek similar convenience in other fields.

Evolution of the Model

The concept of ride-sharing is not a new one and was present in certain forms throughout the second half of the twentieth century. Its popularity was the highest in European countries, where the price of fuel was high enough to make users seek cheaper alternatives. BlaBlaCar was conceived in 2006 and existed on a relatively modest scale until 2008, when major additions were made to the service, such as the introduction of the rating system. Two major events occurred the next year which defined the future direction of the company’s development – the expansion to Spain and the launch of the BlaBlaCar app on the iPhone. From then on, the company has expanded to more than 20 markets, underwent three successful rounds of fundraising, and conducted eight acquisitions of similar services from other countries (BlaBlaCar 2016). It continues to set records in revenues from long-distance carpooling and constantly innovates its services to stay ahead of the competition.

Leader Background

The success of the company is attributed to three people. Frédéric Mazzella is the author of the original idea and a major contributor to the brand’s strength and recognition on the international stage. He is also the person behind effective internal communication and is responsible for sharing vision and values among employees. Nicolas Brusson is the current CEO of the company and is responsible for its public image. He is a strong proponent of the startup culture and agile structures, which can be traced in the BlaBlaCar’s strategies since his arrival in 2011. He is also responsible for the direction and oversight of the acquisitions and fundraisers undertaken by the company. Francis Nappez is a leader in the technical development of the platform and provides innovative designs and solutions to the service. He also conveys his development philosophy of innovation to the staff and facilitates cross-functional team building within the departments of the company.

Stakeholders

The most evident stakeholders of the model are the company owners and the customers – the people who need transportation services and the drivers who seek ways of reducing trip costs. However, the actual audience is much broader and includes individuals who prefer to travel with partners while simultaneously receiving financial benefits. The customers also seek BlaBlaCar services due to the discomfort associated with other types of transportation (e.g. aviation) or for purely aesthetic reasons.

The local community can be considered a stakeholder since the trust facilitated by the service functionality plays an important role in creating favorable emotional and psychological climate. Besides, the service helps to establish safer communication channels between people who would otherwise seek public transportation. In the same way, local employers are benefitting from additional mobility of the workforce as they gain access to a broader audience. Local and national administrative bodies can be considered stakeholders to a limited degree since they may benefit from infrastructural and organizational benefits provided by the company. This is best illustrated by the spike in the service’s popularity during the 2007 train strike in France when the demand for carpooling services surged (BlaBlaCar 2016). In this way, the service may provide additional safeguarding measures against disruptive effects of unpredicted events and facilitate an optimal load distribution on public transportation systems. Finally, the service may be useful from an environmental standpoint, whereas a higher number of passengers per ride minimizes the number of rides required to transport a fixed number of individuals. This, by extension, produces fewer carbon dioxide emissions and optimizes the use of energy resources. Therefore, the population is a stakeholder on the national and global scale.

Competitive Advantage

Power of Suppliers

The most significant suppliers are fuel providers. However, their influence on the business is inverted, i.e. with higher prices of fuel the popularity of the service rises (customers seek saving options). Since there is a direct relation between the price of fuel and the popularity of the car-pooling services, we can conclude that the power of suppliers is high.

Power of Buyers

The service is both valuable and desirable to the customers. The switching cost is very low (due to the transaction-based method). The buyers are very numerous. Therefore, the power of buyers is moderate.

The threat of New Entrants

The technology used by the business is available and accessible, and the model is recognizable and popular. No significant initial investment is required. Therefore, the threat of new entrants is high.

Existing Competition

Currently, the market segment of ride-sharing is relatively developed but does not have any players comparable to BlaBlaCar in either scale or popularity. The closest competitor is Uber, although it operates under different principles, resulting in higher prices. The threat of competitors is low.

Threat of Substitutes

All of the traditional means of travel, such as trains and airplanes, can be considered substitutes. Also, low fuel prices make solitary driving a substitute. Depending on multiple social, economic, and cultural factors, they may be more attractive in the Arab world. The threat of substitutes it thus high.

Conclusion

The tremendous popularity and spread of the Internet opened great opportunities for ride-sharing services. As was demonstrated in the analysis, constant innovation and the utilization of information technologies allow to raise the value of carpooling services such as BlaBlaCar to a considerable level and sustain its popularity among a wide audience. The accessibility resulting from reliance on mobile technologies, implementation of social network principles, and utilization of big data for determining customer behavioral patterns adds value to the service and creates a cost-effective and attractive solution. However, it should be acknowledged that the popularity of the service is explained by a multitude of factors, not all of which apply to the Arab world. For instance, the prices of gasoline are considerably lower in the region compared to Europe, where the service is the most popular. Nevertheless, the characteristics of the service have several other implications of benefits beyond purely financial perspective, such as infrastructural and administrative optimization, improvements of social climate, and environmental enhancements. Thus, the long-distance carpooling services such as BlaBlaCar are capable of creating value by incorporating IT as a part of their operations.

Reference List

Addict Mobile 2015, BlaBlaCar success story, Web.

BlaBlaCar 2016, , Web.

Cairns, R 2015, HP helps BlaBlaCar improve customer experience, Web.

Cook, J 2015, , Web.

Schneider, G 2014, Electronic commerce, Cengage Learning, Stamford.

Tardy, F 2015, , Web.

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