Sampo’s blog: The business model of Mobility as a Service (MaaS)
By Sampo Hietanen, CEO and Founder of MaaS Global
As an eager young traffic engineering student, one of the first things I learned in my introductory courses was that when it comes to getting around, the consumer is far from rational. A city dweller could easily hire a cab every time her destination is outside of walking distance and still end up significantly richer than her neighbour who insists of driving around in his own car. Or, if a computer, a math machine, had transportation needs, it would very seldom choose to own a car. Yet, we people love cars.
When you’re trying to solve the ever-growing challenges of transportation in cities – the congestion, the pollution, the cost and safety issues –, what you are actually trying to crack is not a logistics challenge, but the complicated geography of human desires, fears and habits related to traffic.
And, as if this equation wasn’t challenging enough, we must remember that the roots of city traffic planning lie with water and sewage management, not with the concepts of freedom and self-expression. If your idea of looking into the human psyche is through what we can learn from sewage management, you have some serious issues, or at least the wrong toolbox.
What seems like an impossible equation is where the amazing opportunity of MaaS, or Mobility as a Service, presents itself. It is ever slower, more expensive and more annoying to own and drive a car in a modern city. From the point of view of resource allocation it’s plain crazy: if you own a car, 85% of your transportation cost are due to the ownership. In Tokyo, more than half of the cars are used less than once a week. In the greater Helsinki region, the home of Whim, there are maybe 600,000 private cars. If organized optimally, just 30,000 vehicles would do.
Imagine that instead of owning a car and dealing with all the hassle that comes with it, you could just download an app that takes care of all your transportation needs. And imagine that this app could, in addition to getting you around, create the same feelings of freedom, social status, joy and safety as a private car.
Now, stop imagining and discover Whim.
MaaS Global and its service, the Whim app, are often mistakenly thought of as just another digital marketplace, aggregating the information on what’s out there and then displaying the findings according to the user’s wishes. This is how you find hotels, restaurants and plane tickets. But this is not Whim.
We are old-fashioned in the sense that we buy the parts, then package and brand them to meet our customers needs, and then charge for the value we create to the customer. In practice this means buying bus, tram, taxi and bike rides and car rentals beforehand based on our knowledge on how much and how people like to move in a month. Then we assemble these rides into packages that meet different demand profiles and focus on creating an experience that beats owning a car. Our business is in putting these packages together and selling them for profit.
It’s a little bit like assembling a car. A car is not its parts, nor is its price the cumulative cost of those parts. When a person buys a car, she buys it for the benefits she gets and pays accordingly.
But this is as far as the manufacturing analogy goes. We may be traditional in our packaging thinking, but our business model goes far beyond what’s currently thought of as a platform business. We like to think that we are a platform 2.0 company. This means that we are not shooting for a monopoly but rather believe in open access to transportation services and open access protocols to our services and others’ services. We also believe that our customers own their data – we don’t. And more than anything we believe that the stronger the ecosystem of different actors with open APIs is, the better the service to the client, and the better everyone fares.
Traditional carmakers have been great at creating an experience of value. If you really must own a car, you could easily do with one that costs 20.000 € or less, yet quite a few opt for cars that cost more than 40.000 € and the sky is the limit. One of the most desirable cars at the moment, a Tesla Model S, will set you back 120,000 € or so. When people buy cars, they do not think what it costs them, they think about the perceived value it brings.
What does this mean for MaaS Global? When we assemble our products, we know that in Helsinki, an average resident makes four trips a day, that the length of the trips usually varies between 2 and 30 kilometres, and that the daily travel time is 90 minutes. But when we package our products, we look at two things: first, the desirability and therefore the willingness to pay for our service must rank right next to owning a car; secondly, we must be able to influence how different modes of transportation are used within the service. When we get these two factors right, we’re selling for more than we’re buying, and when we do that in great quantities, we are profitable.
To make all of this work, we must understand that we are in the operator business. We need considerable volumes to achieve success and to get there we subsidize our offering in the beginning. If you look at how much an average user is worth to Facebook, it’s around 30 cents a month, while a mobile phone or a broadband user may be paying somewhere around 30 euros a month for the operator’s service. However, if you own a car, you are paying somewhere around 500 € every month. That’s the price point that makes building a Mobility as a Service operator such a lucrative idea. MaaS is massive beyond anything we’ve experienced in digital services so far.
The only thing I can see being even bigger is living. Why not, one day, buy accommodation as a service? Not from a smorgasbord for temporary needs like AirBnB, but as a long-term solution tailored to your lif And then, on top of that, opt in for a mobility service. Now we are talking about people buying services for maybe 1,000–2,000 € a month. It seems worth keeping an eye on this space, no?