I bet many of you have had a post-COVID dream, a thought that has helped you to get through yet another pandemic Groundhog Day on Zoom. Being an engineer, I prefer planning to dreaming. The grand plan that has kept me going has been to visit some of the best ski resorts in Switzerland, using our Whim app to get to them and also to get a seat in the lifts.
It is no secret that MaaS Global’s international expansion has been slower than what we projected a few years ago. Therefore, we have researched endless markets, looking at demographics, psychographics, infrastructure, and, most importantly, transport networks’ contractual and political openness in different cities.
In business, to expand is an end in itself, but we have learned an important lesson about it along the way: in each new city, we must prove a new thing. So, in choosing the next market, a decisive factor has been our need to prove what we could not prove in Helsinki, our birthplace.
In Helsinki, we have proved that MaaS is technologically viable, that people like it and that it can replace a car. For that, Helsinki has been the perfect environment. However, it has not been an optimal place to prove that MaaS scales and that it scales profitably. To be completely honest, many of our packages in Helsinki have been prototypes rather than fully developed MaaS. This is due to the geographical area of operation and the availability of modalities.
The key to making MaaS attractive is that it should be synonymous with freedom, and being operative in a single city is not yet that. The key to making MaaS profitable is the ability to actively manage the modalities people choose, as I will explain in a moment.
When you start a business and eventually scale it, one of the things investors are most interested in is unit economics. In MaaS’s case, the unit is a single customer, and unit economics refers to direct revenues and costs that come with that customer during the time they use the service. Projecting promising unit economics can make or break an investment round, and of course, the company itself. It’s easy to justify a robust customer acquisition cost and even considerable production cost if it’s likely that the customer sticks with the service and brings in a high margin. But things can be the other way around, too: in the worst case, it is expensive to attract people to the service and to produce it, but customers tend not to stay or bring in much money. This is how many startups fail.
In MaaS’s case, the question of unit economics is both highly lucrative and particularly challenging. The potential revenue stream is vast since we talk about 600 € a month mobility packages, not 9,99 € a month streaming services. The challenge is the production. In MaaS, it is different from how most other digital platforms work.
For MaaS to be a solid business, it must get three things right: when selling the service, it must appear to be better than owning a car, when producing the service, it must prove itself to be superior to owning a car, and when choosing the right modalities for the client, it must leave a healthy profit.
So, what will change as we now enter Switzerland? Two things: the availability of modalities and the geographic reach of our service. In Switzerland, the approach to mass transit ticketing and reselling is a modern one, and the barrier to entry to a MaaS operator therefore moderate. We are going to provide 3,5 million citizens in Switzerland access to single tickets and daily travelcards in six cantons; Bern, Fribourg, Neuchâtel, Soleure, Valais and Vaud.
The Whim mobility service in Switzerland is offered in co-operation with key strategic partners such as Transports Publics Fribourgeois (TPF), e-scooter operators TIER Mobility and Voi as well as the e-bike company BOND Mobility. Other transportation partners and new modes such as car rentals, car share and more will follow in the coming months to provide Switzerland’s 8.5 million inhabitants with an even more comprehensive Swiss-wide mobility experience (and soon, I believe, even the ski lifts). Broad access like this, with several add-ons, brings Whim pretty much on par with a car of one’s own.
The unit economics in MaaS behave entirely differently than they do in fully digital services, for example, games or digital media. In fully digital services, it may be expensive to build the service and hard work to get the customers in and get them to pay, but once they start paying, the production cost is zero, and therefore the margin is massive.
In MaaS, the unit economics depend on something we call the modal split. The modal split refers to the components of each trip. Here lies the path to profitability in the long run. To demonstrate, let’s say we sell a package that includes taxis and bicycles. The more the customer uses taxis, the higher the production cost, and the more they use bicycles, the lower it is. Thus, the unit economics of the customer who bought the package depend entirely on how much they use each modality.
To bring the calculation closer to reality, let’s say a customer gets an unlimited monthly package and, in the beginning, uses a rental car for 24% of the trips and a taxi for 21% of the trips. The remaining 55% of the trips are public transportation, micromobility, and walking. If we, through intelligent route planning, can suggest faster and more convenient choices and at the same time drop the usage of rental cars to 19% and the use of taxis to 17% of all trips taken, we just saved 100€ in production costs per month.
Helsinki is unfortunately too small and too rigid to test this approach fully, but Switzerland will be different. You need enough people, enough choices, and open interfaces and attitudes to spin the multimodal wheel for the benefit of the customers, the environment, and a healthy business. We’ve already seen this work in Antwerp, where our service has been available for a while now.
In Switzerland, we will up the game and prove the Whim business model when it operates country-wide. Then, once we’ve shown healthy unit economics there, we are ready to proceed to bigger markets.
As we add new and bigger markets, there’s at least one more thing to prove: the best way to enter a market. I’ve said many times that instead of demonizing cars, we must learn from the automotive industry. The same applies to the rollout too. A T-Ford was not everything a car could be, but it had mass-appeal, and it was affordable. When enough people bought enough T-Fords, the roads improved, and a market developed for more advanced products.
Currently, my expectation and our strategy at MaaS global is the same. When we enter a new market, we first prove the concept with a pared-down product among people who use public transport. Then, with an upgraded product, we proceed towards groups that have not yet considered an alternative to their cars. As the infrastructure and the modalities available for MaaS develop, what was once curious will become commonplace. And somewhere along the way, I’ll go skiing.