Commentary
How Google Could Use Online Advertising To Own The Taxi Industry
- by David Rodnitzky , Op-Ed Contributor, September 4, 2013
Google self-driving cars are pretty cool, but until last week’s announcement that Google Ventures was putting almost $250M into Uber (a technology-driven limo service), it was unclear to me how Google planned to actually monetize these robot cars. But imagine a driverless car that picks you up (using Google Maps/Waze for navigation, of course). That could be a cheaper and more efficient taxi service than our current human-controlled ones.
Consider this: according to the Bureau of Labor and Statistics, there are currently 48,370 people employed in the “taxi and limousine service” business. All told, the U.S. taxi industry makes almost $11 billion of revenue and $1.4 billion of profit a year, the most expensive cost being wages, which annually comes in at over $7.4 billion. Driverless cars could take that $1.4 billion in profit to $8 billion or more without the cabbies. That’s a nice addition to Google’s top and bottom lines (Google’s annual revenue in 2012 was over $50 billion, with profits of $10 billion).
advertisement
advertisement
But wait, it gets even better. Most cabs in big cities now have advertising integrated into the inside and outside of the car. These ads are – for lack of a better term – dumb ads. Basically, advertisers buy a “run of cabs” and get their ad into rotation on every cab in the city – either on the side or top of the car, or in the form of video broadcast to passengers. Imagine how much better this advertising could be if Google took this space and used its knowledge of cab location and passenger demographics and psychographics to come up with smart ads?
For example, using GPS, it would be easy for Google to know exactly where a cab was at any given moment. So rather than advertising the hottest Broadway show to users 40 miles from the theater district, Google could allow advertisers geo-targeted advertisers to outbid the “run of site” theater ads. For example, a local hair salon could never afford to buy top-of-cab billboards across all of New York City, but might be able to buy an ad on top of a cab that is within five miles of its actual location (and let’s not forget day-parting – that hair salon could limit ad time to its hours of operation). This is not only a more relevant ad for people who see the cab, but it opens the top-of-cab ad space to more advertisers, which results in more revenue per billboard for all involved.
What’s even more interesting is what Google could do inside a cab. Consider this scenario: a cab ride from NYC to JFK airport normally costs about $50. What if, in exchange for watching targeted videos on your ride, that cab ride’s cost could be reduced by $15-$25? Here’s what I’m thinking: when users enter an Uber/Google cab, a prompt shows up on the video monitor asking them if they’d like to save money on their fare by watching a few ads. If they are willing to do so, they enter their Google account details (or perhaps use NFC to transmit this from their phone). At that point, Google is able to access tons of specific information about that user – information that is very valuable to advertisers.
And better still, Google could require passengers to answer questions after each video ad to ensure that they were paying attention. If a passenger wasn’t watching the ads – and got the answers wrong – the fare would go up with each wrong question. Passengers who got the answers right (and thus saved money on their fare) would associate that good feeling of saving money with the brand sponsoring the ad.
So let’s review: cheaper labor costs, more accurate mapping, better ad monetization, and potentially lower costs for passengers – this sounds like a great opportunity for Google to disrupt yet another offline industry. And it’s a good starting point for what is clearly Google’s ultimate objective: ad-monetized hyperloop!
Hi David. Brilliant! Need a partner? :)
Those figures you mention are awesome, in both cases, wether cabbies are made redundant by google Ubiquous business ventures, or Geo-Social marketing tools to be applied on cabs advertising spaces are all quite a bite for anyone with the power and capabilities of Google and Google's minds. As usual it begins with an "imagine if" and will end as "I told you"
Great post David.
Couldn't agree more that data would improve targeting, yield and ultimately the taxi experience. Geo-targeting via GPS is already being done inside the cab and has been for almost 5 years. And the only way to leverage data to improve ad targeting outside the cab is to make the ad units digital which is very expensive to build & operate (but it is coming). There are companies like VeriFone Media which is the largest taxi media company in the US which has been operating and executing on that exact vision. As much as I love Google products, there is not much they can do to improve the taxi advertising experience except using its deep pockets to speed up the capital intensive vision laid out above.
@Chris - if Google knows the actual occupants of the taxi (via their Google user information), wouldn't that be superior to the existing advertising in the cabs?
@David - more information is almost always better and Google has one of the best dbases of personal information in the world. But you have to balance more data to its useful value. VeriFone operates the credit card system inside the cabs so that gives them some targeting advantages as well (along with a mobile payment app). People inside taxis are already a highly sought after demographic and VeriFone leverages many targeting techniques increasing the overall value. If someone could demonstrate that more data from Google will improve ad yield by a large margin, then the Google argument would ring true. Your article would be enhanced if you had more context around the actual ad rates and sellout rates of the current taxi system. I think you would be surprised at how robust of a platform it already is.
@Chris - I admit that my knowledge of taxi cab advertising is limited! From a consumer-perspective, I can tell you that the ads that I see don't seem to be targeted at all - it seems to be a continuous loop of the same ads, day after day!
The argument is certainly attractive from a pure business perspective, but quite uninviting from the standpoint of the driver, for whom driving a cab is at best an entry level admission into the job market but probably the only way they'll ever work. Admittedly it's by no means a great job but it's usually the only alternative to even less attractive lower than minimum wage jobs.
@Kenneth, I think that is true for any job that is displaced by technology. In theory, workers who lose low-skill jobs to technology can be retrained into higher-paying, higher-skill jobs.
The US is gradually shifting from an agrarian economy, to an industrial economy, to an information worker economy. With these changes, wages should increase, at least for those who are able to enter into these more skilled jobs.
Hopefully this won't turn into an economic/political debate. We might have just opened up a big can of worms!
@David - just to weigh in here from VeriFone: We recently launched the Way2ride mobile payments app for taxis, which let's you "check into" the taxis at any time during the ride to pre-pay with your preferred card, tip, and receipt options. In doing so, you've engaged in a session with the screen allowing targeting of ads, real-time buying of goods and services advertised on the screen, etc.
Today we announced an integration with Hailo to allow Hailo passengers to check in as well. We are also integrating with the other major e-Hailing apps to do the same. So whether you've hailed a cab with an app or your hand, we will be able to start delivering the functionality you are describing. As Chris mentioned, we already know where the cab is, where it came from, etc., but we believe there will be huge value when we can identify (anonymously, of course), a large enough portion of the riders to make it interesting to advertisers at that level.
@Jason - that's fantastic to hear, it sounds like you are building technology that is valuable for both the consumer and advertiser.
I would be curious to know what percentage of passengers use cabs frequently enough to want to download a mobile app. For example, I probably use a cab 5-10 times a year and that is spread out over different cities, so the value for me of an app would be limited. I suppose the same argument could be made about e-hailing apps like Uber.
In theory, if Google allowed you to login with your Google login (and Google Wallet), this would be a superior experience for people who do not see the utility of downloading a standalone app. Just a thought!
I speak as a customer when I say I hate the ads in the cabs. I hate the whole video thing that's hard to turn off, and I hate the way the whole taxi industry (in the U.S. at least) has resisted the use of credit cards — and then, when they caved in, defaulted the tips on the display to your choice of 25%, 35% or 50%. That said, I think integrating the cab business with geo, search, mapping, services like Uber and Lyft... and mobile in general is likely to be a winner, however it plays out. Just remember that what makes Uber and Lyft so useful is better signaling of intent by customers who don't need to be guessed at in the here and now. Not better advertising.