Getting Inside the Gett-Juno Deal

Getting Inside the Gett-Juno Deal

Written by Assaf Gilad and Dan Schwarzman

Gett and Juno, two transportation apps operating in New York merged earlier this week to better fight incumbents such as Uber and Lyft. The two share some things in common: they are small players in NYC, and they were both founded by Israeli entrepreneurs.

Not a lot is known about this deal, so let’s go over the details: Juno shareholders will get $200 million, probably in Gett’s stocks, in exchange for 100% ownership over Juno. By doing this, Gett, which had some limited success with New York taxis, will own the third most popular transportation app in New York (or second, if you ask Gett’s people).

Juno achieved their status by poaching highly rated Uber drivers and promising them better terms and benefits. Juno takes a commission of 10%, the lowest in the industry. For a thirty dollar ride, an Uber driver would keep $19.11 after commission, taxes, and fees, while a Juno driver would get $23.61. In addition, Juno offered its drivers shares in the company, in a model that incentivized them to drive more for a longer period of time in exchange for earning more shares.

Here are some important points worth mentioning following the deal:

1.Gett is now affiliated with the affluent Shabtai family, a major, low profile shareholder in Juno that has made a fortune selling chat app Viber to Rakuten in 2013. The family, led by Gilad Shabtai, saw about $500 million dollars from Viber’s deal and will potentially be able to lead further investments in Gett.

2.The success of the deal depends on the reaction of Juno’s drivers: As one of biggest perks promised by Juno was its shares, the acquisition deal had all the restricted stock units being nulled. Those who are qualified for RSUs will be cashed out, and Gett said it will embrace a similar model for its drivers without getting into details. The 10% commission will stay the same, along with 100% of all tips.

But for the deal to succeed, Juno and Gett will have to effectively manage their promises to the drivers. Several drivers have already complained to Recode that they had received around $100 for their shares, regardless of how many shares they had accumulated. If Juno is able to manage their drivers’ outrage, and Gett is able to promise the same terms promised by Juno – and keep their promise – the deal’s future seems rosy.

3.Gett’s CEO Dave (Shachar) Waiser said in 2016 that Gett will stay European-centered. With Juno’s acquisition, Gett will become a medium-sized player in the U.S., something which will require massive future financial rounds in order to subsidize rides in order to compete with Uber and Lyft.

4.Gett had always partnered with actual taxi drivers, so the company was not subject to the same legal confrontations that competitors like Uber are suffering from in many cities for acting against professional drivers’ interests. With the Juno deal – Gett is now prone to regulation more than ever.

Gett – Basically a Tel Aviv, Moscow and London-based app

According to a Zirra research, Gett’s initial attempt at penetrating the US market has not been as successful as they hoped. Despite strong marketing efforts, attractive fixed fares, and CEO Shahar Waiser moving to New York (and even changing his name to Dave), the company’s New York business is not yet profitable and trails behind competitors.

Gett claims to be the market leader in Europe in terms of volume of rides, revenues, and profits. Within Europe the service is currently live only in Russia and the UK, indicating much more room for growth and building on their market lead. Despite talk over five years ago of launching in France and Germany, Gett has not yet entered those markets. Yandex Taxi holds the largest share of the Russian market, and in France Uber has taken a leading role but met with serious resistance from Taxi drivers and from the French government. German companies MyTaxi and Taxi.eu lead in Germany, where Uber has run into issues and been forced to leave all but Berlin and Munich.

Despite low-profit margins, the extensive Russian market is one of Gett’s strongest. Gett has also received investments from Moscow-based Baring Vostok Capital Partners and a $100M loan from Russian bank Sberbank, which is also one of Gett’s corporate customers. App ranking histories show that Russia is Gett’s fastest growing market. According to data from App Annie and SimilarWeb, the Gett app cracked the top 100 Android apps in Russia in October 2016, making it up into the 40s before slipping in 2017. Gett is also a top 100 app overall in Israel but does not crack the top few hundred in the UK or US.

More according to the research, the leader in web traffic for Gett’s website is Russia, with 52% of all visits. Israel follows with 20%, the US has 9%, and 9% comes from the UK. The social page that provides the most referrals to gett.com is Russian social network VKontakte, with 56%, compared to 29% from Facebook.

Gett’s biggest competitor in Moscow is Yandex Taxi, owned by Russian internet search giant Yandex. Yandex Taxi accounts for about 55% of all taxi rides in Moscow, with Uber and Gett together handling about half of the remaining 45% of rides in the city.

A survey cast by Zirra show that users’ biggest problem with Gett is its limited locations and availability. One expert points out that Gett’s supply of cabs is strong in cities like Tel Aviv and Moscow, where rides can be found even during peak hours and for short trips, is improving in London and is weak in NY, where coverage is mostly for rides to and from their airports.

This article is based on a Zirra Deep Report on Gett. If you wish to get a Deep Report on a startup company, contact us here

 

 

 

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