When Careem announced $1.7 million in investment from STC Ventures last week, it seemed like a timely response to the entrance of its rival, global transportation company Uber, into the local market. Both companies offer customers the ability to order a private car service directly via a mobile application.
Uber, which was founded in 2009 in San Francisco, launched in Dubai with a splash, offering well-known television anchor Riz Khan a ride, just days after announcing that the company had raised $258 million from Google Ventures and TPG investment, at a valuation of US $3.5 billion. A week after that, Uber poached talent from Google, Klout, and Facebook.
With those numbers, Uber may become the Goliath to Careem’s David as it enters the Middle East. Yet, with a fresh round of investment, Careem is buckling down with a plan to own Saudi Arabia. After testing in Doha and launching in beta in Riyadh, the company plans to expand into Jeddah and Dammam next year.
In Riyadh, its service is growing “50-60%” month on month, says cofounder Mudassir Sheikha, as its early adopters- business travelers, women, and members of the tech community- test its new fleet.
Saudi Telecom Group-backed STC Ventures will boost the company by promoting the Careem app on its own app store, helping the company set up its local administrative branch, and, in the future, exploring mobile billing options, says Partner Angus Paterson.
It will also help Careem fight for quality assurance in a fragmented market with a low bar for service. “Where to start?” Sheikha says, when asked about local challenges in Riyadh. “Some drivers are accustomed to driving in jeans and slippers; they’re not used to opening doors or helping with the luggage.”
To solve that problem, Careem selects the drivers it prefers, and then adjusts the amount of work each driver receives- in all of its markets- based on customer feedback.
Its bigger challenge, says Sheikha, is sourcing the right cars. Careem, like Uber, partners with local limousine services to provide a fleet of cars. In Riyadh, where several small car companies own only 10, 20, or 30 cars, often cars are Camrys or economy models, not the “Lexus and Audi models” that the company prefers. Initially, Careem was forced to use SUVs instead, yet thanks to the influence it has built with local companies, “you’ll now see Lexus becoming a part of the market,” says Sheikha.
These idiosyncrasies in the Saudi market might make it more difficult for a foreign player like Uber to enter, not that Sheikhaa, who is Pakistani, or his Swedish partner, Magnus Olsson, are locals. Yet their local experience has granted one insight that may ultimately define the difference between the two companies in the Middle East: Careem offers the option to pre-book service, while Uber’s technology is designed to only offer immediate orders.
This February, Careem also launched a “Now” service, which emulates Uber, allowing users to order a car immediately and track its location in real-time. Yet today, Careem is still seeing 70% of its order placed for pre-booked trips.
“Doing prescheduled booking is a logistical problem; it’s no longer a technology issue,” says Sheikha. Unlike Uber, Careem also offers customers a direct line to call. “We believe that in this market, you need to be a bit more in front of the customers,” he explains.
Uber, however, has been very quick to secure local partnerships. Just yesterday, Souqalmal.com, the review site for financial products, announced that it was offering complimentary rides on Uber for the first 1,000 users to post a review on the site.
Ambareen Musa, the site’s energetic founder, said that the partnership was a natural fit; after Uber’s general manager in Dubai met her at an INSEAD alumni event, he approached about a promotion, hoping to get the word out. It’s been “phenomenally successful” within the past day, says Musa. “People seem to need it.”
Yet, she admitted, “when I need a pre-booked car, I book with Careem.” Uber, she says, will hopefully eventually scale to have a large enough fleet that it won’t need to offer pre-booking. Or, Uber could stick to serving its population of international travelers with its current services. But, she concludes, “there’s space for two in this market.”