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Raz Godelnik headshot

Gett Acquires Juno: 5 Lessons For the Sharing Economy

By Raz Godelnik

Last week Gett, a Tel Aviv-based ride-hailing company, announced it was buying Juno for $200 million. As reported by Johana Bhuiyan of Recode, “While Gett is acquiring Juno’s assets — including its founding team — Juno will still operate as an individual platform for now, called Juno by Gett.” The two ride-hailing companies will join forces, hoping to become the second largest player in the New York City market after Uber, a place now occupied by Lyft.

This could be tough as Lyft provides about 55,000 trips a day in New York City, compared to about 35,000 trips a day with Juno and Gett combined. (Uber, just for comparison, gives 250,000 rides a day in New York.)

But the real challenge Gett and Juno must now address is a backlash from Juno’s drivers, who learned that the stock plan Juno once offered them is now void. Instead drivers can receive cash payouts, which are far smaller than what they expected: about $100 to $200 per person, according to some estimates.

Keren Kessel, a Juno spokeswoman, told Quartz in an email that the company’s stock program is being replaced with a “new cash incentive plan” for drivers who continue with Juno and agree to the terms. "She declined to elaborate on what that plan would look like,” reported Alison Griswold of Quartz.

In the meantime, the Internet of Ownership -- a directory and portal for the platform co-op ecosystem -- announced in a tweet that “due to its withdraw of promises to share equity w/ drivers, @Juno has been removed from our #platformcoop directory.”

Regardless of whether a new plan will be offered to Gett/Juno drivers and what it will be, this is still a shock for many employees who joined Juno and enthusiastically supported its new premise to become a driver-friendly platform that cares about the drivers and sees them as an integral and important part of the company.

While we need to wait and see what consequences of Juno may face following this acquisition, there are already a few lessons that I see in this case that are relevant not just for Juno, but also for many other platforms in the sharing economy.

1. Relationships matter

This story shows how much relationships matter, at least to drivers. I take rides with Juno almost every week. And every time I ask the drivers what they like about Juno, they talk about the smaller commission the company charges them. I think there is more to it.

If it was purely about the money, then Juno drivers wouldn’t be as upset as they are now because they will still be charged only 10 percent of every ride under Gett. It is true that drivers feel disappointed about the unfulfilled equity promise, but I doubt this is just because of the money – I don’t believe many drivers actually thought they could get rich from it. I believe the main value in the equity plan was that it was a signal to the drivers that they’re truly respected by the company and are part of the company.

It seemed to be working pretty well – as its founder and CEO Talmon Marco told CNBC in an interview last October: “Our drivers refer to Juno as ‘we,' we are Juno. When was the last time you heard Uber driver saying ‘we’ at Uber. It’s ‘they.' It’s always ‘they.'”

Now, we see the backlash – “I don’t think I’ll drive for Juno or Gett anymore,” Steven Savder, who drives for Uber, Lyft, Juno and Gett, told Recode. “I’m saving more commission with Juno and Gett, but at least I know where Lyft and Uber stand. They treat us like dirt, but I know where they stand. Juno sold us false promises.”

This is a lesson in making promises, but also in the value of relationships. Sharing economy platforms that build their supply side purely on economics are exposed to greater risk due to low loyalty levels among their service providers. Platforms that build their supply side on relationships, on the other hand, will be far more resilient and be in a better position for the long-term.

2. Money matters

The Rideshare Guy blog estimates that Juno loses $2.50 to $8.75 per ride (depending mainly on the discount passengers receive, which can be up to 35 percent). Multiplied by 25,000 daily rides, the blog suggests the company loses “anywhere between $1.9 million to $6.6 million per month.”

As the company apparently raised only $30 million, you can see that Juno couldn’t continue operating for long without taking some measures. The company could look for another round of funding, dig deeper into its pockets (Marco sold its last startup, Viber, for $900 million), increase prices/reduce discount to riders or increase the commission it takes from drivers, or look for a partner/buyer.

I won’t get into the question of whether the choice the company made is the best one. I guess only time will tell. The lesson though is that money matters -- or, in other words: You can have a great vision coupled with a human-centered approach to business, but if you can’t operationalize your vision effectively and figure out how to make the unit economics work, you will find yourself out of business pretty quickly.

This is an important lesson especially for platform co-ops and other platforms that focus on values. Values can certainly be key to your value proposition, but you can’t avoid the competitive environment. And if you can’t marry values with value creation and delivery effectively, then it’s game over for you.

3. Transparency matters

Gett said it’s paying $200 million to acquire Juno. Apparently most drivers will get a $100 to $200 payout. The Rideshare Guy blog did the math: “If Juno had 12,000 active drivers and they all got a $100 to $200 payment, that’s only a $1.2 million to $2.4 million payment. So what about the other $198 million?”

The answer to this question is probably complex, but it's an answer that should be given to the drivers and, frankly, the public. If Juno is truly committed to being “an ethical ride sharing service,” as it described itself in an email to the drivers announcing on the acquisition by Gett, it needs to walk the talk and explain to employees who is getting what from the deal and why they get only 1 percent of the payment.

Traditional business may be able to avoid such level of transparency, but not for long as clarity becomes key to anyone claiming to be a socially responsible company. For platforms, this is not even a short-term option: Those that avoid it will find themselves dealing with frustrated service providers with little trust in the platform and no incentive to provide customers with great service. That road leads in only one direction.

4. Leadership matters

Another lesson from this case pertains to leadership. Some may say that crafting a new vision, working hard to successfully operationalize it and taking whatever steps are necessary to make it work is indeed a manifestation of good leadership. This may have been true in the past, but I don’t believe this is the case anymore, especially not in the case of platforms.

Platform leadership requires a system leadership approach, one where leaders “need to look beyond what their firms own or control, monitoring and addressing complexity outside their firms," Martin Reeves et al. explained in the Harvard Business Review last year. "CEOs must ensure that their companies contribute positively to the system while receiving benefits sufficient to justify participation. Companies that fail to create value for key stakeholders in the broader system will eventually be marginalized.”

In addition, platform leadership requires the ability to empathize not just with your customers, but also with the service providers, communicate it effectively, and be transparent and honest.

Effective platform leaders must embrace new skills. Traditional leadership is no longer effective because platforms are not traditional business environments. So far we haven’t seen this type of leadership in this case, which seems to be one of the reasons why drivers are so disappointed.

5. Culture matters

In a previous article comparing Juno’s business model with Uber’s, I wrote the following about Juno:

“An important part of the company’s attractiveness to drivers comes from providing them with equity. This equity can be realized either when the company becomes public or is sold, which means there will probably be some internal pressure to do so. However, in both cases the culture of the company could dramatically change as a result of a new owner’s agenda or pressure from the financial markets. Etsy, in its public company form, is a good example of this tension.”

Juno’s business model was grounded, as I wrote, in a humane culture -- “one that respects its service providers and is centered around their needs as much as it is around those of the riders.”

Now, even if Juno miraculously recovers from this crisis without any long-term damage, the question is still out there: What’s the culture of Gett? Will it be just like Juno’s culture? I doubt this will be the case, but we’ll have to wait and see.

Beyond the notion that culture is important, the real lesson here is how fragile a culture is when it is mainly based on its founder’s mindset and has no beams to support it. Platforms that want to build resilient cultures will need to look for better ways to ensure their cultures can survive different shocks, including the one we see in this acquisition.

Image credit: Gett

Raz Godelnik headshot

Raz Godelnik is an Assistant Professor and the Co-Director of the MS in Strategic Design & Management program at Parsons School of Design in New York. Currently, his research projects focus on the impact of the sharing economy on traditional business, the sharing economy and cities’ resilience, the future of design thinking, and the integration of sustainability into Millennials’ lifestyles. Raz is the co-founder of two green startups – Hemper Jeans and Eco-Libris and holds an MBA from Tel Aviv University.

Read more stories by Raz Godelnik