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The Quest to Make Ridesharing Free
Model of a driverless car

The Quest to Make Ridesharing Free

How a local ad software startup is shifting its focus to change the future of ridesharing.

Company: Vugo

Founded: 2015

Location: Minneapolis

Industry: Advertising

Rob Flessner has an ambitious goal: To make ridesharing free by 2021. And he and his colleagues are confident they can make it happen through digital advertising in driverless vehicles.

Flessner is co-founder and CEO of Minneapolis-based rideshare advertising platform Vugo, which uses its patented TripIntent technology to display targeted advertisements to Uber and Lyft passengers on a tablet attached to the back of the vehicle’s headrests. Flessner, James Bellefeuille, Michael Dillon and Eugene Kurdzesau founded the company in 2015 to enhance riders’ experiences and help rideshare drivers earn extra income. But as the market shifts, Vugo is shifting its focus with it.

The company’s founders predict that within the next few years, all ridesharing vehicles in the U.S. will be driverless, and in-vehicle advertising tailored to passengers’ destinations and interests will lead to free transportation. “The idea is to put brands in front of passengers who are en route to make purchases,” says Flessner. For example, retailers will sponsor transportation to their stores so they can preview products to customers who are headed their way.

The prediction isn’t as far-fetched as it sounds. In the past year, companies such as Ford, Lyft and Uber have announced plans to launch self-driving vehicles over the next few years, specifically for ridesharing. This past summer, General Motors began testing a beta version for an app that allows customers to hail its self-driving cars, and in late September, Ford announced its partnership with Lyft to deploy self-driving vehicles for ridesharing by 2021.

The cost to operate autonomous vehicles is 20 cents per mile, says Flessner, with no labor costs. Currently, Vugo pays drivers who use its platform 60 percent of its advertising revenue. The company uses a cost-per-impression (CPM) structure, which is about $25 per 1,000 impressions. For a full-time driver, it can equate to $100 to $300 per month; Vugo currently has about 10,000 drivers in its network.

“We have already started communicating with automakers about how we can bring Vugo into self-driving cars to engage riders,” says Flessner. His goal is to eventually have the platform embedded into vehicles as they are manufactured.

Until self-driving vehicles become mainstream, the company is shifting its focus from partnering with individual drivers to direct partnerships with rideshare companies and companies that operate fleets, such as taxi cabs and airport shuttles. “We learned that there is an extremely high turnover rate among rideshare drivers,” explains Flessner. “About 50 percent quit within three months.”

In the next year, Vugo will add more than 40,000 vehicles to its network through pilot programs with three major rideshare companies. Flessner cannot disclose the companies, but one is in Southeast Asia, another in the Middle East and the third is in the U.S. He hopes to expand into an additional two to three international markets relatively soon. “There are 8 million rideshare drivers globally,” says Flessner. “And most of the market is international.”

Vugo estimates there are about 500,000 rideshare drivers in the U.S., leaving plenty of opportunity to grow domestically. In fact, most of the drivers in Vugo’s network live in Los Angeles, even though the company is based in Minneapolis. But with the Super Bowl only a few months away, Flessner says they are ramping up their efforts in the Twin Cities.