Startups aim to put video ads in ride-sharing cars

RiderAds, started by Harvard Business School students, is offering full-time Uber drivers $150 a month to install its ad system.RiderAds

Anybody who has plopped down in the back of a taxicab has probably found their gaze drawn to the TV screen bolted to the seat backs, playing an endless loop of news snippets, late-night monologues, and local commercials.

Now several startup companies are hoping to bring in-ride video advertising to Uber and other car services that are hailed via smartphone apps. And they’re forging ahead even though Uber, the most powerful company in the market, does not love the idea of outsiders putting ads in its customers’ faces.

Uber, of course, is a paradigm of determination, having built a multibillion-dollar business by plowing past intense opposition from the entrenched taxi industry.

“We took a page from the Uber playbook and said, “We’re going to do it anyway,’ ” said James Bellefeuille, chief executive of a Minneapolis video-ads startup, Viewswagen. Uber’s attitude toward in-car advertising, he said, “was not going to sway our decision one way or the other.”

To get drivers on board, Viewswagen offers 60 percent of the ad revenue it collects. It is unclear how much an individual driver can get in one shift from the ads.

But those direct deals with drivers can make relations with Uber tricky.

Uber regards drivers as independent contractors, not employees. That limits the amount of say it has over a driver’s activities.

“We don’t believe that in-ride advertising enhances the ride experience, and we discourage driver partners from working with third-party in-ride advertisers,” Uber spokesman Taylor Bennett said. He said Uber has no affiliation with any in-ride advertising companies.

The popularity of ride-hailing services has prompted investors to pour money into the two largest companies, Uber and second-place rival Lyft. Uber has raised more than $5 billion from its investors, while Lyft got about $860 million. The services are available in dozens of cities across the country.

At that size, it’s little surprise that entrepreneurs have identified Uber and Lyft as fertile ground for building their own businesses.

In Boston, a group of Harvard Business School students hopes to capitalize on the idea with a startup called RiderAds, begun as an entrepreneurship class project earlier this year.

RiderAds recently completed a pilot test with advertisers and Uber drivers in the Boston market and is now seeking advertisers that might help it launch more broadly by the fall. The startup was offering full-time drivers — those who make at least 100 trips in a month — a flat monthly fee of $150.

In its rollout, RiderAds used inexpensive Android-based tablets to display video spots from local advertisers during Boston-area Uber rides.

RiderAds says that drivers are open to the idea for a simple reason: more money. As Uber and Lyft both enlarge their rosters of drivers and battle for market share with lower prices, the drivers themselves face more competition.

“Obviously, anything that allows them to increase their income with minimal effort is attractive,” said RiderAds’ co-founder, Tyler Sipprelle. “We want to make this extremely simple for drivers. You attach this to the back of your passenger seat, and then you don’t have to do anything. And you get paid for it.”

Viewswagen, which says it has signed up about 1,000 drivers and has an advertiser already on board, appears to be the most advanced startup in this burgeoning market.

Bellefeuille got the idea while he working as an Uber driver. The proprietor of a cafe suggested he carry some menus in his car.

“Shortly after I did that, I had a couple visiting from New York and they asked, ‘Hey, where should we go to eat?’ ” he said. “That got my wheels turning.”

Viewswagen thinks it can improve on the existing model for in-car advertising by using data from the rider’s trip to decide which advertisements to show.

Viewswagen’s software, Bellefeuille said, can use the rider’s destination, the time of day, and other “environmental” factors to help provide a relevant ad without relying on more invasive data-collection.

“If you’re going to DSW shoes, you’re likely going to buy a pair of shoes, right? In theory, Nike would be able to influence your purchase decision once you reach DSW shoes,” he said. “There’s absolutely no personal data. Zilch. Nothing.”

Of course, making money on in-car advertising sounds like something car-dispatching companies might like to do themselves one day. But Uber says it isn’t kicking drivers off its system purely for using in-car video ads, even though it discourages their use.

Lyft declined to comment.

Both Viewswagen and RiderAds note that Uber and Lyft are currently fighting federal lawsuits that question the fairness of their independent-contractor arrangements with drivers.

To eager entrepreneurs, that ambiguity looks like a golden opportunity.

“The reason why they won’t deactivate drivers — at least not yet — is because they have this labor lawsuit hanging over their head,” Bellefeuille said.

“We’re basically using that as a temporary shield or defense so that we can build our company.”