Acquiring users - at almost any cost?

There's no escaping the fact that our global cities have become battlegrounds for potential transport disruptors. From Uber's well-documented regulation battles and Lyft's regular headline grabs to Parisian taxi drivers' apparent dislike of any change and London's battle to preserve its iconic black cab. None of the new market entrants - including London's black-cab-only Hailo - are end service providers, all using technology to connect a network of users (riders) and providers (drivers), in the truest sense of platformisation.

The latest platform entrant is Karhoo. A 'new' arrival, set up in January 2015, Karhoo is not without backing, having raised $250m+ in funding so far. (A sizeable sum, but one that pales in to insignificance against Uber's - which is nearing $10bn). The company was founded by Daniel Ishag and is globally headquartered in New York, with regional hubs in London, Singapore, and Mumbai - where it has courted major industry players in the private hire sector: Addison Lee in London, and Comfort Delgo in Singapore, etc.

Karhoo is best described as a mashup of the comparison sites so familiar to financial services and travel (think: CoverHound, Compare The Market, Priceline, Kayak) and the now (in)famous Uber. Riders can instantly summon a car from several locally available private hire companies, selecting journeys by fare or proximity to pick-up. When it works, it works well. And, in my experience, it mostly works. Having a selection of companies to choose from, as well as having the ability to filter by price and ETA, gives a greater sense of control than many of the apps Karhoo would count as rivals.

So, if it does work so well, and Karhoo is acquiring users at an eye-wateringly-high rate, why is the company incentivising users to a level I've not seen in a very long time?

I joined Karhoo a couple of months ago, as a referred user. Both I and my referrer benefited from a member-get-member function that is increasingly familiar to us all - £10 in app credit each. This is relatively standard and £10 seems a fair user acquisition cost. Incidentally, if you'd like your own free £10 ride, add promo code 'CRAIG549'.

But it didn't stop there.

Since, I've received an email from Karhoo at least once a week. Each has offered a £20 free ride code, with almost no restriction bar none of the codes so far being usable on Saturdays. In the last two weeks, since its rebrand (marketed as a launch month in the UK) I've had three of these codes every week - and the last email said I will continue to do so throughout the rest of May. By then I'll have had more than 16 of these £20 credits.

Added to that, Karhoo has (seemingly) had some platform teething problems following the app's redesign. I've had two cars not turn up, two cars cancel, and one car over-charge me. Each of those incidents led to a £15 credit also.

Which totals £405 (nearly $600) in 100% free Karhoo credit.

I understand the marketing psychology behind prompting lapsed users, or the staggered support strategy required to onboard new users. But, surely this level of user compensation - when the user in question (me) hasn't even had time to lapse or prove he needs to be encouraged to onboard - is unsustainable, non-productive, and wasteful? It has to be under-benchmarking in returned user commitment.

If I'd have had my initial £10 welcome, and perhaps a couple of well-timed £10 codes (during bad rain, problems on public transport, late evenings etc), I'd have booked several more journeys with Karhoo - and they wouldn't have had to subsidise every single one of them.

I've still not spent a single penny with Karhoo. I certainly won't until the freebies look like they're stopping. And - even then - as all of its marketing (to me) has focused on promo credits (rather than unique service features) I'm not guaranteed to have enough reasons to when I'm paying for journeys myself.

Again - while the Karhoo gravy train is travelling at full speed - if you'd like your own free £10 ride, download the app and add promo code 'CRAIG549'.