In-car entertainment startup takes a backseat ride to success | Crain's Baltimore

In-car entertainment startup takes a backseat ride to success

Vugo, an advertising platform launched in 2015 to geotarget consumers via a tablet installed in the back of a ridehailing car, has grand plans. As the vehicle fleet goes autonomous, Vugo expects to dominate its competition by doing what it already does: calibrating content to passengers. The Minnesota-based startup, piloted in ridehail-dense Los Angeles, may leave the big car manufacturers to grapple over driver-oriented features rather than the entertaining of passengers.

Although there is nothing to stop a passenger from watching content from their own phone or tablet, Vugo has an algorithm that generates ads based on chosen content and location. With the ability to target a demographic baked in to message delivery, the benefits to advertisers are obvious. For content providers, they get sold on using Vugo with audience data, so even the entertainment content that could one day run ad-free goes to a researched audience.

Founder James Bellefeuille, who believes free transportation is in our future, spoke with Crain’s about the in-car entertainment landscape, what he and co-founders CEO Rob Flessner, CTO Eugene Kurdzesau, and vice president of sales Michael Dillon have planned and how they found a place in the automotive industry.

Q: The head of Daimler told Road and Track last year that in the next “couple of years” you’ll see more change in in-car entertainment than ever before. Do you agree?

I would say that in-car entertainment is probably going to change as rapidly in the next year to the year after. I’d specifically say from 2018 to 2019 [you’ll see the advent of new technology].

Q: What happens then? Is there some patent that people are racing for?

There are patents up the wazoo. Ford is working on an entire windshield system, which I think is awesome. Google has a multitude of patents. But in-car entertainment is going to be a battleground for all these companies because that is – in my opinion – where the revenue is going to be derived, from the consumer engagement side.

Brands overall are going to become less important. Do you know what brand of water is coming out of your tap? I don’t. I don’t know where it’s coming from or who is cleaning it. All I know is there is a minimum amount of quality that I expect. And that’s [how it is] going to be [with] transportation, or “mobility as a service” is the term people are using. The differentiation [will be] in the in-car entertainment system. What is the overall passenger entertainment experience?

Q: How do you see smaller apps overtaking the major auto manufacturers in offering these services, or being competitive enough that you can form a partnership?

The answer is really two-fold. It’s that in the automotive space, a $5 billion market is considered a niche market. Outside of the automotive space, a $5 billion market is a market all by itself. We think the for-hire entertainment space—for-hire taxis, rideshare vehicles, et cetera—is a $5 billion market. It’s essentially blue ocean: there’s very few competitors outside of the traditional TV taxi market.

The bottom line is, automakers could do this. There is nothing that with the capital and talent of a Ford or a General Motors [they] couldn’t do in theory, but it’s more about what they choose to prioritize.

Vugo [is] exclusively focused on passenger entertainment without thinking about the driver whatsoever.

There’s nobody developing a passenger-only entertainment system. And if you accept the fact that self-driving cars are going to be here in 2018, why aren’t you focusing on passenger infotainment or entertainment as much as driver infotainment?

I think I have a pretty good idea of the market. I think there are some systems that are dual purpose. But there’s nothing that [asks] ‘Hey, how are passengers going to be entertained?’

Q: On the topic of content, I know that you have been in talks with multi-channel networks.

The objective that we have is giving the passenger the remote control so that they can choose from a multitude of channels.

Q: How do you see this interacting with your vision for eventually getting to free autonomous ridehailing from the advertising side? Do you see content providers developing licensing agreements with Vugo and eventually driving down the cost of ridehailing?

Absolutely. But I’d say it’s not going to be the content providers that drive down the cost. It’s going to be autonomous cars and greater vehicle utilization.

In the future there’s going to be more passengers per car. Instead of one family having four vehicles, three families [will share] one vehicle. That vehicle would be a part of a mesh network of vehicles that would be on-demand as you need it. And what that does is it brings the unit economics of advertising to the public. More eyeballs [on a screen] per car, results in more advertising revenue per car [to offset the fare].

Q: Let’s talk about breaking into the in-car entertainment space. Where do you start?

You need to know which side of the marketplace comes first. Like if you build it, do they come, or when they come, do you build it? Every market is different.

We decided data that comes from [ridehailing] drivers on the road comes first. The vast majority of [car companies] want to see pilot data so that they can build out their financial predictions to build a mobility-as-a-service platform like Vugo.

Q: How did you make the contacts, or form the partnerships?

It goes back to press. That’s why Vugo is very friendly to [the] press. When [we started in 2015], we got covered by Forbes. Then we got covered in AdWeek. When we got covered in AdWeek, my phone practically melted.

I don’t think cold calling works at all.

Networking happens after you establish a reputation. The opportunity that Techstars gave us, inviting us to exhibit at Automobili-D at the Detroit Auto Show – things got a lot easier after that.

Q: Is there one major auto manufacturer that you think is the most out in front right now?

I’d say General Motors is way ahead of everyone else. It’s No. 1 in the mobility-as-a-service space. They bought out Sidecar, which was first in the ridehail space and they bought out autonomous car technology, Cruise Automation. That sets them up to have a huge advantage in autonomous vehicles. GM also made an investment in Lyft.

Daimler is doing a lot as well, but I’d put GM at the top.

Follow Vugo on Twitter @Go_Vugo.

May 9, 2017 - 1:08pm