Careem’s Super App Ambitions Face Challenges Amid Eroded User Base

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Careem, the leading ride-hailing company in the Middle East, Northern Africa, and Pakistan region, faces significant hurdles as it strives to establish its super app model. The concept of super apps, popularized by successful platforms like WeChat and Gojek, involves building a robust user base through a core service and then expanding into additional offerings. However, Careem’s ambitious expansion plans have encountered obstacles due to an eroded user base and intense competition in the market.

Careem launched its super app in 2020, diversifying its services beyond mobility to include food delivery and payments. While the app flourished in Dubai, where its headquarters are located, the story was different in other markets, such as Pakistan, where the food business was shut down in 2022 and the payments vertical struggled to gain traction. Furthermore, Careem faced fierce competition from rival platform InDrive, causing a decline in its core ride-hailing business.

Relevant Read: e& to acquire a majority stake in Careem Super App

The financial strain resulting from the acquisition by Uber limited Careem’s ability to invest in its core services, let alone expand into new verticals. However, a recent development has brought a glimmer of hope for the company. Careem announced a $400 million investment for its super app from e&, the Emirati telecom group and partial owner of PTCL. This partnership with e& aligns the interests of a cash-strapped tech company with a telecom player seeking new revenue streams.

Telecom companies like e& have long been proponents of the super app model as they face declining average revenue per user from traditional services. By leveraging their extensive customer base, telecom companies aim to unlock new opportunities in the tech sector. For example, Veon previously invested heavily in its own version of WeChat but ultimately transitioned to multiple platforms across different categories, such as financial services, video entertainment, and audio streaming.

While Careem’s partnership with e& offers potential advantages, the company faces the challenge of rebuilding its user base, which has significantly declined in volumetric markets. In Pakistan alone, Careem’s ride volumes dropped from over 100 million in 2019 to just 63 million between 2020 and October 2022. The company has also lost its top position on app stores in various countries, making it more challenging to sell additional services to a diminished user base.

Despite these hurdles, Careem can leverage e&’s large customer base to regain momentum and expand its offerings. However, this raises questions about the sustainability of subsidized growth models and the importance of solid unit economics and metrics. Careem’s exceptional ability to secure substantial capital sets it apart from other startups, emphasizing the need for founders to approach growth strategies with caution and financial prudence.

As Careem navigates the complexities of rebuilding its user base and capitalizing on new partnerships, the success of its super app ambitions remains uncertain. The company serves as a reminder that conventional wisdom in the startup world does not always guarantee success, particularly when market dynamics shift.

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