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Uber Business & Revenue Model (Everything You'd Like To Know)

29 November 2016

Uber, one of the world’s most acknowledged ride sharing app is close to getting recognized in 60 countries in its 5th year of life span. The business model of Uber is such that the on-demand app is showing no sign of slowing down. The Uber Company has already surpassed $50 billion mark as far as funding is concerned.

Pertaining to these accomplishments, it would be unfair to assume that Uber just got lucky. Well, Rome wasn’t built in a day. From its initiation to completion and execution to success, the whole story of Uber consists of many twists and turns. Gaining a good knowledge of Uber’s business model would give us a good insight of the journey from a small app to a world-wide on demand phenomena. Let’s dive into some useful insights and know about the business model of Uber in detail. Get ready as we take you to the ride of knowing the unknown facts about this company along with customer’s segments, revenue model, cost structure, and key problems.

A peek into the stats about founders, funding received and respective timeline

  • Uber was founded by the duo of Garrett Camp and Travis Kalanick
  • The company is headquartered at San Francisco, Unnited States
  • Company values at over $51 billion
  • There were as much as 8 Million Uber users recorded at the start of 2015
  • Total of 1,60,000 drivers were registered at the start of 2015
  • Total funding received by Uber sums around $8.2 billion
  • 50,000 new drivers are registered with Uber every month
  • Uber host 1 million trips every day

Uber Timeline

While the company is still growing, its ups and downs can be seen from its timeline since its inception. As a part of Uber’s successful Business model, here is a step-by-step info on how the company evolved and was finally able to create a first of a kind revolutionary tide in the on-demand arena:

  • March2009-The idea was visualized with the initiation of UberCab. This gave rise to the first office of the company under the name of Uber
  • July 2010-Uber met its users for the first time. The year saw this on-demand app going live for the first time in San Francisco, California
  • February 2011-Uber raises $11 Million in Series A
  • May  2011-Just like San Francisco, Uber went live for users of New York City
  • December 2011-Expanding into the beautiful city of Paris, Uber raised $37 million in B round series
  • July 2012-this month witnessed the launch of UberX. The ground-breaking app gets released in London
  • Aug 2013-$258 million were raised as Series C. The expansion continued to India, S. Africa and many more countries
  • July 2014-Uber reached world’s most populated country-China, and further spread to Nigeria and Laos
  • Dec 2014-Uber raised $600 Millions
  • January 2015-Uber launched Uber Cargo and raise 1.6 Billion
  • August 2015-A private equity funding of $100 Million is raised by the company
  • January 2016-Uber received $2 Billion as private funding equity

Value Propositions And Salient Features Of Uber Business Model


Ease of use
A Uber user can simply use his smartphone to call a cab at his precise location. When notified about a call, a driver has the privilege to accept or reject the call. Once the driver accepts the call, his details are sent to the user looking for the ride.


Tracking at its best
Serving the best of technology to both parties, Uber gives the user the details to track the driver while driver gets the details through which he can track the user and reach his location.

As far as the payment is concerned, the procedure is handled and simplified by Uber itself. Besides all types of online transactions, countries like India have started accepting payments in the form of cash given directly to the driver.

Payment
Another important feature of Uber Business Model is that it has review system through which travelers can rate the driver once a ride is completed.

Benefits for customers
The foremost benefit of Uber is same as that of on-demand economy. Customers now don’t need wait long times for availing taxi. Uber also provide certain discounts and deals for regular and new customers. Comparatively, Uber costs less than traditional taxis. Also, the fares for places like airports and hotspots are fixed. And what’s more? You get to travel in styles through safe and stylish taxis.

Benefits for drivers
Drivers registered with Uber gets additional source of income that is regular and stable. Furthermore, drivers get to work according to their need in a flexible schedule. Uber cater to the needs of not only customers but drivers as well as they pay them to be just online, if they are not getting any calls or request.


The Revenue Model Of Uber Explicated

A major part of understanding Uber Business Model involves diving deep into the pool of revenue model of the company. Here’s all you need to know about those big numbers the on-demand giant is earning:

1. Uber offers different cab models for different customers-an offering like no other
Uber X, Uber black, Uber taxi and Uber SUV are the models offered by the company for its customers. Be it a will of travelling in a black car, or that of saving money by travelling in Uber Taxi, or a need of travelling with family in a comfortable Uber SUV, you can get it all with the help of simple Smartphone taps.

2. Robust pricing technology
Arising from its variance in cab models, the fare charged is also an important aspect of Uber’s Business Model. This involves asking rates according to the situation, time or traffic density. The company usually increases price when the need to travel increases. Overall, the price depends on the number of drivers available and the number of calls or requests by people who are in need of a quick travel.

3. Uber for everyone
Uber is now offering rides not just through cabs, but boats, ferries and helicopters as well. In Paris, the company has launched a motorcycle-pickup service as well. The initiative also involves a delivery service through ice cream in 7 cities. Adding new sources of revenue to Uber Business Models, such initiatives have increased the popularity of the app in different geographical locations.


How Does It Works–The Operation Model Of Uber

Uber follows a precise four step model that clarifies its operation:


First step-requesting a cab
This step creates a demand for transportation services. Through the app, people can use Uber and request cab instantly to their exact location. Customers can even schedule the cab to arrive later


Second Step-connecting
When you send a request to a Uber cab driver, he has the option to accept or reject your call. In case he accepts, all of the details about the customer are sent to him for pickup. If the driver rejects the call, the request is automatically transferred to another driver in nearby location.

Third Step-Riding
When the request is accepted, customer gets the details about when the cab is arriving. He is also shown the estimated time for arrival on the smartphone itself. The meter starts ticking when the customer sits in the cab. This can also be tracked in the customer interface of the app. Riding is an important aspect of Uber’s business model and the driver has to ensure that the ride is comfortable and safe.

Fourth Step-rating and payment
When the ride is over, fare is paid through cash. Also, the customer gets the privilege to rate the driver according to the travelling experience. A good rating will help a driver gets noticed among other customers on the app.


The Success Story Of Uber

Uber has come a long way from being a simple unknown app to a leader in the on-demand arena. The credit of its success can be given to several factors:

Traditional Taxi Trouble
As with the local system of travelling through taxis, earlier we had to stand, wait and search for a can ourselves. Besides waiting time and inconvenience, the high rates charged gave a difficult time to every commuter. The traditional taxis used to charge as per their will and even doubled the amounts during peak hours. Besides this, finding an empty local taxi in traffic was a tough thing to do.

How Uber acknowledged the problem
Foreseeing the problems arising from faced with traditional taxi systems, Uber decided to take the help of technology to device an impeccable solution to the commuting crisis. Keeping the on-demand module a core of Uber business model, the idea of booking a cab from a smartphone was unearthed. After its official launched in 2010, Uber totally changed the way people travelled and brought the old cabs commute into trend once again.

The obstacles faced and conquered by Uber
Uber was first launched in the city that breathes internet-San Fransico. This gave it an edge in its particular geographic area. The cold calling gave way to first few drivers of Uber, out of which many were either professional drivers with other companies or self employed. Like a smart start up, Uber took to social media in order to gather first few customers. By offering discounts and fewer rates, the success story of Uber sailed through major obstructions. Customers started travelling thorugh these digitized cabs enthusiastically and felt a lot much safer while travelling. The offerings of rides from venues to a customer’s doorstep gave birth to a ripple in the ocean of on demand technology. Uber also offered rides to corporate world who would require daily travel to offices and workplaces.

Help came from reviews and referrals
Giving a top notch experience, the Uber customers were usually baffled by the comfort they got while travelling. This turned first time users into potential regular customers and helped spread the name through reviews and word of mouth appreciations. This fact is said to be one of the most vital facet that helped in the advertising of Uber.

Unique Selling points of Uber
Uber offered rides for party people who could go to club and reach parties or events on time without having to drive a car or rent a vehicle. Uber also acted as a charm for business travelers and tourists. The cab arriving at your doorstep even in bad weather conditions made people travel where they would have sat at home otherwise. At last, one important USP of Uber was that it made the city’s nightlife more alive by offering commute in late hours.


Problems That Still Faces

Though the Uber Business Model seems unimpeachable, it still faces some issues:

1. Lawsuits: the San Francisco and New York courts have alleged the company in different lawsuits that are still pending. The issue is about Uber’s statement about all drivers being its partners. The court however thinks that the drivers are the company’s’ employees. Along with Uber, many other companies are facing such lawsuits that hired 1099 lawsuits.


2. Tribulations with new city launch - whenever Uber launches a new city, it face problems as to how to hire new drivers and drive customers at the same time. Offline marketing comes to the rescue at this point of time and the company has to initiate certain discounts to gain popularity in the particular geographical area.

3. Safety and behavioral Issues - grass is not always greener on the other side. There have certain incidences where drivers have misbehaved with the passengers. Also, there have been cases where the drivers have heated up the modesty of female commuters to a level that is intolerable. This poses a big challenge for the Uber Business model. Company is making efforts to ensure the safety of customers by verifying the IDs of drivers and checking their details to increase safety.

Things to learn from Uber Business Model

As with every success story, Uber also gives us certain take away to be kept in consideration by startups as well as established organizations. Here is a description of things to be learned in a nutshell:

  • Chose your niche and develop your industry in it. To elevate your value, always tease a common problem that common people face. Find a solution to it through technological tools and you are all set to become a legendary initiative
  • Start with minimal ownership model. Till today, Uber does not own cab yet provides over 1 million rides per day through its network of partners. Such is the grandeur of Uber Business model.
  • Always serve your initial users best. They are like your first impression you will have on your future customers as well as investors.
  • Take steps with time and expand with every step. Do not think of achieving and investing everything at one go. The project of Uber that started with just cabs now serves through helicopters, bikes and even boats.
  • Never stop looking for opportunity. Customers are out there waiting for your service. You will have to approach them yourself. Uber did this by offering discounted rates and robust marketing.
  • Uber mentions its drivers to be its partners. This is a good example of how you should always respect and value your workforce if you want to grow in business.

Today Uber stands tall in the list of world’s most profitable and well-established on demand companies. The company has not just became a rebellion of taxi services, but also represents a business model that edify a lot of things to other companies looking to grow. By gaining a deep insight into Uber business model, we expect that you will understand how success is achieved and what the complications faced by every successful company.

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Lakhwinder Singh Lead Developer - Mobility

Lead Mobile App Developer, covers wide range of technologies applied to the development of websites and business applications too. Enjoys doing creative things in Mobile and is passionate about developing unique Mobile Products.

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