Its undeniable that Uber, the on-demand service for transportation, has transformed the way that people use transport. In just under a decade, Uber has emerged as a new and innovative market leader within the sharing economy. With the realisation that there were areas within the transport industry that needed to change, Uber has forever revolutionised the way that we hail a taxi.
What is Uber?
Uber Technologies Inc. is a transportation network company that is headquartered in San Francisco. It offers a location-based app that enables users to hire a private driver to pick them up and take them to their destination with the tap of a button on any smartphone device (Uber, 2018). The company is one of the key players in what is known as the ‘sharing economy’, which “refers to a set of techniques and practices that facilitate trusted transactions between strangers on a digital platform” (Calo & Rosenblat, 2017, p. 1625). Uber took advantage of the growing interest in smartphone technology and used it to link consumers to independent drivers, creating a new and innovative business model (Ansari et al., 2015).
Video about using the Uber app in Australia
Source: Uber, YouTube
The history of Uber
The origin story of Uber can vary depending on the source that you go to. According to an article by Success Story, on a cold evening in Paris in 2008 an engineer by the name of Travis Kalanick was attempting to hail a cab to a tech conference. After making it to the conference in the nick of time, he began to chat with fellow entrepreneur Garrett Camp about creating an app that made getting a taxi as easy as pressing a button.
Investopedia tells another version of Uber’s story, where Kalanick was already with Camp, and it was while they were struggling to find a cab to head home from the conference that the conversation about a ride-sharing app occurred. Although the details of what really happened on that night are still up for debate, the concept that emerged from it remains the same in every story: an app that lets you find a ride with the click of a button.
A little over two years later, UberCab was officially launched for the first time in San Francisco (Uber, 2018). Kalanick and Camp created an app that provided users with an alternative to taxis, where all riders had to do to connect to a driver was to download the app and request a ride. Originally, Uber was marketed as a black car service however moved away from that niche when they realised the profitability of more day-to-day ridesharing services (Slee, 2015).
In 2011, UberCab shortened its name to Uber which Smith notes may have been an attempt to distance itself from the taxi industry (Smith, 2018). The next two years saw Uber launch across numerous countries including France, China, India and Australia. By 2014, Uber existed in over 100 cities (Uber, 2018). Within only a few years Uber had rapidly grown to become the highest valued private startup company in the world (Blystone, 2018).
How does Uber work?
One of the predominant reasons that Uber rose to success so quickly, undermining the need of cabs and public transport, is its innovative and forward-thinking business model. Bellissimo-Magrin explains that what Uber did was change a system that didn’t think it needed to change. She believes that “their strength was understanding the modern consumer’s expectations for a market that some might say took the customer for granted.” (Bellissimo-Magrin, 2018).
Uber found flaws in the cab system: the struggle to hail one, the waiting time, the uncertainty of the driver finding you, and it created a simplified system where these things did not exist. Smith even goes as far as arguing that “the poster child for the economy of the future is Uber…the on demand-mobile service for transportation that changed the world.” (Smith, 2018, p.383).
Uber’s business model is fairly simple. The company allows anyone who has their driver’s license and access to a car to apply to be a driver (Uber, 2018). They go through a screening process and once they are approved, they are enlisted in the system. Those who want a ride simply download the app to their phones and request a car to their location. They are then able to track their driver as they approach.
The fares are set by Uber based on the make of the car, the distance and the time of day (peak or off peak) and riders pay using credit cards that are already linked to their account. Uber then takes a percentage of that fare for themselves and deposits the rest into the drivers account (Smith, 2018).
According to Smith, there are two elements that are critical to the Uber business model:
- Personal service: at its core Uber is a personal service of drivers. Smith argues that “services need to innovate what they do to stay ahead of the broader conversion of value into sometime tied to a service in every category.” (Smith, 2018, p.385)
- On-demand availability and shift towards immediacy. Smith believes that Uber changed the game by giving people exactly what they wanted when they wanted it: “a brand sells by the slice – no more than a consumer needs in the moment (Smith, 2018, p.385).”
Uber as a market leader
With its innovative peer-to-peer, ridesharing business model, Uber has positioned itself as a market leader within the sharing economy industry (Cannon & Summers, 2014). A key part of Uber’s ecology are their users as the company relies significantly on their drivers and riders to operate.
Uber’s partners are another significant part of the company’s ecology. One of Uber’s global partner is TomTom, a Dutch company which produces navigation and mapping technologies (Uber, 2018). Uber also has short-term promotional partnerships with companies such as Red Cross, Qantas and DrinkWise (Uber Blog, 2018). Since Uber does not provide their drivers with cars, drivers also act as a partner.
Uber also faces many competitors within the transport industry. When the company entered the market, it was the first of its kind. However, in the past decade direct competitors such as Lyft, OLA Cabs, Taxify and Curb have all emerged. These companies all provide users with an easily accessible platform where they can get a ride at similar or sometimes cheaper prices (Cannon & Summers, 2014).
The traditional taxi industry, as well as methods of public transport like buses and trains, are also act as competitors. They provide users with transportation options however they do not operate as ‘on-demand’ ride-sharing services, making them an indirect competitor.
As Lieu’s article notes, like all forms of transport, Uber is regulated on a state level so that it can be adapted according to the needs of area. The ACT and NSW governments were the first to legalise Uber in Australia, with Queensland, SA and Tasmania following shortly afterwards. Victoria was amongst the last to legalise the ridesharing service and the Northern Territory only introduced it this year.
Video about the Uber and TomTom Partnership
Source: TomTom Official, YouTube
How has Uber transformed our world?
The launch of Uber significantly changed the way that people use transport and it is because of this it has had such a transformative effect on how we use and understand the internet. Uber is what Stark likes to refer to as a disruptive innovation, which is a type of new and innovative business model which caters to the needs of a currently unserved market or provides a better alternative to an already existing market (Stark, 2018).
Uber took two things that already existed, our need for transport and our use of the internet and technology and merged them together to create a completely new business model. People were already using the internet for its ease and immediacy in other aspects of their life, then why not use it to get ride?
As Stark notes, the service has made accessing public transport a total breeze, helped millions of people to access rides, provided employment opportunities to the everyday car owner, and has even contributed to the infrastructure of several towns and cities (Stark, 2018).
Uber has shown the business world that certain professions can be turned into tasks and these tasks can be profited from by anyone with the right equipment (Rogers, 2017). It has provided an online platform for those with a driver’s license and car with professional opportunities and a source of income which has had a profound social and economic impact.
Uber also revolutionized this idea of on-demand availability anywhere, anytime. There’s no longer a need to wait around for a cab or rush to try and meet bus schedules. Uber offers transport at your fingertips and as Smith explains there is nothing that people like more than convenience (Smith, 2018).
By doing this, Uber took its first steps towards creating what Smith refers to as a ‘come to’ world (Smith, 2018). People no longer had to waste hours wandering aimless in the search for a cab or wait around at train stations for trains that were never on time. Instead they created a place where the service comes to the consumer.
This revolutionary business model also created new expectations for other retailers. Uber used the immediacy of the Internet to create an on-demand service which acted as a catalyst for other companies to do the same thing. Amazon, inspired by the Uber model, created their on-demand services that guaranteed same day delivery (Smith, 2018). Thus, the world of consumer demand for immediacy was born.
However, although there are evident benefits of Uber’s transformative powers, there are also a number of concerns that come with them, primarily associated with safety. Uber relies heavily on trust between strangers. In the past, getting in a car with an independent driver would have been frowned upon but Uber has attempted to normalize it.
In an attempt to guarantee safety for both rider and driver, the company implemented an online rideshare rating system (Ansari et al., 2015). Both parties have the option of leaving a review and providing a rating out of five on the app, depending on how they found the service. Whilst this online rating system helps establish accountability, it can pose a challenge as they are not a requirement to fill in and are dependent on rider and driver objectivity (Ansari et al., 2015). Therefore, in reality they do very little to promise safety.
This concern with safety has also led to debates surrounding the need for Uber to have stricter regulatory processes. Since Uber’s launch just under ten years ago it has been hit with countless lawsuits from both passengers and drivers claiming they’d been assaulted or discriminated against while using the service. Uber has also received backlash regarding the inadequate background and safety checks they do on drivers. This forced Uber to bring in a new regulatory system where they are able to monitor and continuously check up on their drivers online (Bell, 2018).
In Australia, Uber drivers are also now expected to display identification stickers in the windscreens of their cars to help riders be able to identify their vehicle (Uber, 2018). An article by SBS states how earlier this year New York even went as far as placing a one-year prohibition on ride-sharing services in an attempt to reduce some of the concerns with Uber and is encouraging Australia to do the same thing.
So, what’s next?
Uber has certainly been the epitome of innovative disruption, transforming our use and understanding of the internet. By utilizing the technology that society was already using and removing the problems that came with hailing a taxi, Uber created an online, on-demand business model unlike anything that had been seen before.
However, as we have explored in this essay, this business model is easy to replicate and doesn’t necessarily guarantee all good things. So, what does this mean for the future of the internet? Will we literally have the world at fingertips with the tap of a button? Right now, no one can be sure what the future holds. But as long as we’re aware of both the benefits and the risks of transformative technology, I think it has great potential.
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Bell, K. (2018). Uber drivers are now subject to ‘continuous’ background checks. Retrieved from https://mashable.com/article/uber-continuous-background-checks-for-drivers/#h11652nTKOqU
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