Uber has had a transformative effect on our use of the internet in order to service our transportation needs. Through an analysis of Uber and its economic, social, political effects on the transportation industry, the innovative effect of web technologies will be revealed.
The first half of this essay will provide an overview on Uber, its historical development and the disruptive elements of its business model. The essay will then go on to focus on Uber’s struggles with regulation and its current place in the internet ecology. Furthermore, this essay will analyse the future capabilities of Uber’s technology with a focus on the ‘Uberization’ of global industries.
What is Uber?
Uber is a peer-to-peer transportation network that specialises in providing quick, reliable and pre-arranged rides (Uber, 2018). The story of Uber begun in Paris in 2008 where two friends, Travis Kalanick and Garret Camp, were struggling to hail a cab. The idea of ordering a car online was hatched. Uber wasn’t founded until June 2010 in San Francisco morphing from a black car service to an intermediary between riders and drivers. This company is a large part of what Meyer (2016) refers to as the sharing economy in which “consumers are more powerful than ever before, and people are finding new ways to earn a living” (p.4). The sharing economy builds on the transformative effect of the Internet and its ability to create connections between individuals such as buyers and sellers. Through its rapid and disruptive expansion, traditional industries such as taxicabs are facing heavy competition. This is exemplified in the constant controversy surrounding Uber as traditional taxicab services are threatened by its low price and digital booking. As highlighted by Burns (2016, p.1), “Uber is the archetype of digital disruption. It has completely changed the face of the transportation industry”. With services in over 600 countries worldwide and 15 million trips completed each day, Uber has not only used technology to get people from ‘A to B’ but has led to billions of moments of human connection (Uber, 2018).
Uber was only launched in Australia in November 2012 however it is already threatening Australia’s state-based taxi services. According to Roy Morgan Research (2017), “nearly 3.7million Australians aged 14+ are travelling by Uber” – a statistic that is up from just under 1 million in 2015. This phenomenon is especially prevalent in the isolated state of Western Australia in which Uber adoption is higher (23.9%) than that of taxi patronage (19.6%). This is followed by Victoria at 21.8% with New South Wales and Queensland following behind at under 20%.
Behind Uber’s innovative business model
Uber founded itself as a technology provider offering to match the demand and supply of locomotion. As highlighted by Schneider (2017, p.36), “Uber re-intermediates the taxicab market” of which has been without a ‘middle man’ for decades. Uber’s technology allows a transparent flow of information that leads to a quick and specialized service for both riders and drivers. Uber’s app is available for both iPhone and Android and uses Global Positioning System (GPS) to display a map of the surrounding area, calculating the closest Uber driver and its estimated arrival time to the rider. For riders, Uber provides not only the location of their drivers but also their ratings. In return, riders create a profile with their telephone and credit card number allowing easy payment. For drivers, Uber provides a flexible income that can fit into the everyday lifestyle. Once passed the internal screenings, drivers are given an iPhone with the app to manage their incoming requests (Uber, 2018).
Uber’s disruptive business model has numerous elements that add value to its technological innovation. Ubers instruments of intermediation set it apart from the traditional taxicab service. These include its pricing, payment and revenue structure. Ubers’ system provides an estimated fee for the customer prior to ordering a ride, along with an estimated duration. Exact prices are calculated once the ride is finished depending on distance, service level and demand. This charge is automatically charged to the credit card attached with a users’ account and there is no need for a additional tip. The three main pricing structures include fixed airport rates, standard fees and dynamic pricing. These prices are not always cheaper than taxi services however, the security and ease of one’s transaction provides Uber with a competitive edge. Additionally, Uber views its riders as ‘suppliers’ instead of employees, thus they receive 80% of the fare while Uber take the remaining 20%. As argued by Schneider (2017, p.52), “Uber’s business strategies mimic successful technology firms much more than transportation firms”.
In a comparison of both services, Perry (2015) points to its levels of service, transparency and professionalism of drivers as key to its success over an industry that hasn’t changed since the 1940s. Uber provides numerous levels of service ranging from UberX, a standard 4-person ride, to UberBLACK, a black car professional driver. Furthermore, there are a frequency of discounts that Uber offers to its users. The monitoring program also plays an important part in guaranteeing the quality and safety that is associated with Uber. Through a two-way rating system (link video), Uber’s consumers are given the power to rate their Uber experience with each driver thus, motivating drivers to provide comfortable services as riders can decide who they wish to commute with. Furthermore, while Uber can terminate the contract of its riders who deliver poor service. The transparency of Ubers service is only depended through the detailing of not only the specifics of the ride but also the car type and plate number before it approaches and the ability to share this information with a friend. Riders are also given the ability to communicate with the driver before or after the ride. Compared to the taxicab service, these user-centred elements of Uber provide it with a competitive edge that only innovative technology can compete with. As highlighted by Burns (2016, p.2), “Uber didn’t succeed because it offered low priced taxis; it succeeded because it made the process of booking better and simpler… Uber has created a revolution in consumer user experience.
Below are screen-grabs from an Uber (2017) video showcasing the convenience of its technology and the elements of its service.
Uber’s internet ecology and struggles in regulation
Although Uber experience incredible growth and success, it also faced numerous challenges particularly with regulation. From the get-go, Uber was faced with a cease-and-desist-order during its lunch in 2010 due to regional taxi and limousine laws. Furthermore, Uber has now been banned from markets such as Paris (Schneider, 2017, p.45). Uber not only threatens the taxi industry by ‘poaching’ its customers but its consumers aren’t faced with regulated prices and its drivers don’t need a taxi license or medallion to operate. This is exemplified in cities such as New York where Uber is categorized as a prearranged ride in comparison to a street hail and is thus able to operate without the need for medallions (Meyer, 2016, p.5). The company is currently on a rocky-path in London, with a succession of protests and a newly established 15-month contract following a short ban in the city. The contract, as reported by CNBC, stipulates that an independent review into its procedure will need to be provided to regulators every 6 months.
In order to face the effects of the industry Uber is focussed on directly influencing the logic of regulation itself. To do so, Uber has created “one of the largest and most successful lobbying forces in the United States”, with 250 lobbyists nation-wide making a case for a ‘level playing field’. (Schneider, 2017, p.122). Through lobbying Uber has become an insider aiming to achieve legitimacy agreeing to adhere to regulation “as long as it can compete with standard taxis solely in terms of quality and price” (p.123). However, there is a risk to this cooperation as Uber is no longer a disruptive force and new ride-sharing services such as ‘Lyft’ or ‘Ola’ are providing the same service with new possibilities. As Schneider (2017) argues, there is a danger of self-destruction, “if Uber does not continue to disrupt the taxicab industry by innovating, it will itself become the target of even newer market entrants” (p.126).
Numerous academics argue for a push by Uber against policy makers and current regulatory processes. Meyer (2016) highlights that current policies hinder economic growth through dynamic processes as he questions whether the public or special interest is being protected. This is especially prevalent in the case of Uber, a new business model that is being forced into traditional rules. These regulators must embrace the changing economic and social context in order to embrace permission-less innovation that benefits the public and the future economy and work opportunities. As Meyer (2016) argues “a regulatory framework for the future must embrace flexibility if it is to allow for the next transformational product or service to reach the market” (p.18). In order for Uber’s business model to continue to succeed, a limited or de-regulation of all providers of transportation that empowers users will create cooperative practices and lead to future and beneficial innovation. This is a political change that Sobel et al. (2007) argue will “give consumers the ability to pull the plug on the failed ventures and efficiently guide the expansion of, and adjustments to, successful one” (p.231).
An insight into Uber’s internet ecology and its actors is shown below
The transformative effect of Uber – what does a future of ‘Uberization’ look like?
Uber has certainly had, and continues to have, a transformative effect not only in the transport industry but in numerous traditional businesses. So much so that the term ‘Uberization’ has become popularized in order to exemplify the corporations influence. Through ‘Uberization’ traditional businesses are facilitating peer-to-peer connections between buyers and sellers, just as Uber does. Thus creating a context collapse between different social and cultural groups. As highlighted by Schneider (2017, p.58) “Uberization is providing on-demand services for as many needs and preferences as possible…boldly put, for every consumer demand, there will be a mobile app that can service that need”.
As highlighted by David (2015), the success of Uber’s technology is its understanding of the psychology of convenience, in relation to decisions, access, transaction and benefits. Through a capitalization on such convenience a blueprint of innovation in a variety of sectors can be achieved. This uberization of the world will create an on-demand revolution throughout the economy (Freeman, 2015). Similar to that of the effect Netflix had on the television industry, Uber’s influence is already coming to light with businesses such as ‘Deliveroo’ and ‘AirTasker’, that provide real-time data and instant gratification. An example of the effects of Uberization can be seen below.
Furthermore, the Uber corporation itself is expanding its services with branches such as ‘Uber Eats’and ‘Uber Business’that provide simplified services for the food and business industry respectively. Uber’s innovation has also encourage social change with initiatives such as ‘Uber drives the vote’that launched on the 6thof November that used $10 off discounts to provide a ride to polling booths. This nationwide effort encouraged civilians to vote during the Mid-Term Elections by providing an easy and cheap way to get to their nearest polling booth.
Overall, Uber has certainly been a disruptive and innovation form of internet transformation. The introduction of Uber’s consumer-focussed and accessible technology not only reimagined transportation services but has created a domino-effect in industries such as food and business. The future in this Uber-led revolution is certainly bright and one that will have not only economic but also political and social change.As outlined by Uber (2018), “What started as a way to tap a button to get a ride has led to billions of moments of human connection as people around the world go all kinds of places in all kinds of ways with the help of our technology”.
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CNBC(2018). Uber allowed to operate in London again after judge overturns ban. Consumer News and Business Channel. Retrieved from https://www.cnbc.com/2018/06/26/uber.html
Davis, G.F. (2015), ‘What might replace the modern corporation: Uberization and the web page enterprise’, Seattle University Law Review, 39 (11), 501–14.
Freeman, Sunny. (2015). Uberization of Everything Is Happening, But Not Every Uber Will Succeed. Huffington Post. Retrieved from http://www.huffingtonpost. ca/2015/04/01/uberization-uber-of-everything_n_6971752.html.
Meyer, J. (2016). Uber-Positive: Why Americans Love the Sharing Economy. Encounter Books, New York, NY.
Perry, M. (2015), ‘Creative destruction: top 20 reasons ride-sharing is better than taxis and represents the future of transportation’, Retrieved from http://www.aei.org/publication/creative-destruction-top-20-reasons-ride-sharing-is-better-than-taxis-and-represents-the-future-of-transportation/.
Roy Morgan. (2017). Uber soars and well-placed to tackle rising competition. Roy Morgan Research. No.7444. Retrieved from http://www.roymorgan.com/findings/7444-uber-growth-last-two-years-2015-2017-september-2017-201712150309
Schneider, H. (2017). Creative Destruction and the Sharing Economy: Uber as a Disruptive Innovation. Edward Elgar Publishing, Inc. UK.
Sobel, Russell S., J.R. Clark, and Dwight R. Lee. (2007). Freedom, Barriers to Entry, Entrepreneurship, and Economic Progress. The Review of Austrian Economics 20(4): 221–236
Uber (2018). About Us. Retrieved from https://www.uber.com/en-AU/about/
Uber (2018). History. Retrieved from https://www.uber.com/en-AU/newsroom/history/
Uber (2018). Uber drives the vote. Retrieved from https://www.uber.com/newsroom/update-uber-drives-vote/?utm_term=R2wTPFy2Z0AuSQxwCgx2R3vbUkg3JHWmkUm7RY0&adg_id=218769&cid=10078&utm_campaign=affiliate-ir-Skimbit%20Ltd._1_-99_national_D_all_ACQ_cpa_en&utm_content=&utm_source=affiliate-ir
Freeman, S. (2015). Uber of Everything. Retrieved from https://infogram.com/_/MeJmkls5mYdMyWvZbgmP
Mashable (2018). Uber’s New Logo. Retrieved from https://mashable.com/article/uber-font-new-logo/#G4MqLo5qqEqP
Uber (2017). How-to use the new app Australia. Retrieved from https://www.youtube.com/watch?v=E4oNXzVs6kU
Uber (2017). How the two-way rating system works. Retrieved from https://www.youtube.com/watch?v=jxx5RG0wW2U
Uber (2015). The economics of partnering with Uber. Retrieved from https://ubernewsroomapi.10upcdn.com/wp-content/uploads/2015/01/uber_PartnerEconomicsInfographicFinal-01.png
Uber (2018). Uber Eats: About. Retrieved from https://about.ubereats.com
Uber (2018). Uber Business: How it works. Retrieved from https://www.uber.com/business/how-it-works