Introduction to Uber’s ride
Uber Technologies Inc. is a ride-sharing, food delivery and transportation network entity that has revolutionised the mobility of people, goods and services around cities. Uber was officially founded in 2009 by Travis Kalanick and Garrett Camp, birthed out of their frustration of not being able to get a cab.
Uber was first tested with three cars in New York before being officially launched in San Francisco of 2010 (Blystone, 2018). By mid-2014, Uber had over 8 million users, 160,000 drivers in 250 cities across 50 countries and quickly grew to become one of the highest valued private start-up companies in the world (Smith, 2018).
Today, it is valued at approximately USD$62 billion providing around 15 million Uber trips per day, although continues to operate at a loss (Delventhal, 2018).
Further, with its successful food delivery service ‘UberEats’ launching in 2014 and other service offerings including helicopter rides and exploration of self-driving cars, Uber’s network is constantly evolving to transform the mobility of individuals around the globe.
However, after a number of controversies surrounding founder Kalanickm, company culture and regulatory issues, Dara Khosrowshahi took over as CEO in 2017.
Despite the backlash experienced, the fact that Uber does not own a single cab but is still able to service 25 million riders a day is a testament to the online networking capabilities of their Internet-based business model.
Uber’s rise within the ‘sharing-economy’
Uber, amongst other companies, originated out of the rise of the ‘sharing-economy’ that has transformed “underused assets into competitors to established industries” (Wallsten, 2015 p.2). It has allowed for a surge in peer-to-peer businesses to appear that make the existence of an intermediary company irrelevant.
The sharing-economy is also argued to have grown in popularity in the “context of cities that struggle with population growth and increasing density” and by a growing environmental conscious (Cohen and Kietzmann, 2014 p.279).
Combined with the ubiquity of the Internet and communication technologies, ‘sharing’ assets on a large scale has challenged previous perceptions regarding how resources are distributed and received. Venture capitalist Shervin Pishever believes that
“these services will have a major impact on the economics of cities” (Cannon & Summers, 2014). He says, “this is a movement as important as when the web browser came out.”
Just as Airbnb made it possible to rent out underused real estate and Airtasker matches skills with where they are demanded, Uber saw this notion of under-used cars as an opportunity to solve existing inefficiencies in the transportation market.
Whilst these services are already available in the form of hotels or taxis, it is the incorporation of new technologies such as iPhones, payment systems, feedback and tracking capabilities that
“significantly reduce the transaction costs of matching under-used assets to those willing to pay to employ those assets” (Wallsten, 2015 p.3).
Indeed, the fact that these services were previously available is why Christensen (2015) argues that Uber is not a “disruptive innovation,” as it did not originate in “new market footholds.” Uber’s success thus stems from “having created a far more efficient market for car-hire services” that has transformed, as opposed to disrupted, the experience for consumers (Rogers, 2017 p.86).
Uber’s unique business model
Uber has an established internet-based business model that connects drivers offering rides and passengers needing them. It has resulted in creating a
“functioning market for car-hire services that is governed largely by supply and demand” (Rogers, 2015 p.86).
Their main revenue streams come from:
The income of an Uber driver tends to vary across each country, however, in Australia, Uber drivers make on average $30 per hour before Uber takes a 20% cut (Uber, 2015). The income left afterwards does not take into account additional expenses such as insurance, petrol, super contributions, maintenance or parking (Barry, 2018). For this reason, Uber’s business model allows them to significantly save on operating costs placing essentially all of the burden on the driver’s themselves.
Uber has gone beyond a regular taxi service by offering a range of different services that differ in price so as to not limit themselves to one customer segment. There is:
- UberPool: split the cost by picking up other passengers
- UberX: Everyday drivers earning extra income
- Premium services: Uber XL, Select, Black, Lux, SUV
- Taxi services: Metered or unmetered
- Uber Assist: mobility friendly vehicles
- UberEats: service offering that allows contracted drivers to deliver food ordered by individuals. In Australia, there is a $5 delivery fee that Uber absorbs.
Surge Price Model
Uber has a patented pricing algorithm that automatically detects instances of high demand that increases the fare price to a ‘surcharge’ to meet the shortage of drivers. The higher fare price acts as an incentive to attract more drivers onto the road to meet the demand.
Surge pricing has led to a number of controversies such as during the Sydney siege in 2014 when the volume of people trying to leave the city caused the surcharge to skyrocket leaving the community angered that Uber could profit off a crisis.
The Political and Regulatory Battle
The controversies extend far beyond the extortionist surge pricing. Despite Uber’s popularity and perceived success, they have faced backlash against the company’s ethics, legality and social cost.
As a result, Uber has withdrawn in many places such as Denmark, the Northern Territory, Hungary, Bulgaria and China due to imposed licensing costs or prohibition under competition laws (Dickinson, 2018).
Since its first cease and desist in 2010, Uber has encountered issues regarding safety and instances of rapes in ride-share cars as well as Susan Fowler’s sobering blog post about the sexist company culture at Uber. Kalanick’s ties to the Trump Administration in conjunction with these other controversies led to the #DeleteUber movement in 2017, which saw 200,000 people delete their accounts in just a weekend (Carson, 2017).
Further, Uber’s latest venture that involves self-driving cars resulted in tragedy earlier this year when a test vehicle in autonomous mode struck a woman crossing the road (ABC, 2018). As many companies like Alphabet and General Motors compete to release driverless cars, the incident has significantly underscored public perception and confidence in the future of road safety.
Issues of privacy have also served to damage Uber’s reputation amongst regulators and the public. In 2016, the personal data (names, email addresses and driver’s license numbers) of 57 million customers and drivers was hacked. Uber failed to disclose the information for over a year, instead paying the hackers $100,000 to keep quiet; a move that has failed to instil confidence or trust in the company from regulators (Newcomer, 2017).
As Uber continues to settle lawsuits over data security closures, it raises significant questions about not only the physical safety of users, but also how governments should regulate sharing-economy companies to ensure the security of user’s personal information.
Uber’s Extended Ecosystem
The ultimate success of Uber relies on the equal commitment and two-way exchange between the driver and passenger. They are both equally dependent on each other as without drivers there is no use for passengers and vice versa. Drivers can be anyone with a license and a car who applies through the Uber website and passes a background check.
Passengers seeking rides are able to use Uber through the user-friendly app on their smartphone to input a destination, see an estimated wait time and fare cost, book a car, track the incoming vehicle, link a credit card for cashless payment, split fare with friends and also use Uber’s rider-feedback model, which requires drivers to maintain a minimum score or be removed from the service (Rogers, 2015).
Uber’s suppliers are crucial to their core product offering. Drivers with their own cars are needed to fulfil demand from users. Payment processors like Visa and Paypal supply the foundation of ‘cashless payments.’ Google supplies their map API interface that allows for real-time tracking of vehicles and predicted arrival times. Investors are also crucial to providing sufficient funding for the company to continue growing, with 21 rounds completed and $24.2bn raised.
There is still significant debate regarding how Uber and other ride-sharing services should be regulated moving into the future. Firstly, councils in respective cities take control of passing bills such as the New York city council capping the number of ride-hailing vehicles allowed in the city.
Secondly, State Governments have attempted to regulate Uber by imposing taxes such as the $1 levy charged on each ride that was rolled out earlier this year in NSW.
Thirdly, Federal governments also have a role in what legislation these new sharing-economy companies must adhere to, such as compulsory CTP and ride insurance. A judge in the U.S. also recently ruled that drivers are not employees of the company under federal law, meaning they are not entitled to minimum wage, benefits or overtime as contractors (Wiessner, 2018).
Indeed, the regulatory framework for digital platforms is yet to be developed in many countries with action predominantly taken in response to lobby groups such as the taxi industry. Thus, resolving difficulties raised by Uber could set a precedent for incumbent companies (Wilemme, 2018).
Uber has a number of partnerships that extend its value proposition and product offerings. Airlines such as Qantas and Emirates have partnered with Uber to offer discounted rides to the airport as well as frequent flyer point earning schemes. Initiatives such as the ‘#ghostclassy’ in collaboration with DrinkWise as well as partnerships with professional sports teams and ‘Limebike‘ that all serve to position Uber as the preferred mode of transport.
Excited for the road ahead with @limebike. Whether you choose to ride, bike, or scoot, we're working to put your perfect transportation option just one tap away. https://t.co/sZNu3Tfz2P pic.twitter.com/rYss3N9Ixy
— Uber (@Uber) July 9, 2018
With low barriers to entry and an imitable digital interface, Uber faces a lot of international competition, namely Lyft, Ola and Didi. Lyft is another U.S. company that is challenging Uber for market share, even causing declines in Uber’s profits. Ola is an Indian company that has recently been pushing into markets such as Australia where Uber is already established. Didi proved to be a serious competitor when they purchased Uber’s operations in China and pushed them out of the most populated market in the world.
The transformational impact of Uber
Indeed, the innovation of Uber as a ride-sharing service has been transformational in its ability to disrupt conventional models of transportation in cities. It envisions the future of a ‘smart city’ that “uses technology to reduce energy consumption and pollution and make transportation more efficient” (Woyke, 2018).
In a study conducted by the EDR Group (2017), it is claimed that nearly a quarter of Uber drivers were unemployed before they started driving with Uber and that the platform supported $17bn of GDP in the U.S. highlighting the significant economic impacts the company has in contributing to the community.
Further, the study also showed that 14% of Uber trips in the U.S. allowed riders to visit destinations they could not access without Uber (EDR, 2017). Thus, from a social and cultural aspect, Uber has transformed the way that millions of people are able to navigate their city through the networked capabilities of their digital interface.
In Los Angeles for instance, Uber has upended the way that people live and socialise by offering a viable alternative to owning a car and making it possible to stay in the city until long after public transport stops (Ryzik, 2014).
In the same way that ‘Googling’ has become a common verb, it is argued that “ride-sharing companies will become ubiquitous as we begin using phrases like ‘Ubering’ to work” (Valerdi, 2015 p.24)
Uber also claims to be reducing the number of drink-driving fatalities. However, in a study conducted it was found that the “deployment of Uber services in a given metropolitan county had no association with the number of subsequent traffic fatalities” (Brazil & Kirk, 2016 p.192).
Uber’s plan to get more people into fewer cars. Video: Travis Kalanick 2016, Retrieved from Youtube
As former CEO Travis Kalanick explores in the above video, Uber has also sought to position itself as an entity capable of transforming society from an environmental perspective. He explores how the UberPOOL service, which accounts for 20% of trips in available cities, is said to have prevented 10,228,000 kg worth of CO2 emissions in Los Angeles in 2015 because riders opted to share their trip (Uber, 2018).
However, a recent study on ride-share services has shown that a 37% increase in the number of passengers transported in ride-sharing vehicles has significantly worsened traffic congestion in major cities and even disincentivised use of public transport (Schaller, 2018).
Further, the legal system prior to the introduction of sharing-economy companies did not have sufficient infrastructure to regulate such activities and laws that were once relevant for the taxi industry, are no longer applicable (Valerdi, 2015). Uber has thus incited a transformation of the legal system to accommodate the legality of ride-sharing services.
Despite mixed societal and regulatory reception to the usage of Uber, it is undoubted that ride-sharing apps are only just beginning to establish a strong foothold in the dynamics of city transportation. Further, investments in the development of driverless cars and additional ventures by Uber will bring a whole new array of societal changes and concerns.
Critical idiosyncrasies aside, the rise of Uber as a digital platform has certainly been a pioneer in the Internet transformation that is the sharing-economy. Indeed, the networking capabilities as evidenced in the above ecology of Uber has transformed people’s expectations of the simple act of getting around town.
ABC, (2018, March 20). Uber suspends self-driving car tests after vehicle hits and kills woman crossing the street in Arizona. Retrieved from https://www.abc.net.au/news/2018-03-20/uber-suspends-self-driving-car-tests-after-fatal-crash/9565586
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Carson, B. (2017, February 3). Over 200,000 people deleted Uber after drivers went to JFK airport during the Trump strike. Retrieved from https://www.businessinsider.com.au/over-200000-people-deleted-uber-after-deleteuber-2017-2
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Roberts, E. (2018). Screenshot of Uber’s Interface.
Kalanick, T. (2016). Uber’s plan to get more people into fewer cars. Retrieved from Youtube