Uber : Changing the way world moves
Uber
• 2015 – Uber became Global Phenomena
• Like Google Uber had a brand name in regular use as a
verb
• Million active drivers in 60 countries in 330 cities
around the world
• Valued @ $51 billion (2015)
• Startup more valuable than 2/3rd of Fortune 500
companies
• Company credited with ushering in what was called as
On demand economy – smart phone to connect services
Master Class, Prof. Wirtz Jochen NUS Business School
Uber
• Platform – Connecting passenger and driver through
Apps enabled by Smart phone
• Customer’s happy about Uber’s reliability and
convenience
• Uber’s net commission from Drivers is 20%
• Efficiency of its value proposition resulted in astonishing
growth
• 2 million rides a day (2015)
Uber – Regulatory Challenges
• Adage about disruptive technology companies “ move
fast and break things”
• Constant battle with Government regulators, taxi
companies and critics who charged they were playing
loose and fast the legal system
• Conflict with Taxi companies and critics about their
legal compliance
• Criticism from many agencies
• Customer criticism on Surge Pricing Policy
Origin of Uber
Origin of Uber
• In 2008 – Two young serial entrepreneur Travis Kalanick, and Garrett
Camp toying about their next business idea
• Had difficulty in finding a taxi in snow
• Technology to solve the pain area for common man
• Smartphone app to solve the problem of finding a car service
• Launched uberCab.com – private luxury car service catering in SFO
and Silicon valley
• Netflix over charging on late fee - $40, Airbnb – hotel shortage
Learning from these three startups – Uber, Airbnb, Netflix
• Ubercab.com – private luxury car catering Service
• Customer to send a email to the company.
• Company sends a code to gain access for the app
• Customer to enter the credit card no and could summon a car
• Customer can track the car. Built in GPS guided the driver to
destination
• Cost is automatically charged to the credit card at the end of
the ride
• Uber keeps 20% of gross fare s commission and rest is with
the driver
Uber
• Customers were happy – executives have to book expensive
private car well in advance or walk to street and hail a cab –
uber offered efficiency and convenience
• California Public utility commission and SFO municipal
agency issued notice to Uber to cease all advertisements
and operations or pay fine of $1000 or 90 days in prison for
operating taxi without a License.
• Uber CEO – Uber was not in Taxi business and is only a
platform to connect drivers to riders.
• Changed the name to Uber
How Uber Works
Limitations in Taxi Service
• Poorly maintained, unclean, unpleasant, seat not ok
• Some cabs accepted credit card / some cash payment
• Needed to give direction of destination
• Music / noises and advertisement during the drive
• Catching a car required standing outside - hit or miss
proposition
• Difficult to get at night, do not accept to drive in certain
areas
How Uber Works
• Ease of use - Download App, create an account, input credit
card information
• To summon a car simply open the app and press a button
• Drivers name and quality rating can be viewed and customer
can make the selection
• Customer can track drivers progress. Once the driver picked up
the passenger, driver could navigate to the destination using
built in GPS
• At the end fare is automatically deducted from customer’s
account
• Email is send to customer and customer can rate the trip and
driver.
Driver earnings Uber vs Taxi Service
• Complicated process due to regulatory constraints,
needed medallions which was capped in some cities-
price soared
• Few drivers owned their own medallions others
purchased.
• In NY 75000 USD a year to rent a medallion
• In London potential drivers need to pass a “Knowledge
test” Although GPS make this obsolete, it would take 4
years to pass
• High profit at Top and low wages at bottom
Driver earnings Uber vs Taxi Service
For 40 hours a week the difference Uber / Taxi driver
earnings annually ?
• Uber = 40 X $19.19 = 767.6 X 52w = $39915
• Taxi = 40 X $ 12.9 = 516 X 52w = $26832
48.7 approximately 50% more
Uber – Driver Model
• Driver – Independent Contractors not regular permanent
employees
• No health benefits, retirement, , vacation, leave or injured
worker compensation etc. Get payment for the business
• 20 % of gross fare as commission for Uber
• Uber do not own the cars, it served as a referral for drivers
who drove heir own car
• For UberBlack town car service they relied on drivers.
Drivers need commercial license, auto insurance, clean
driving records and undergo background checks
Uber – Driver Side
• When customer summoned a car, driver has the
option to respond or refuse if passengers rating is
low
• Option to contact customer or text a message
• Heat maps that gave drivers visibility into areas
where they were more likely to find passengers
• Earnings breakdown display
• Feedback icon – Passenger ratings, comments
How efficient is the Process ?
Uber – Head Quarters
• At SFO – HQ software tool God view offered Uber
managers a real time display of all city Uber vehicles
• Tiny car on map for car and tiny eyeball for
customers
• Use sophisticated data analysis to determine best
locations for drivers to wait for pickup
• Large Data science team of Phd from various fields to
hone algorithms for maximum efficiency for Uber
Uber – Types of Service
• Uber Black – own cars
• Uber SUV – wanted UberBlack service but required an
SUV
• Uber X – cheaper version that allowed non
professional drivers having vehicle.
• Uber XL - low cost Uber X service but needed a larger
vehicle
• Uber Pool
• Exhibit 5 and 6
Uber’s Pricing Model
How Uber Works – Pricing Model
• Price determined by time and distance of trip measured
by GPS
• During peak ridership – rush hour, bad weather or special
occasion – Uber charges Surge Pricing – 1.5X to 7X of
normal charges
• Precise algorithm behind Surge price is unknown. Went
into effect automatically whenever demand in an area
exceeds supply
• Surge Price is intimated when customer opens the App.
Customer has to acknowledge the surge pricing.
• Commission is flat 20% regardless of the price
Uber Surge Pricing models
• Not a new concept used by hotels, movie theaters, airlines,
restaurants
• Uber’s surge pricing invited invited negative attention due to
several specific incidents. In 2014 in New year eve Uber charged 7X
times
• Uber vowed not to exceed 2.8X normal rates
• But 2014 Sydney hostage crisis Uber’s algorithm put surge pricing
of 4X. The company refunded and apologized
• CEO “ Because this is new, its going to take sometime for folks to
accept it. There is 70 years of conditioning around fixed price of
Taxi”
Surge Pricing – Right Strategy ?
Network effect
Network effect - Uber launch in a new city
• Sends two teams to the area 6 weeks in advance
• Team 1 – building market awareness
• Team 2 - recruiting drivers and service
• Second Team – aggressively pitch potential drivers
• Drivers can set in their hours, earn good income.
Automatic payment after the trip
• Bonus and incentive for driving Uber specially in first year
• Loan for purchase of Vehicle
Uber’s Competition
Competition
• Directly against taxi industry which operated differently
across countries
• In US Taxi cab needs license or medallion to operate
• In NY and SFO medallion is fixed in spite of increase in
population
• Price is based on distance and time and was regulated by a
taxi meter
• Some location ( Airport) had fixed price
Uber vs Competitors
• Uber faced Competition from livery service that provided
limousines and black town cars
• In US livery services are highly regulated.
• Faced competition from other ride sharing companies like
Lyft, Side car .
• They allowed non professional drivers to drive the car and
use their App
• Although had initial momentum none could not achieve
the popularity and momentum of Uber
Regulatory Challenges
Regulation & Public Relation
• Regulators, Politicians, taxi industry started fight
against Uber since inception.
• Some countries Netherlands, South Korea banned or
treated Uber as illegal taxi service
• In some countries taxi drivers strike against
government sating government failed to regulate Uber
• But Uber defended saying that they were not taxi
services they were a software platform. Uber’s unique
model made it difficult to compare
Battle of words, Regulation, Public Relation
• Most laws were formed before the software
could coordinate in real time ride sharing
using a mobile
• Non Professional drivers on the road
• Prices unfairly designed to kill competition
Uber Aggressive Market Tactics
• There was a perception that Uber engaged in overly aggressive
marketing tactics.
• When entering new markets ignored all local regulations, began
operations without waiting for permission
• Complaints – slow down service of one of its competitor by ordering
and cancelling cars enmasse ( Uber later apologized)
• Poaching drivers from other ride sharing companies with bonus and
incentives.
• In 2014 hired David Plouffe who was in Obama's presidential
campaign in 2008 for PR and communication and repair Uber’s
image problem
Battle of words, Regulation, Public Relation
• Clashes with regulators and courts in Germany, Spain, England,
France
• Anti protest from Paris to Madrid
• Putting energy into conquering two world’s largest markets China
and India
Looking Ahead
• Uber had number of reasons to be optimistic about its
future
• New York city mayor threatened to put a cap on the number
of vehicles Uber could operate in the city.
• Uber made advertisement in response to this. Uber
responded by putting a view in the app showing how lengthy
the waiting time would be if the regulation is passed.
• Got support of celebrities in Social media and New York
Governor said Uber “ one of the great inventions of this
economy.”
Looking Ahead
• Real estate expert said making transportation
reliable an affordable in some cities made
resurgence in real estate in some locations.
• A Public health study reported reduction in drunk
driving as a result of Uber
• Price of a NYC taxi medallion had dropped by 40%
with Ubers presence
Looking Ahead
• Actively experimenting with new services & Businesses
• Uber POOL – paired rides same route and charged them a
reduced price. In SFO 50% of all trips on some days.
• Driverless car initiative by hiring Technocrats from CMU
with high salaries and bonuses
• Experimenting in some cities with lunch delivery service –
Uber EATS
• Other cities with food delivery Uber FRESH
• Bicycle courier service in some cities Uber RUSH
Looking Ahead
“ We want to get to the point that using Uber is cheaper
than owning a car. Transportation that’s reliable as running
water”
“ We like to think of Uber as the cross between life style
and logistics, where life style is what you want and
logistics is how you get it there”. If we can get you a car in
five minutes, we can get you anything in five minutes”
Uber Today
Source : Uber Investor Day Presentation 2023
Uber Today
Source : Uber Investor Day Presentation 2023
Uber Today
Source : Uber Investor Day Presentation 2022
Uber Today
Source : Uber Investor Day Presentation 2022
Uber Today
Source : Uber Investor Day Presentation 2023
Uber Today
Source : Uber Investor Day Presentation 2023
Uber Today
Source : Uber Investor Day Presentation 2023
Uber Today
Source : Uber Investor Day Presentation 2023
Uber Today
Source : Uber Investor Day Presentation 2022
Uber Today
Source : Uber Investor Day Presentation 2022
Source : Uber Blog
Uber Today
Source : Uber Investor Day Presentation 2023
Uber Today
Source : Uber Investor Day Presentation 2022
Uber Today
Source : Uber Investor Day Presentation 2022
Uber Today
Source : Uber Investor Day Presentation 2022
Uber Today
Source : Uber Investor Day Presentation 2022
Uber Today
Source : Uber Investor Day Presentation 2022
