Uber Business Model- How It Works

August 20, 2019 leave a comment

We can’t imagine those days where it was a nightmare to commute to the office or any party. It was those days where we used to wait for taxis along the roadside for our requirements. All these were changed with the opening of the online cab service in the taxi business industry.

It made a revolutionary in the taxi industry. When we hear about the online cab, the first and the foremost online cab service which strikes our mind is Uber- The topmost emerging online taxi business and a very good taxi booking app which helps the customers to commute as well as the drivers to move along with this transportation network business.

With the arrival of Uber into the taxi industry during 2009, drastic changes happened to overcome the traditional way of booking a taxi. Through Uber, you can book a taxi online within a few minutes.

It introduced cheap rides when compared to traditional rides and there is no tipping system in Uber. You may wonder how it works well to earn revenue. It is based on Uber Business Model

In this article, we will look into the Uber Business Model and how it works

What is Uber?

As we have already seen Uber is an online taxi service started in 2009 by Travis Kalanick. It is a multinational and American based ride hailing company with its own Uber mobile app offering for its massive customers and driver partners.

Uber Timeline

uber growth timeline

Uber has been in the taxi business for long ten years. Here we can look into the Uber timeline underscoring the galloped achievements and showdowns of Uber.

March 2009:

The black car ride service model was established by Kalanick and Camp and later it opened the way to Uber Cab service.

June 2010:

In San Francisco, Uber was launched and the service was linked with high tech professionals, car owners.

October 2010:

The company was renamed from UberCab to Uber. In capital funding, the company share was around $1.25 million. Shawn Fanning, who was the former co-founder of Napster invested in the company. Immediately after two months, Graves stepped down from the CEO position and it was replaced by Kalanick.

May 2011:

The service was expanded to New York City and it was highly competitive among the massive cab industries. After six months it was able to launch to Paris.

December 2013:

The drivers of Uber joined up to initiate a lawsuit against Uber for employee designation rather than contract workers. It was the first and one of showdowns.

August 2014:

Uber Pool was introduced to have a ride-sharing model and to split the ride fare between multiple customers.

April 2015:

It introduced UberEats in few cities like New York, Los Angeles, Chicago and offered the food delivery experience of Uber. It allured busy professionals who hardly had time to cook dinner. It added a remarkable profit to the company.

February 2017:

The first charge of sexual harassment was reported in the workplace of Uber. It was reported by a former company engineer which resulted to hire Eric Holder who was the former Attorney General of the US. He was responsible to investigate the issue. After 5 months, this forced Kalanick to resign from the CEO position and replaced by Dara Khosrowshahi, who was the former CEO of Expedia.

May 2019:

In New York Stock Exchange, it goes public at a share price of $45 and the market capitalization was around $75.5 billion.

How it Works?

how uber works ?

The following steps can be followed to understand the working of Uber App.

Step 1:

Customers can book a taxi from the Uber App by enabling the GPS and internet connection. GPS will track the customer and driver location for each other.

Step 2:

The taxis available near to the customer place will be listed and the customer can choose the taxi based on the nearest available taxi to pick up point or customer location.

Customers can also select from standard cars to luxury depending upon their requirements.

Step 3:

The drivers can use a seperate Uber app developed for their drive partners to view the customer request and to manage the commissions earned from Uber.

When the drivers accept the request, the taxi can be tracked by the customers and the payment is calculated based on the fuel consumption, time taken for the ride, distance traveled.

Step 4:

The payment can also be paid during the booking or after the ride. If the ride gets canceled the payment made will be back to the customer’s account. Once the ride is completed the payment gets deducted from the customer’s account.

Step 5:

After the successful ride, the customers will be able to rate the taxi service and provide positive or negative feedback with the real time ride experience.

Read about how you can build your own Uber-like Taxi App, Yet Unique.

What is Uber Business Model?

UBER BUSINESS MODEL

Credits: BMI

Uber’s business model is the business model followed by Uber. Uber collects efficient drivers with their own cars who want to earn income from Uber.
Uber does not own any car. It charges some percentage of income for making use of its platform.

Uber Target Audience

All age groups use the Uber platform for their daily commute. Customers of different age groups like college goers to office goers make use of this platform.
It provides a very cheap ride when compared to other private cab services.
It is mainly used by tourists, to/from airports, shopping, Uber is a complete solution for all age group customers.

Uber Revenue Generation Model

When you look into the revenue of Uber, it completely depends upon the fare charged for the ride and for the cost of promotional activities.
Uber does not have any other source of revenue as of now. This is a unique business model of Uber.

The Revenue Generation Model can be described as follows:

1. Adopts different cab models

Uber has a wide variety of cab models and not restricted to any particular model or group of people.
Uber X is a model of black cars, Uber SUV is a model of luxury cars, etc.

2. Surge pricing technology

The cab fares depend upon the demand of their service, the price per mile will get increased.This is a part of their business model.
The updated price will always depend on the number of drivers available and the requests placed by the customers.

3. Other Uber rides

Not only taxis, but they also started launching other Uber rides like helicopters, boats, delivery service, Pick up service using the motorcycle, truck service, etc and these new services add value to their business model

Uber for X Model

Uber has an aggregator business model and Uber for X model falls under this Aggregator business model.
By using this business model it collects the elements required for the service and this service will be available under a single brand name.
In the Uber’s business model, the cab rides are related to their service. They don’t own any cars.
The drivers are not treated like their employees, instead, they view them as their partners and they provide a platform for the drivers to use the brand name “Uber”.
Here in this business model, there is no employer and no office. Uber uses the partnership with the drivers in their business model.
The drivers or the partners will sign the contract with Uber by following the terms and conditions of Uber regarding the cab ride services.

The following points can be understood from the Aggregate business model of Uber and it denotes the -“ Strengths Of Uber”

Uber business model is a partnership model

As we have already discussed that Uber does not treat their drivers as their employees, instead it maintains a partnership with them.
Basically, it does not act as a transportation company. Here the drivers have all the rights to accept and reject the agreement based on the terms and conditions.
Drivers build their own business structure and are officially under control with Uber

How Uber works with this business model

As the drivers are the partners with Uber, they both together decide the commission structure in their business.
Uber acts as a platform for the partners to get the rides through online booking and they set up a commission from the customer fare.
Usually Uber charges 20-25% of the ride charge and the drivers as partners need to pay out this commission to Uber.

Uber- Customer Interface

The Uber App is available for customers on a smartphone to book the rides.
Once the ride is completed the customers can share the feedback regarding drivers.
This is, in turn, will help Uber to take necessary action against drivers to enhance their business.

Price calculation of the ride in this business model

Price is always calculated depending upon the Distance and the time spent on the ride.

Dynamic pricing in this business model

Uber is very transparent about their business. There used to be some change in the price during peak hours, bad weather or during any public holidays.
As the demand gets increased, customers need to cooperate with the price inflation.
Uber informs its customers regarding the price structure in advance to avoid any kind of inconvenience to its customers.

The success of Uber business model

As people don’t compare the services of the transportation network companies, Uber stays profitable with their service to the customers. Thus with this platform, it gained a huge number of customers for its business
Apart from the strong network, a huge number of cars offer a very good service to its customers. The ride fares are cheap when compared to other private services and it is very pocket-friendly.
It is an admirable opportunity for the owners of the vehicles who gets into this business and finds bankable.
As more people are inclined to this type of ridesharing for their daily commute, it is definitely going to be a profit for the Uber drivers.

Uber-like cab management software is on high demand to run a Taxi business these days. Here are some more benefits of Uber-like Taxi App.

Conclusion

Hope you will find how the Uber Business Model works. Uber business Model is a business Model which is very transparent and easy to understand for its customers and driver partners.

They mainly satisfy their customers and their driver partners to run their show. A very good platform for the vehicle owners to start their business and they stay success with this Business Model.

Before concluding you can also try a Free Taxi Dispatch Software Demo to understand how it works for your business.

Similar to Uber, Ola is one of the leading Taxi Booking App based in India. Here You can also have a look at the Ola business model which has become highly popular in a short span of time.