How Uber Works? Insights into Business and Revenue Model
Uber services are like a fad in the world of technology. One of the most common things we have noticed is that people are scrambling to spot the left-out Uber services, which is still to be tapped in the marketplace.
Uber’s strengths are not just in the terms of providing cheap rides but the on-demand transportation service has captured the market in building a large and powerful logistics business.
Uber’s business model which is the highest-valued private technology company so far operates in about 270 cities and more than 60 countries worldwide, and as of this June, Uber completed 5 billion total trips.
What draws the strengths of this billionaire company?
The soaring need of on-demand rides has triggered a rising need of this big fish in the market. What draws the strength of this the global ridesharing leader? Let’s distill the facts:
1. Brand Equity
Uber is currently valued at over $68 Billion and is slated to progress even more downright. Due to the high valuation of brand, Uber is incessantly attracting investors.
2. Low Fixed Investments
Uber does not require high fixed investment due to its aggregation policy which becomes the main reason behind its rapid expansion.
3. Dynamic Pricing strategy
Uber works on dynamic pricing strategy that is in peak hours, midnight and bad weather the company raises its prize. This becomes extremely beneficial for the company and drivers to earn a good amount of money.
4. Emphasis on Customer Satisfaction
Uber places itself a notch higher to provide better customer satisfaction and enhanced user experience.
5. Growth Rate
Source: Business insider
Other than this, Uber wins in:
- Verified drivers and Cars
- An unlimited fleet of vehicle
- No full-time drivers, as it does not hire the drivers
- A very little competition. But the major competitor is Lyft
- Lower prices compared to traditional taxi operators
Uber’s Interesting facts
- Uber service is available in 83 countries and over 674 cities worldwide (Source: Uber)
- Uber fulfills 40 million rides monthly and has over 77% of US ride-hailing market (Source: Wiki)
- Total number of rides by 2016 – 2 billion (Source: Forbes)
- Uber gross revenue 2016 – $20 billion (Source: BusinessInsider)
- Uber driver’s average income – $364 / month (Source: Ernest.com)
- Venture capital raised – $11.5 billion (Source: Crunchbase)
- Uber net revenue 2016 – $6.5 billion (Source: BusinessInsider)
- Uber valuation in 2017 – $69 billion (Source: Bloomberg)
- In the US, Uber has over 160,000 active drivers, receiving $656.8m of payments during Q4 2014 (Source: Benenson Strategy Group)
- The top two reasons for drivers to choose Uber are higher income (91%) and work-day flexibility (87%) (Source: Bureau of Labor Statistics)
- It’s largest competitor Lyft generates a fraction of net revenue ($700 million) compared to Uber ($6.5 billion) (Source: FutureAdvisor)
- However, Uber has given Lyft a boost – generating greater engagement on the app (Source: Forbes)
Uber’s Business Model Canvas
Uber’s Valuation compared to selected Unicorns
In 2013 Uber valuation was $3.9 billion now it jumps to $68 billion in 2017.
1. Privacy Concerns
2. Low Barriers to Entry
Apps like Uber prevailing in corners of the world are the direct outcome of low barriers to entry by the ride-hailing company Uber. Eventually, the company has started facing competition from multiple fronts.
3. Drivers Earns less
Despite Uber being the biggest startup company on the planet, it does not serve much to its key workers viz. Uber Drivers.
This chart compiled by Earnest.com compares the average income of Uber workers from Airbnb, TaskRabbit, Etsy, Lyft and several other companies.
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