Hackernoon logoThe Business Model of Uber | Guide for Budding Entrepreneurs by@zoey-parson

The Business Model of Uber | Guide for Budding Entrepreneurs

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@zoey-parsonZoey Parson

Tech Enthusiast, Activist, Engineer

Uber, the taxi titan was founded by Travis Kalanick and Garrett Camp. With its headquarters located in California, United States, it has spread to over 65 countries and 600 cities worldwide. Its rise to fame was steady and calculated, bringing in success from every corner of the globe. The company is valued at over a whopping $70 Billion and it continues to grow exponentially. 
Uber has penetrated the lives of more than 50 Million individuals, most of whom avail taxi services every single day. It has transformed from being a luxury to becoming a lifestyle in a short period of time. It is no shocker that Uber has completed more than 10 billion trips worldwide. It focused not only On Providing Seamless Services to users but also in making the taxi industry a friendly environment for drivers. 
An average Uber driver takes home an income of $364 per month. There are 3.9 million Uber drivers globally. By creating a bridge for the two major stakeholders (riders and drivers) to meet, Uber made a complex and chaotic service extremely simple. This is the major reason for the huge figures attached to its name and why entrepreneurs are trying to imitate its framework using solutions like the  Uber clone
Uber’s well-known opponent, Lyft has partnered with 1.4 million drivers that have served over 23 million passengers. It comes as a surprise that Uber’s key international rival is the initially localised Chinese company, Didi Chuxing, valued at $56 billion. The taxi giant has over 21 million drivers and offers an average of 30 million rides every day. 
Grab, Uber’s Asian competitor has claimed to transport 36 million riders with over 2.8 million drivers registered on the app worldwide. The reason why Grab has such a good standing is because its services cater to the needs of the local market and solves daily issues faced by the locals. Uber continues to keep up with new technology in order to hold its position and also comes up with new strategies to outsmart its competitors.
Key Opportunities Leveraged 
Uber has exploited certain market needs to drive its business forward and also gratify its users. There are quite a few sectors that rely on the use of taxis heavily. The common ones are:
  • Business professionals always on the move
  • There are certain professions that require the individual to travel around often either for business meetings or conferences. A taxi service comes as a relief to this category as transportation can be arranged in less than a minute. 
  • Tourists and travellers
  • A taxi driver can act as a tour guide for tourists who completely rely on locals to take them around the city. All they need to do is download the app to book taxis. Uber also provides car rentals that offer the users with flexibility and privacy.
  • Transportation services during bad weather
  • We all know that it is hard to find transportation in bad weather. But there are emergencies that require us to travel. For these unforeseen emergencies, a taxi service will be of great assistance.
  • The party people
  • The city comes alive at night and often, it is almost impossible to find a taxi around. Taxi services like Uber came in and provided a solution to this issue. Now, finding a cab at 2 a.m. is easier than ever.

    Key Principles of Uber

    Improving accessibility
    Offering variety
    Meeting needs
    Ensuring reliability
    Maintaining transparency
    Key Sources of Revenue
    Variety of taxi models to suit everyone
    Uber has a wide variety of ride categories so that all needs are met efficiently. The following are the general vehicle types offered to the users.
    UberX - This 4-seater is the most economical ride.
    UberXL - 6-seater. Perfect for extra luggage or spacious travel.
    UberSUV - Provides an SUV for taxi services.
    UberPOOL - 4-seater. Ride-sharing with other users to reduce costs. Max 2 seats per booking.
    UberBLACK - These provide premium cars like Mercedes or BMWs at reasonable prices.
    UberASSIST - Door-to-door service usually used by old or disabled people.
    Surge Pricing 
    Bad weather conditions, traffic, and public holidays are when users have to pay a hiked price for their taxi ride. The users are informed about the increased price in advance.
    Promotional Partnerships
    Uber has partnered with various big brands like BMW, Pepsi, and Spotify to market their products innovatively. Uber is paid for the publicity the brands receive.
    In-app Advertising 
    Advertising that is displayed on the app also brings in revenue. This can disrupt the user’s experience so it has to be placed carefully.

    Other Services

    UberKIDS - Vehicles are equipped with a child safety seat. 
    UberPETS - This service allows pets in the taxi. 
    UberWAV - It offers a wheelchair accessible vehicle. 
    UberEATS - Food delivery app that allows users order from various restaurants.
    UberRUSH - It is a delivery service that offers door-to-door delivery.
    UberMOTO - Transportation services are in the form of bike taxis. 
    UberBOAT - Basically allows passengers travel through water bodies.

    The Business Model 

    Key partners
    • Taxi drivers and vehicles
    • Investors
    • Lobbyists
    • Payment processors
    • Maps/GPS
    Key Activities
    • Partnering with drivers
    • Linking drivers and users
    • Managing driver payouts
    • Marketing services
    • Expanding market
    • Customer support
    Key Resources
    • Data collected
    • Professional drivers
    • Driver app, rider app, etc
    • Funding
    Value proposition 
    Customers
    • Cost-effective taxi services when compared to normal taxis.
    • Waiting time is reduced to 2 to 5 minutes.
    • The estimated fare is provided before the ride is booked.
    • Secure services and SOS button in case of emergency.
    • Cashless payment through card or online wallets.
    • Feedback segment to review the services availed.
    Drivers
    • A good source of income.
    • Flexible shift and freedom to work part time.
    • Easy to find customers with the app.
    • Added revenue from surge pricing due to weather/traffic conditions.
    • In-built maps for easy navigation to pick-up and drop locations.
    Customer relationship
    • Social media channels
    • Feedback provided like review and rating 
    • Customer support
    Channels
    • Website
    • Android app
    • iOS app
    Customer Segments
    Users 
    • Those who do not own a car
    • Users who do not want to drive
    • People who like the comfort and luxury of a taxi
    • Those who want taxi services on demand
    Cost Structure
    • Marketing expenses
    • Salary to employees and partners
    • Technological infrastructure
    Revenue Streams
    • Taxi rides based on distance travelled and rate/km.
    • Surge pricing
    • Variety of taxi models - UberX, UberSUV, UberPOOL, etc.
    • Other services - UberBOAT, UberEats, UberMOTO, etc.
    Building Your Own Business
    Uber has become the go-to taxi service for a majority of the world’s population. The idea started small, but it saw steady growth over a period of time.
    Therefore, there is hope for entrepreneurs who dream to Build their own business from scratch.
    Hard work and determination can take you far but there are smarter moves you can make to get you there faster.
    Ultimately, there is a great deal to learn from Uber’s evolution, its miscalculations and achievements. Tread cautiously and observe your audience. If you cater to a dire need in the market, there is nothing stopping you.
    Bon chance!

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