According our class Twitter poll, 94 percent of us (17 out of 18 total respondents) had used Uber within the past week! For many of us, it’s hard to justify owning a car when Uber serves as a much cheaper and more convenient alternative. In this post, I’ll provide an overview of Uber, follow-up on ideas from my presentation, and discuss topics relating to Uber that I haven’t yet mentioned.
One snowy evening in Paris…
In 2008, Travis Kalanick and Garret Camp were traveling in Paris for the LeWeb technology conference. A blizzard struck and the two entrepreneurs struggled to navigate the snow-covered Parisian streets.
What better time to start thinking about solutions to life’s problems? The issue at hand was that Kalanick and Camp were stuck in a foreign country in the middle of a blizzard and couldn’t get a ride. They felt that others shared their ride hailing struggles, so they came up with an idea: get a ride with the tap of a button.
In 2009, Kalanick and Camp founded UberCab. The service was a quick solution that transformed a mobile phone into a personal dispatcher. UberCab launched in San Francisco as an on-demand black car service with the motto “Everyone’s Private Driver.” Kalanick’s image of Uber was an invitation-only “baller” service that enabled well-to-do single men (like himself) to travel around town in high style.
Shortly after launching, UberCab was targeted by industry regulators. Kalanick and Camp were issued a cease-and-desist order from the city of San Francisco. The co-founders denied the city’s jurisdiction over the company on the basis that it was a technology and logistics company rather than a transportation company. Soon after, the company dropped “Cab” from its name to affirm its stance as a technology platform. To this day, Uber faces regulatory and legal battles over the right to operate.
Changing the Landscape
Unlike companies offering traditional transportation services, Uber does not own fleets of cars for dispatch, incurs no vehicle maintenance costs, and “partners” with drivers instead of hiring employees. Its on-demand app has not only changed the way consumers purchase products and services, but has also changed they way people work. Uber created an on-demand workforce providing drivers with the freedom to work or stay home as they choose. For these independent contractors, the ability to “be their own boss” is worth forfeiting compensation benefits.
The “Uber effect” has had a significant economic impact in metropolitan areas. The taxi industry, which once captured the largest share of the transportation industry, lost a significant share of its stake. The market value of a New York taxi medallion quickly dropped from well over $1 million to just $250,000. Lately, an increasing number of people are ditching their cars and choosing ride sharing services, such as Uber, as their primary mode of transportation. Uber’s increased efficiency and optimization has resulted in more cash in drivers’ pockets, thereby strengthening local economies.
Uber offers a wide variety of services throughout the world to achieve its mission of
“making transportation as reliable as running water for anyone, anywhere.“
These are some key points about Uber’s operations:
- Services available in over 632 cities world-wide
- Connects over 40 million riders and 2 million drivers
- Over 5 billion trips completed throughout the world
- Over 10 million trips completed daily
- Major competitors are Lyft, Grab in Southeast Asia, Ola in India, Didi in China
To maintain its competitive advantage, Uber heavily subsidizes rides, works to expand its network of drivers and riders, and offers an extensive array of services for all types of consumers. Here are Uber’s current offerings (varies by location):
In the Driver’s Seat
Uber (currently) relies on its network of drivers to transport riders and deliver goods. The company has had a tenuous relationship with drivers and a history of overlooking drivers’ concerns. Uber takes a 25 to 30 percent stake per ride and Uber drivers pay for transportation and maintenance costs. Under Uber’s new CEO, Dara Khosrowshahi, Uber has demonstrated a commitment to improving driver relations. Uber recently introduced an optional tipping feature and has expanded its perks to include fuel and maintenance discounts, car rental options, and liability insurance while drivers are using the Uber app.
In a company report, Uber found that most of its drivers are middle-aged, white, and male. About 48 percent of Uber’s drivers are college educated or have an advanced degree. Most drivers partner with Uber to supplement their income, with roughly 80 percent of drivers putting in under 35 hours a week.
Uber’s Sophisticated Software
The Uber app employs an algorithmic matching and management system to calculate rates and establish connections with Uber drivers. The algorithm designates parts of town into distinct pricing zones while taking into account the weather conditions, demand for rides, and the number of drivers on the streets. Surge prices are recalculated about every five minutes, rebalancing the supply of drivers and demand for rides. So, if you ever find yourself paying way too much for a ride, try giving the app 5 minutes to recalibrate!
Uber’s use of algorithms to oversee drivers complicates its role as a neutral intermediary. Uber checks in with drivers by sending automated messages and notifications during busy periods, nudging them to hit the streets. Uber’s software acts as a “virtual manager” by setting performance targets for drivers. These algorithmic management tools challenge the notion of Uber drivers as “fully independent contractors,” considering that the tools largely influence drivers’ behavior.
Uber’s Acquisitions: An insight into Uber’s next moves
Uber’s four company acquisitions provide insight into Uber’s current focuses and initiatives. Among these include enhancing logistics, self-driving technologies, and the future of food delivery.
deCarta (2015)- Mapping company specializing in geospatial software. With deCarta, Uber can develop its own mapping capabilities to decrease its reliance on Google Maps.
Geometric Intelligence (2016) – Machine learning company. With Geometric Intelligence, Uber can refine its algorithms to be more accurate and user-specific.
Otto (2016) – Autonomous vehicle company. Uber leverages Otto’s technology for Uber’s autonomous vehicle initiatives.
Swipe Labs (2017) – Photo sharing/social products company. Uber may incorporate Swipe Labs’ social products to improve mobile communication on the Uber app and expand into the content marketplace area.
Visiting our very own TechTrek class… BC Alum Pat Twomey!
Pat is a BC alum (CSOM ’08) and a graduate of Harvard Business School (MBA ’13) working in Growth Analytics at Uber. Pat has been with Uber since 2012 and has held various roles at the firm. He started working at Uber San Francisco as a Pricing Manager, became the Head of Growth Analytics, and then took on the role of Data Science Manager. Pat is currently a Senior Data Science and Analytics Manager for Uber in Boston. We are extremely fortunate to have Pat share about his work and experiences at Uber with us!
From my presentation, I hope you took away these key ideas:
- Uber is a digital platform which leverages data collected from the Uber app.
- Uber has experienced enormous growth during its <10-year lifespan.
- Uber’s rapid growth came at the cost of internal development, resulting in a toxic corporate culture.
- Uber is preparing for an IPO in 2019 under its new CEO, Dara Khosrowshahi.
- Moving forward, Uber aims to improve its corporate culture and is focused on making transportation and delivery more reliable and accessible.