A lot of people have been asking me to explain business models of different startups, so I thought of doing a series on the same. And what better startup to start with than Uber?
Before we start we need to understand some facts related to Uber.
Founded:March 1, 2009
Aliases:Uber Technologies Inc., UberCab, UberCab.com
Employees:5k – 10k
Headquarters: San Francisco, California
Description:Uber is a mobile app connecting passengers with drivers for hire.
Founders: Garrett Camp, Oscar Salazar, Travis Kalanick
Categories: Public Transportation, Mobile Apps, Ride Sharing, Transportation
The problem that Uber is solving is a classic on. On-demand taxi. Generally people had to stand on the sidewalk and wave at a taxi that’s passing by. If it stops you are in luck, if it doesn’t well you are late for that meeting you had to reach. Also the rates were extremely high, people had no control over the rates. During peak hours, it was impossible to find a taxi.
Uber solved this problem by getting technology into play. By making an app through which you can book a cab at your convenience, Uber solved the one of the major issues in America. UberCabs launched in 2010 and became popular real soon. It delivered value to people which was one of the reason it became popular.
Business Model & Revenue Model
There are two faces to Uber’s business model:
- Driver/Partner Facing
- Customer Facing
Uber helps the driver partner with loans at cheap rates from various manufacturers. It’s upto the driver to choose the model and make, rest Uber handles. Based on this the driver can either pay a daily, weekly or monthly fee to Uber as a payback for what Uber paid upfront. Apart from this, Uber takes 25% cut from the drivers on what they make on the trips.
There are two ways a Driver can earn:
- Trip based incentive
- Total Money paid/day based incentive
Apart from these they get more incentives for staying online for more than 9 hours. Uber also has this feature where if a driver is on a trip then he’ll get a trip before the current trip ends, making it continuous rides for the driver.
Customer facing app has 4 options: uberPOOL, uberGO, uberX and uberXL for different price points.
uberPOOL is for those who would like to share their ride with others while commuting. This could be to save money, to carpool and save the environment. You can book a maximum of 2 seats with uberPOOL and the price difference is significant.
uberGo is their lowest single cab offering. With a price of 7 Rs/km upto 12km and 13Rs after that. uberGO is aimed at short distance travel within the city.
uberX is for those who love to travel in Sedan rather than in a hatchback. It’s a bit expensive as compared to uberGO but the luxury factor is more too. Price starts from 8 Rs/km upto 12km and 14Rs there after.
uberXL as the nomenclature suggests is for bigger groups/families. If you are looking at booking more than 4 seats. uberXL is the way to go!
- The less asset you own, the better.
- Treat your first 100 customers as gods. They are the ones you will give you the next 1000 customers.
- Word of mouth marketing is the best way to effectively get the word out.
- Treat your employees equally. They are your main strength.