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How Uber Works, Uber business model is an on-demand transportation service which has brought a revolution in the taxi industry all across the world. The business model of Uber has made it possible for people to easily tap their Smartphone and have a cab arrive at their location in the minimum possible time.

Uber is one of those few tech industries in the whole world that has been valued over $70 Billion. Uber has already received an equity funding of $11.56 Billion and is present in 70 countries. These all facts surely show the trust of shareholders in Uber’s business model and make it easy for us to imagine how much revenue will Uber be making once it attains liquidity.
I am confident that this will also provide a better understanding of the reasons behind us at Future Work Technology , approaching things in a modular way, and designing a Mobile Backend as a Service (or MobileBack) service on demand.

In this post, I have highlighted some unknown facts and figures about Uber along with a detailed explanation about the model by which Uber earn money and does business. Uber’s client segments, value propositions, main problems, solutions, cost structure and revenue model have also been discussed. For budding businessman, I have catered to the rise of ‘uber for x’ startups and what you should be looking for in this space. Read on!

Uber Founders, Funding received and Timeline:

Founders: Travis Kalanick and Garrett Camp.
Company Headquarters: San Francisco, California, United States.
Funding received by Uber: $11.56 Billion. (as of April 2017).
Company Valuation: Over $70 Billion.
Number of Users: More than 14 Million (as of 2016 end).
Number of registered drivers: 2,90,000 (as of Dec 2016).
Number of new driver sign-ups: 60,000 every month.
Average number of daily Uber Trips: 2 Million (as of Dec 2016).

The successful timeline of Uber:

Uber’s Revenue Generation Model:

If you have ever travelled in a taxi, you might have paid the driver in cash at the end of your journey. The cash collected by each journey is the only source of income for a traditional cab industry. Uber is no different. Neither does Uber have a different revenue model than the one mentioned above nor it has any other source of revenue as of now. But just imagine 1 million rides a day. It will help you calculate those big numbers that Uber gains. Let’s dig a little deeper to understand Uber’s source of income.

What has made Uber so wealthy is the fact that the revenue model of Uber is as unique as their business model. It can be explained as:

1. Different cab models to cater to everyone:
Uber has not limited itself to a particular segment of cars or to a particular segment of people. There is Uber X, Uber Black for those human who love to travel in a black car, Uber Taxi for those looking for cost-efficient solutions and Uber SUV for those who want richness.

2. Surge Pricing Technology:
Imbalance in cab rent according to different situation is an important aspect of Uber’s business model. Whenever the demand inclined, per mile cost are automatically increased. The new cost depends on the number of available drivers and the number of requests made by human who want to travel. Uber has applied for a price surge technology patent in the US.

3. Other Uber rides:
Uber has come a big way from cabs. It now offers boats, food delivery, goods delivery, grocery delivery, helicopters, truck, self driving cars as well as some other transportation means on demand. Uber now launched a delivery service in San Francisco, motor¬cycle-pickup service in Paris, and an ice-cream-truck-delivery service in 8 other cities. However, these means are available in selected geographical locations but it has led Uber to add new streams of revenue into its business model.

Value Propositions

Customers:
• No need to wait for a taxi for long times.
• Free rides on certain occasions and discounts from time to time.
• Prices lesser than the normal taxi fares.
• Uber’s tagline says – Your personal driver. It lets customers travel in style.
• Fixed prices for common places like Airport etc.

Drivers:
• Additional source of income.
• Flexible working schedules. Can work part time or simply whenever they like.
• Easy payment procedure.
• People who like to drive can earn money while pursuing their hobby.
• Uber pays drivers to be online, even if they don’t get any request.

Customer Segments
Customers for Uber are those who:
• Do not own a car.
• Do not want to drive themselves to a party or function.
• Like to travel in style and want to be treated as a VIP.
• Want a cost-efficient cab at their doorstep.
Uber has such a vast customer segment that it has got something on offer for everyone. From Uber Taxis to Uber Black and from Uber X to Uber SUV, the company has got a vast range for its customers to make a choice.
Uber tries to touch hearts of people by offering special services like:

Uber for Kids: A special service from Uber dedicated for parents who want their kids to reach home from school in an Uber cab.

Uber for Senior Citizens: Another important service from Uber where it targets senior citizens. As per the statistics, Senior citizens make for upto 30% to 40% of total rides in many cities. This made Uber have some good features for seniors and hence attract many senior citizens on the platform. Check out this post from fortune: Why senior citizens are flocking to Uber.

We extended our research beyond Uber business model and came up with an entire development model of Uber.

Growth Model: How Uber finds customers

In less than 6 years, Uber has managed to become the best example of a city-by-city mobile service company roll-out. Many generic pointers that I talked about in this article Post regarding scaling User Acquisition efforts for On
The advantages that Uber has as compared to new beginning in this space are:
1. Lot of money to incentivize both drivers and customers.
2. Rock solid processes or playbooks that have evolved through skillful launching Uber in 311 cities till date.
3. Already known brand that gets early curious adopters.
First customers come from various local advertising channels like FM radio, newspapers, online advertising etc. Uber is such a big name that people are already waiting for the cab industry to start services in their city.

Uber Business Model Canvas

4 step model about how Uber works

Step 1 (Request a cab): The first step in the business model of uber is about creating a demand. Peeps have a smartphone application which lets them request a cab instantly or schedule it for some time later.
Step 2 (Matching): As soon as the request is made, a notification about your details is sent to the nearest driver. Cab driver has the option to accept or reject the ride on demand of the customer. In case he rejects, notification is sent to another driver in that area.
Step 3 (Ride): Customer can track the cab when it is arriving and the ETA is also shown to the customer. The meter starts as soon as the customer sits in the cab which can be tracked through the customer side app as well.
Step 4 (Payment & Rating): Once the ride is over, customer gets an option to rate the driver. Rating system is an important part of Uber’s business model as it lets a person know about the driver before booking a ride and helps him trust the driver.

How and Why Uber became so successful:

The problem with local Taxis
The launch of Uber
The early adopters
Word of Mouth advertising
Main Growth opportunities tapped by Uber

Want to create the next big thing like Uber? Get in touch with us and know how we can help you.

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