In the digital world, Uber’s business model has been copied repeatedly. As a ride-sharing company, Uber is part of an emerging business sector that has changed the transportation industry. Uber is among the top producing ride-share apps today based on its peer-to-peer business model. The inconvenience of getting a taxi to the office is a thing of the past.
How Uber works
Today, the company is estimated to have over 91 million active monthly users, is worth $120 billion, and operates in multiple countries worldwide. Uber provides ride options, including bikes and scooters and Uber Air for their users.
I will list here just a few services Uber offers to its ride-share customers.
- UberX: Offers your basic pick-up and drop-off service.
- Uber Pool: Offers you the option to share rides and fares with other riders.
- Uber SUV: Offers a more high-end ride with added space.
- Uber Comfort: A service that matches riders and drivers with newer and more spacious cars.
- Uber Black: Uber pairs riders with highly-rated drivers in luxury cars for a premium price.
- Uber LUX: Uber’s luxury car service picks up riders in high-class vehicles such as 2012 models and up.
- Scooters: Fun, affordable, and easy to use, Lime electric scooters are available through the Uber app in select areas.
- Uber WAV: Connects riders to wheelchair-accessible vehicles in select areas directly through the Uber app.
Uber’s Business Model
Uber introduced the idea of a peer-to-peer business model to a broad audience. This business model involves building partnerships with existing businesses, letting them handle all aspects of the offering’s creation and development, and allowing your business to focus on branding.
While Uber does not own any cars, it signs drivers who use their own cars but work under the Uber brand name. The company also ensures that the service standards are met and maintained, requiring their drivers to have car maintenance checks before taking their first fare. You also must maintain a certain level of cleanliness inside the vehicle. Now, with covid-19, you must wear a mask inside your vehicle. The company is also concerned about the safety of all drivers, requiring them to verify their fares before proceeding with their route.
How It’s All Put Together
Uber focuses on two aspects of its operating model. One aspect is signing as many driving partners as possible to deliver customers a seamless experience. The second is to market the ride-share app to customers and choose their desired mode of transportation.
Through the app, a customer chooses ride options. They choose a vehicle size, price, and estimated arrival time; decide on an option that fits their needs and confirms the ride.
The app’s algorithm then informs nearby and available drivers about the request. They can then accept or decline the rider on their own. To avoid bias, Uber does not tell drivers where passengers are going until after a driver has accepted the ride. Once the driver has accepted a ride, the rider is notified and thus starts the agreement for pick-up and drop-off of the rider.
Why This Business Model Works
This type of peer-to-peer business model works for several reasons. Uber matches its customers with their drivers first, then facilitates the payment process. Uber offers cash-less payments making it easier than ever to make purchases through your smartphone without bringing your wallet along. Uber then gives map details of your destination with directions and an estimated arrival time through the application.
Another factor that makes this business model make sense is processing the fees. Uber charges 20-25% of the ride fees plus other miscellaneous fees like safe ride fees, booking fees, etc. This is a way for Uber to profit from each ride it takes and give back to its drivers by offering driver incentives like paid college tuition, dental care, local discounts, and more.
People Love Uber
The fact of the matter is that people love Uber. Whether they understand the business model or not. Uber has been a hit with the ride-share industry for its technology, reliability, and, most importantly, the fact that they’re frequently the most affordable transportation option in the cities in which they run. This is what keeps bringing customers to Uber. While there are endless comparisons between Uber and other ride-share options, the stats don’t lie. Riders choose Uber time and time again. The concept of Uber’s ride-sharing service is not revolutionary, but its business model is what makes it work.