Uber Work Principle: Causerie on Uber Business Model and Revenue Sources

Straightening out the complexities, Uber was born in 2009 (Co-founders: Travis Kalanick + Garrett Camp; CEO: Dara Khosrowshahi), and has since then sailed across various markets and industries to become a premier ride-hailing platform, a default verb and noun of cabs. Uber-ing is simpler than taking a ‘Lyft’ or an ‘Easy Taxi’. Getting the better of similar ride-hailing services around like: 99 (99app.com), Careem (Careem.com), Curb (GoCurb.com), EasyTaxi (Easytaxi.com/en), Flywheel (FlywheelNow.com), Gett (Gett.com), Grab (Grab.com), Kabbee (Kabbee.com), MyTaxi (MyTaxi.com), Ola (OlaCabs.com), Safr (GoSafr.com), SheTaxis (SheTaxis.com), Takkun (Takkun.Taxi-Tokyo.or.jp/english/index.html) and Via (RidewithVia.com) etc., Uber has continued to grow since its inception and has become an entrenched cab-bing option.

What does Ride-Hailing Industry look like in 2019?

• Total revenue in the Ride Hailing segment will grow to an estimated US$18,405m by the end of 2019.
• This revenue generated by the ride-hailing industry is estimated to show an annual growth rate (CAGR 2019-2023) of 9.3%, which will result in a market volume of US$26,315m by 2023.
• User penetration in cab booking industry is going to be 16.1% in 2019 and is expected to hit 18.1% by 2023.
• Current annual revenue per user (ARPU) is around US$345.83 currently.
• Most of the revenue in the cab-riding industry is generated in China which is around US$35,589m (Current data as of January 2019)

Uber Business Model: Revenue and Usage Statistics

Uber is one of the most popular and oldest ride sharing app that helps users to order private or shared cabs. Payments are deducted from consumer’s bank account (according to chosen methods of payments, or can also be paid in cash after rise is completed). Services are lined up at economic prices that are considerably lower than adjoining counterparts. Uber has been playing havoc across major cities, disdaining the rule book by being pertinacious throughout its inception days.

Despite all the marketing and challenges, Uber successfully got its name listed among top 50 disruptors globally, according to a report by CNBC in 2018.

Many of its diversifications like Food ordering and delivery (Uber Eats) have been hugely successful and are working around in almost all major cities around the world. Spreading its core offerings, Uber has been architecting peer-to-peer businesses like UberPop, UberPool, UberChopper etc.

What Services Does Uber Provide On-Demand?

Riding with Uber: Levels of Service, products and line of business contain following services on-demand:

How Does Uber Make Money?

Uber is a premier ride-sharing company based in San Fransisco. It started as a smartphone application and featured cars from a bigger segment with a definite high price, which are gradually reduced by the introduction of UberX program – share cabs (Pool, UberGo, Premier) at a much lower price. The company earns by charging from its clients (billed to their credit card) and advertisements.

A network service is used to manage all the elements involved in this service. Matching the ride and payments to the driver are handled via an optimization algorithm. Optimization of time and fuel is one of the major consideration, in addition to making the ride pleasant for the users.

With reasonable ride options like Uber Pool, sharing rides in real-time fills empty seats and help people heading towards a common destination, those who choose a common route in routine travel and subsequently saves a lot of fuel. This is considered effective as it helps to decrease on traffic on road and promotes a cleaner environment.

How Uber Managed to be Valued at $120 Billion by End of 2019?

Uber is going to file for its IPO in 2019. Toyota recently invested about $500 million in Uber (at a valuation of $76 billion). Bankers have estimated that the company could be valued at $120 billion by end of 2019.

Here is an interactive dashboard analysis that illustrates breaking down the company’s base-case valuation, after the recent fundraising from Toyota.

See Also: Car rental apps like Turo

The key values that are check for the company’s valuation include their total monthly active riders, the number of rides per rider (on annual basis), revenue per rising, net revenues and price/sales multiples. Being one of the most valuable startups, driven by prominent revenue growth and plans to expand into new markets. Uber’s value has to be estimated by making use of the following statistics:

• Average number of riders who are active (Monthly)
• The annual number of rides per user
• Gross revenue per rising (Total fare/ride)
• Net Revenues (Uber revenue/ driver earnings + incentives + promos + refunds)

(1) Average number of rides delivered per year

Monthly active users have risen from 50 million users in 2016 to 75 million users in 2017. There is also a rise in the number of rides taken per user.

(2) Listing Gross Annual Revenue

Gross revenue was recorded at $47 billion in 2018, keeping the revenue per rising as same.

(3) Estimating Uber’s Net Revenue

Although the gross revenue has declined due to aggressive promotions and partner incentive payouts, they have taken appropriate steps to reduce the incentive payouts.

(4) Estimation of Uber’s Valuation

(Image Source: dashboards.trefis.com)

After Toyota’s investment in Uber, reported valuation of about $76 billion in August 2018, this was used to arrive at a revenue multiple for the company.

Uber: Key Success Factors

Building an app like Uber can be complicated, with varied features, varied platforms, varied industries – It has always tried a new industry, established a niche for itself and have earned its name as most useful service providers’ on-demand. Along with extensive efforts, Uber has been in the forefront because it has strategized its efforts logically and has achieved audience’ trust in the process. The two most important things that make it ahead in the competition are: Recruiting the drivers and executing the process.

If users get their cabs within 2 minutes of placing the order, it is almost difficult to switch away from that service towards an alternative option. The ability to get drivers and the volume of business that they can get to these drivers are the two premier success factors in promoting Uber.

The tactics and efforts to recruit Uber drivers differ in every part of the world. Having everything happening in the backend from GPS, payment systems, navigation, and mapping, engineers have made it the largest technology company in Silicon Valley.

The choice of business models has made Uber drivers busier as compared to normal taxi drivers.

Get Through: Why Create an App like Uber?

Uber services persist in 65 different countries and in over 600 cities worldwide. It has a funding of $13.1 billion and is been valued at $69.6 billion. Around 15 million Uber trips are completed every day (tentatively). Uber has been extending its efforts to make people realize, less of a need to own a car and instead purchasing rides. Having disrupted industries like – Public transportation, taxi and limousine services, their services have impacted society in many different ways. This is the reason why Uber thought of expanding its efforts and try their hands into diversified industries. Some of these include Uber ice cream services, bbq, and roses for Valentine’s Day besides other on-demand services. App development agencies have deployed artificial intelligence, machine learning, and autonomous vehicles as special technologies to implement apps like Uber.

Normal Ride-hailing apps are developed in Native iOS/Objective C and Android/Node.js

The backend is normally developed in Node.js, Redis (Taxi Booking, Queue Management) and MongoDB.

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