Whenever we think about booking a cab, the first 2 names come to mind, UBER and Ola. Have you ever wondered how UBER makes money? If yes then this article is for you. In this article we will explore the business model of UBER and know how it makes money.
Within the business sphere, Uber stands as a widely recognized entity. Its extraordinary success has served as a source of motivation for millions of business owners and entrepreneurs, and this upward trend is anticipated to persist. Founded in 2009 and based in California, this ride-hailing service has played a pivotal role in catalyzing a substantial shift by propelling the on-demand economy.
From its modest origins, Uber has traversed a significant journey, progressing far beyond its foundational concept of enabling customers to summon a cab with a single tap. Today, it holds the distinction of being the world’s largest ride-sharing firm. Notably, Uber currently commands a commanding share of over 68% in the total ridesharing market within the United States.
Uber Statistics in 2023
Based on statistical data, Uber does approximately 2.3 billion rides per quarter. The company has successfully raised a substantial $70 billion through fundraising efforts, boasts a user base of over 130 million active customers and a fleet of 5.4 million dedicated Uber drivers. This resulted in a remarkable net worth of $130 billion. Undoubtedly, Uber’s extraordinary achievements have not only influenced its industry but have also served as a source of inspiration for many business owners and entrepreneurs around the world.
Uber’s Business Model Canvas
Uber introduced the aggregator business model, a pioneering concept. Its operational foundation rests upon a multi-sided platform strategy, acting as a pivotal connection between riders and drivers. In essence, Uber employs a two-fold business approach. On one hand, it offers clients the convenience of securing a taxi with a simple click; on the other, it empowers cab drivers to efficiently complete their rides punctually and securely.
The primary task is to identify the key customer base to whom value is delivered. The persona method aids in crafting an imaginative depiction of user categories. Uber caters to two distinct user types: drivers and riders. Each type serves a specific subset of individuals who find value in Uber’s offerings.
For the first group of drivers:
- Full-time job seekers – People who have vehicles like cars and bikes, and know how to drive and are looking for a job – People who already have a job but looking for a passive income.
- Individuals seeking supplemental income – People who only know driving skills and looking for a job.
- Enthusiastic about driving – People who only know driving skills and looking for a job.
- In search of a flexible work arrangement – People who don’t want a 9 to 5 job, instead want a flexible job shift.
For the second group of riders:
- Individuals without personal vehicles – People who do not have vehicles and do not want to waste their time in changing buses or rickshaws.
- Non-drivers – Might have a vehicle but don’t know how to drive. Seeking comfort and luxury
- Seeking comfort and luxury.
- In need of cost-effective transportation solutions
- Disenchanted with traditional taxis – People who don’t want to waste their time negotiating with traditional taxis.
- Travelers exploring unfamiliar locales – People who are visiting a new location and not familiar with the locals.
Each persona presents distinct challenges or needs that your product or service can address, and these should be outlined in the value proposition section. Enumerate as many tasks as possible that align with the requirements of your target customer segments.
For drivers, it’s the ability to enjoy flexible working hours and increase earnings, while for passengers, it’s the convenience of paying with credit cards and accessing cost-effective fares. Dissect this section into specific tasks to be accomplished, customer pains and gains, and link them to your product’s value using the value proposition canvas.
Value Proposition or Benefits Uber Offers:
- Easy initiation process
- Earning opportunities
- Enhanced access to passengers
- Flexibility in scheduling
- Online payment receipt
- Minimal waiting time
- Reduced transportation expenses
- Cashless transactions
- Safety and security
- Transparent pricing
Uber’s Channels encompass:
- Smartphone apps (Android & iOS)
- Social media
- Google Adwords
- Media coverage
- Word of mouth
The communication platforms that entrepreneurs employ to reach customer segments are referred to as channels. For instance, if you offer your products through a website, that becomes a part of your business model canvas channels. Examples include search engines, social media, and even word-of-mouth marketing.
This section defines how you engage with customers, including post-sale follow-up and feedback. If your interaction occurs through a call center or chatbot, specify it here.
Uber nurtures customer relationships via:
- Social media interactions
- Customer support services
- Rating, reviews & feedback system
The revenue streams section outlines the avenues through which your company generates funds. These usually stem from customer segmentation and value proposition alignment. For instance, Uber passengers use credit cards to pay for rides, generating revenue through ride commissions. Other streams might involve billable add-ons, subscriptions, premium accounts, etc.
Uber’s Revenue Streams encompass:
- Fare charges per km/mile
- Surge pricing
- Services like Uber X, SUV, etc.
- Divisions like Uber Eats, etc.
- Advertising & marketing
Key activities encompass all tasks required to keep your company functioning optimally in the digital realm. This includes ongoing product development, marketing, recruitment, and more. When populating this section, consider the other segments you’ve already addressed.
Uber’s Key Activities encompass:
- Platform development & enhancement
- Marketing & customer acquisition
- Sales promotion
- Driver recruitment
- Customer support
- Driver payout management
- Customer and driver communication
The assets essential for running your organization at peak efficiency are key resources. For Uber, this includes a network of drivers and riders, a digital platform (website & apps), technology talent, advanced algorithms & data analysis, and a strong brand image. Service-oriented businesses also heavily rely on staff and expertise.
External stakeholders who contribute to your business are outlined in the key partner section. Tech platform development can be fueled by Uber investors, and recruiting partners assist in driver hiring.
Uber’s Key Partners include:
- Investors & venture capitalists
- Technology partners
- Commercial partners
- Payment processors
- Map API providers
The cost structures section delineates where your expenditure goes, including future expenses as your enterprise expands. It encompasses items like hardware procurement, software development, and rental services.
Attributes comprising Uber’s Cost Structure are:
- Customer acquisition costs
- Legal & settlement costs
- Insurance expenses
- Research & development
- Lobbying & compliance
- Platform maintenance
- Infrastructure costs
- Customer support
Upon creating your business model canvas, the subsequent step is analysis. This comprehensive overview helps identify bottlenecks and areas for improvement. Share it with stakeholders for further refinement, and remember that the canvas remains flexible, adapting to your evolving business landscape.