Uber Buisness Model in Detail & How does Uber Make Money?

In today’s world, Uber business model has become so famous and successful that it has powered a new beginning economy, the “on-demand economy”

Uber business model, a booming business, is one such ride sharing company that disrupted the industry in 2009.

If you’ve ever wondered how Uber works, and how it makes money, without giving any charges or few extra tips, the uber business model — a taxi Read on to decode the aggregator.

Having a deep knowledge of Uber’s on-demand business model can be instrumental in modeling your own on-demand startup business idea.

As a leading on-demand startup technology and web development company, we want to share this knowledge with you through this blog post.

What is Uber and it’s basics?

Uber is an on-demand cab service that works on a mobile app which lets you book taxi or cabs from one place to another location, estimate arrival times, and charges provides the choice to break the co-riders, all with a few taps on the app.

Originally, the app only had an option to hail a black colored luxury car.

• Founders — Garrett Camp, Oscar Salazar, Travis Kalanick
• Establishment Year — March 2009
• Headquarters — San Francisco Bay Area, USA
• Total Funding — $24.2B (in 22 funding rounds as of October 2018, Crunchbase)
• Current Valuation — $120B (Source — Bloomberg)

Today, the company is estimated to have over 100 million monthly active customers all over the world , is a unicorn valued at ~$60 billion, and provides ride-hailing options from affordable bikes and scooters to Uber Air.

• UberX: The basic Uber ride.
• Uber Pool: Shared rides.
• “Green: Electric vehicles.
• “Black: Luxury cars.
• Bikes: On-demand electric bikes.
• Scooters: Electric scooters.
• UberXL: Vehicles with carrying capacity of up to 6 people.

Uber’s Business Model — How does Uber work?

• Uber introduces the concept of uber business model to the world
• It has dipped its toes in other areas as well — from Uber Eats (on-demand food delivery) to Uber Freight (on-demand trucking).
• For the sake of simplicity, in this blog, we will focus on the core business process of Uber — uber business model and how does it make money? when did uber start?
• Simply put, Uber doesn’t own a car. Uber want those drivers who drive their own cabs but they will do work under the brand name of uber.
• Through uber cab business model, Uber has been able to produce great value proposition for both riders and drivers aboard its platform and build disruption in the cab industry.

Value Proposal for customers in Uber

• On-demand cab booking (convenient)
• real-time tracking
• exact ETA
• cashless ride
• less waiting time for rides
• advance pricing
• Multiple ride options

Merit Scheme for Drivers in Uber

• Pliability to drive on your own terms
• better earnings
• less idle time to get a new ride
• training period
• Help in getting vehicle loan
• better travel allocation

How does Uber works?

Uber business model operates on a two-way operating model. Here’s how Uber works from the end consumer’s point of view

1. The Application

• The application is the first point where the customer enters point A and point B detail.
• They also review and select ride options for vehicle size, price and estimated drop-off time; selects the option that best suits their demand; and confirm pickup.

2. The Background Algorithm

• It is the backbone of the contribution.
• However, to make sure that there is no bias, Uber does not show drivers location info prior to accepting a ride.
• Once accepted, the rider is informed about the driver and the time taken for the driver to reach the departure point.

3. The Taxi Ride

• This is where the standardization and safety aspect of the brand comes in handy.
• Even though the cabs are owned and worked by the cab driver, Uber makes sure that it handles its brand identity.
• The driver makes sure to follow the instructions given by the rider.
• In addition, in luxurious rides, entertainment systems and WiFi are installed for riders to use during their rides.
• Apart from this, there is also an option to share travel details and live location with other friends and family to ensure safety.

4. Payment

• The payment policy on Uber differs for the different geographic regions where it operates.
• This is provided in the form of cash, app-linked debit card, credit card, bank transfer or wallet.

5. The Social Validation

• This is an operating model aspect that Uber has added to build it more community-friendly.
• After each ride, both the rider and the driver give ratings to each other according to thier behaviour and ride.
• Also, a rider who does not comply with the terms of service is also barred from fulfilling the promise made to the drivers.

How Does Uber Make Money?

• At a glance, Uber business model looks similar to any other taxi company.
• In reality, however, this working and revenue model is little different from that of typical ride-hailing companies.
• In simple words, Uber brings customers to drivers, provides payment options to its customers.
• Furthermore, it is not in the hands of drivers who decide that how much they will charge for the ride.
• For instance, in New Delhi, a 4.5 km journey can cost from ₹21 to ₹380, based on the type of Uber you select.

1. Trip Commissions

Uber provides a robust supply of ride requests for drivers to accept, fulfill, and earn income on its platform (also known as partners).

2. Premium Ride

Uber offers a range of ride options from affordable hatchbacks to luxury sedans and SUVs.

The profit margins for premium rides are very high and this helps Uber earn more money.

3. Cancellation Fee

If a customer cancels a trip after some time limit, such as five minutes, he is charged a cancellation fee.

4. Uber Eats

Uber is betting big on on-demand food delivery and why not.

It was launched as a separate app in 2016 and is rapidly growing in popularity.

5. Uber Freight

Uber Freight is primarily Uber for trucks.

If Uber can execute on its strategy of becoming the freight matching platform of choice, the revenue opportunities are even bigger.

Future Of Uber

• Even though the company has a truly unregulated Uber business model, its revenue model has yet to prove profitable.
• Total bookings for 2019 were $65 billion, up from $50 billion in 2018.
• But taking into the consideration move of on-demand services and the enlarging demand.
• It is certain that the company will be profitable in future.

Wrapping Up!!

Uber’s success in many ways triggered a chain reaction that was followed by hundreds of on-demand/”X” startups launching Uber and hopefully many more to come.

Specially, in the on-demand transportation and logistics industry, the impact has been profound.

We hope our analysis process of Uber’s business model will become a useful resource for upcoming on-demand startups.