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Uber Business Model


This post discusses the Uber business model. Specifically, the key players in the said business model. We will have another post that goes into the Business model canvas.

Personally, it fascinates me to imagine how a company that started about 7 years ago (March 2009) grew and spread to well over 311 cities in the world. You must know that the growth of  Uber’s business involved a meticulous understanding of inefficiencies with private car transportation and ruthless execution of their game plan. In this post, we will attempt to evaluate the Uber business model by checking how it works at various levels. Note – we will not be breaking down the famous “Business Model Canvas” by Alexander Osterwalder: We will likely have another post for that.


The Uber Driver

The ease with which one can become an Uber driver is one of the reasons why there are so many Uber drivers in the world today. Uber business modelDriving for Uber provides the everyday driver the opportunity to make money using their car without having to brand it with the ‘taxi’ sign. All you basically need to drive for Uber is a valid license and a car. Although there are some other necessary paper works and steps that can take 3 to 4 weeks to finalize, everything you need to become an Uber driver (at least an UberX driver) is not beyond what a usual road user should have.


Getting Uber Drivers

Uber has been very successful at getting rideshare drivers to sign up with them. They have done this successfully in city after city by employing a couple of strategies:

  •  Guaranteed Rates for Uber Drivers – To qualify for guaranteed rates, you generally would need to have received an email from Uber inviting you to participate (for existing Uber drivers). Also there are some minimum requirements you would need to meet such as minimum rides per hour and minimum trip acceptance rate.
  • Signup Incentives – For some cities you make as much as $1,000 for just signing up to be an Uber driver. Note -there are however some minimum number of ride requirements you need to meet to get this driver signup bonus.
  • Strong Brand Recognition – This is pretty self explanatory. Uber runs a lot of promotions and has a pretty close relationship with the startup ecosystem in a lot of major cities. People signup for Uber because they are a household name at this point.
  •  Car Acquisition Programs – There are various programs for potential Uber drivers who don’t have cars. (See our post here)
  •  Marketing – I am sure you see a lot of the advertisements on craigslist and even on TV now. Some people become Uber drivers because they respond to these advertisements.


The Uber Passenger

To be an Uber passenger, you ought to have downloaded the Uber mobile application which is available for windows, android and IOS.
After registering an account with Uber, you can then order a ride when you need one. To ensure that you are at rest, the app allows you to monitor the movement of the driver as they come to pick you up for the trip.


Getting Uber Passengers

Uber has also been very successful at getting ride-share passengers to sign up. A couple of the strategies they have employed include:

  •  Free Rides for New Uber Riders – Nothing beats free. By offering a free ride to new Uber riders, Uber reduces the barrier to trying out their services. Usually there is a cap on the amount that is credited to you for a free ride.  (Don’t go taking a ride from Brooklyn to Manhattan expecting for it to be free).
  • Free Rides for Existing Uber Riders – As an existing rider, you have a lot of incentive to tell your friends about Uber especially if you consider it a good service. By referring your friends/acquaintances, you are credited with a free ride also (capped at a certain amount).


Uber Fares & Payment Method

Uber car fares are set exclusively by Uber. Although there might be certain variations at certain times, the chargeuber business models are set to ensure that both Uber and the drivers are never at a disadvantage. Majorly, the type of Uber service and therefore comfort-level of the car you ordered are the greatest influencers of price range. While UberX is a regular, comfortable car and moderate fare service, Uber BLACK on the other hand involves the use of luxury vehicles and professional chauffeur services, with a fare rate to match. Until recently when cash payment was introduced to a few cities, payment was made only with the use of credit and debit cards which is pre-registered on your Uber account.


Uber Revenue

Uber makes money by taking a commission/royalty from every fare paid by  a rider for an Uber ride. Uber’s commission varies depending on your signup city. 

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