Uber Business Model – How Uber Works & Make Money?

Uber Business Model – How Uber Works & Make Money?

In the past, hailing a taxi was difficult. Thanks to the advent of mobile technology and apps like Uber, this situation has completely changed. We no longer need to wait and wave for a taxi, but we can now get one with just a few taps on our smartphones.

Businesses have many options due to the changing trend. Many are offering their ride-hailing services online, while others plan on following in the footsteps of Uber. Understanding the Uber business model canvas will help you understand how Uber operates and makes money if you’re the same.

According to Statista, taxi-hailing revenue is expected to be around US$314,224m by 2022. It is expected to grow at 5.30% CAGR from 2022-to 2026, which will result in a market volume totaling US$386,274m in 2026. Uber’s app made it easier to book a ride. Because of its incredible service offerings, the giant gained immense popularity worldwide in a very short time.

 

What is Uber?

It is an American service provider. Uber has a headquarters in San Francisco. It operates in approximately 72 countries and 10500 cities. Uber is a business giant that offers ride-hailing and package delivery, food delivery (Uber Eats & Postmates), couriers, and electric bicycles.

Although the company does not own any vehicles, it does receive a commission for every booking. Uber will be used by more than 93,000,000 people monthly in 2020. It is a 19% increase over the quarter before. Uber is the most popular and preferred taxi-hailing service worldwide.

The company is based in San Francisco, and its global net revenue is expected to exceed 11.1 billion U.S. Dollars by 2020. Uber booked 57.9 Billion dollars in gross revenue from 19 million trips per hour.

It held a 71% market share in January 2022 and 27% in food delivery. Uber is an outstanding player within the sharing economy. However, many startups refer to their services as Uber for X.

 

What is Uber’s Work Process?

It was founded in March 2009 by Travis Kalanick, Garrett Camp, and offers quick ride-hailing services to its customers. Uber is a new business that allows riders to book taxis from any point globally. The app makes it easy for riders to pre-calculate their fare and estimated arrival time. The driver is notified once the rider has placed the request. They can then accept or reject the ride and arrive at the destination to offer it.

When the founders couldn’t find a taxi on a cold evening, they founded Uber. Uber is constantly improving its service and adding functionalities to it. Recently, Uber added a ” Explore” feature that allows customers to browse and book experiences such as live events and other fun activities.

The company has a million users around the world today. It’s a unicorn worth $60billion and offers a range of ride options, from scooters and bikes to Uber Air.

It is a mobility-as-a-service provider, also tested a new algorithm that changed drivers’ payments in 24 U.S. cities. The algorithm allows drivers to check out the destination and pay before accepting a trip. To make more drivers angry, the algorithm increases driver incentives.

 

4 Step Model of How Uber Works

 

Book a Taxi

First, Uber needs to create demand. People can download the app and request a taxi with just a few clicks. You can also schedule your ride whenever you like.

 

Matching

The driver will receive a notification and all details when the customer requests a ride. The driver can accept the ride request or reject the ride request. A notification is sent to the other cab driver in the area if the driver refuses to accept the ride request.

 

Ride

Once the driver has accepted a ride request, customers can track them and get an ETA. Uber drivers ensure that passengers have a pleasant ride.

 

Payment and Rating

After reaching their destination, passengers can rate the driver. Uber’s rating system is an important part of its business model. It allows other riders to review the driver before they book a ride. It helps to build trust.

 

Uber Business Model Canvas: What it means for all its Ubers

The taxi service offerings go beyond ride-booking. It also offers ride-sharing and peer-to-peer bike-sharing services. The San Francisco-based transport company offers its services in over 785 cities worldwide. Uber’s website and mobile apps allow riders to access its services. Uber operates on a two-sided marketplace model. There are two sides to it:

  • Taxi drivers
  • Passengers/Riders

 

Taxi Drivers

It gives drivers the freedom to work on their terms and earn extra income. To earn extra income by offering their services on-demand, drivers can follow these steps.

 

Passengers

It will meet all passengers’ needs. It eliminates inefficiency and transport costs. The app allows riders to book rides and easily check their drivers’ details. Uber allows riders to track their rides and check the details of drivers.

 

Value Propositions

 

Customers:

  • Riders don’t have to wait longer for a taxi;
  • Special occasions and discounts: Free rides
  • Taxi fares are less expensive than regular ones
  • Common places are subject to a fixed price

 

Drivers:

  • Another source of income
  • Flexible working schedule
  • Easy payment procedure
  • For those who love to make more

 

Customer Segments

  • Is not a vehicle owner
  • Do not try to drive yourself to any party or function.
  • You like to travel in style, and you want to be treated as a VIP
  • It would help if you had a cost-effective cab to pick you up at your doorstep

The tagline of the taxi-sharing company says, “Your driver lets your travel in style.” Uber is a ride-hailing company that pioneered the concept of an aggregator model. The unique Uber business model canvas helps build partnerships and allows other partners to work under the brand rather than create the offer.

It doesn’t own cars; instead, aggregates or drivers of cabs own their cabs and work under a brand. The ride-hailing company ensures that all partners are satisfied with the service. Many taxi companies are now investing in the Uber Clone app to provide exceptional customer service.

Prospecting Deep into Uber’s Revenue Model: How Uber Makes Money

Uber’s revenue model is more complicated than trip commissions. Uber’s commission-based model allows it to make a profit.

It is connects drivers with passengers and offers them a variety of payment options, including wallets and credit cards. Uber charges between 20 and 25% for ride fees and additional fees like safe rides, booking rides, and so on. Uber charges standard prices per mile/kilometer and different classes of rides. Let’s look at different ways Uber makes its money

 

Trip Commissions

It offers a platform for drivers to accept/reject ride requests, fulfill them, and make income. A passenger can pay via various payment methods while making a booking. After cutting its commission (performing this task as a broker), the ride-hailing giant transfers the payment to the partner’s bank account.

Surge Pricing

The Uber has used this pricing strategy to make its money. Uber has also chosen to enter other verticals, such as food delivery. Based on an algorithm that calculates the surge price, fare prices go up when there is high demand. Uber uses a surge price calculation algorithm to determine how Uber manages the demand-supply mismatch.

Premium Rides

Taxi-hailing giant Uber offers many ride options, including sedans, SUVs, and hatchbacks. Premium rides have a higher profit margin, which helps the company make greater profits.

 

Cancellation Fee

Cancellation of the ride is subject to a cancellation fee.

 

Leasing to Drivers

It is  a vehicle leasing program that allows drivers to get on board quicker in many countries. All drivers who sign up for Uber have to pay a security fee. This payment is automatically deducted from drivers’ weekly earnings.

 

Brand Partnerships/Advertising

Uber is a great way for brands to get more visibility. For easy content consumption, the app interface uses a feed-style layout. It can be a great revenue source in the long term. You can also use the platform to promote sponsored content.

You might now be able to see how Uber makes its money. It’s possible to start your ride-sharing or taxi-hailing business online for a very affordable price.

Wrapping it Up

The Uber is responsible for the rapid growth of the on-demand market. Uber’s success was, in part, a chain reaction. Since then, many Uber clones have been launched, and more are expected in the future.

It has been the most successful mobile service provider. This analysis of Uber’s business model and how it makes money should be a helpful resource for you and other startups looking to get into this rapidly changing sector.

On-demand logistics and transportation industry are constantly changing. Therefore, it is crucial to bring something new. You’ll lose many opportunities if you don’t follow the trends. It is the best time to start your ride-hailing company online.

contributor
Smith Joe, an experienced content writer, enjoys sharing his thoughts on various online delivery firms, eCommerce, on-demand business models, and so on. Furthermore, he has assisted numerous entrepreneurs by providing them with advice on Internet enterprises and their influence on the market.

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