Uber and its peer-to-peer ridesharing service under its sharing -economy based business model have been a major transformative and disruptive development.
Uber is a multinational ridesharing company that has truly embraced and capitalised on the increasing interconnectivity of platforms and services online. By 2019, the San Francisco based company has expanded world-wide and is estimated to have 110 million global users (Mazareanu, 2019). The pompany’s peer-to-peer ridesharing model and its use of multiple interconnected online service, all integrated into its app (the user interface), have made Uber a prominent entity in todays sharing economy. This is evident in the fact that the subsequent advancements in industries and the supply of high economical and efficient services being supplied online have been referred to as ‘uberisation’.
This essay will explore the transformation of technologies and innovations that allowed for the development of such a company, while also assessing its business model. Furthermore, we will take a look at Uber’s place in today’s social ecology, and the economic, social and political transformations it has introduced, changing the transportation and ridesharing industry forever.
Uber’s history — Necessity is the mother of all invention
One New Year’s Eve, a computer programmer named Garret Camp faced an astounding $800 bill for hiring a private car with his friends. He couldn’t be the only one unhappy with the then inefficient transportation industry…This got him thinking. What if there was a way to connect drivers wand their vehicles, to potential passengers, through an intermediary that provided this connection without having to own any of the physical assets. The costs would be shared with people, making this a way more affordable and convenient option for transportation. Thus in 2009, Uber was born.
Efficiency and convenience is the name of the game
Uber has now grown into a transformative ‘Internet of Things’ (IoT) company that uses smartphones as their primary interrelated computing devices, allowing automated interactions between drivers and passengers. Being an IoT company, Uber’s services allows all sorts of data to be transferred over a network between mobile computing devices, without the need for direct human interaction with the system. Using the IoT system, and its app as the primary user interface, Uber is able to connect passengers to nearby, available drivers in real time. Through its integrated maps and GPS service, the app offers real time estimations for time till pick up and time of arrival. Furthermore, it also provides an in-app ride-fare payment service that uses passengers’ credit card information to automate the transaction. The app also provides a driver and vehicle profile along with a rating system for passengers and drivers to establish accountability. All the above features involve the real-time transfer of data between different online services; the defining characteristic of today’s ‘sharing economy’
Co-founder Garret Camp, currently owns 6% of Uber’s shares. Figure.X shows some of the other major shareholders. As a publicly shared company, all its investors can be considered stakeholders, however, the predominant stakeholders are the drivers and the passengers.
Uber’s business model
Uber doesn’t own any of the vehicles in its fleet. In fact, its physical assets are mostly limited to their server sites and the electricity needed to run them. This maximises their profits while being able to keep costs low, and beat out the competition. Uber’s business model makes use of data available though IoT. This data, their brand, and their app are the key assets for the company. Uber has established their brand archetypes as ‘The Hero/Innovator’ [g] and strives to be perceived, both publicly and legally, as a technology company rather than a transportation service. Focussing more on technological innovation, and entering new markets by providing more efficient and convenient services, Uber’s urban ridesharing model differs greatly from traditional transportation and taxi services (Teece, 2018). This difference is shown in figure.X, and is credited to Uber embracing the ‘sharing economy’.
Uber’s internet ecology
Uber has forever changed the transport industry, and has emerged as one of the leading, most used providers of this service. The success of Uber has directly influenced the development of other similar ridesharing apps, and indirect influenced a considerable number of new services that use similar integration of technologies online, and the ‘sharing economy’ to provide users with innovative services. Some examples are Deliveroo’s food delivery system which connects restaurants, delivers, and customers; and AirBnB accomodation service which connects people with vacant residences with customers looking for accomodation.
The ‘sharing economy’ requires Uber to partner with other online services and share data, so that their app can function as a user interface inclusive of all its features. Uber used to parter with Google and their Google Maps service for analytics, driver assignment and route processing. However, after acquiring a geospatial software platform call deCarta, this function is managed within Uber’s brand architecture, and makes use of the GPS receivers embedded in smartphones. Uber is also associated with online wallet services like PayPal, and banks like CommBank, NAB, and ANZ Banking Group in Australia. They share user data to allow Uber to pay employees and charge fares, all within the app itself. All the passenger needs to do is provide their credit card details.
Uber’s main competitors are other similar ridesharing companies. Lyft has emerged as a major competitor in the United States, and Ola is challenging Uber with lower prices in Australia and India. Lower prices, shorter waiting times, and better quality of cars and drivers are the main features that fuel competition between ridesharing companies. Taxi Cab companies that used to be dominant entities in the transport industry do not contribute much competition anymore. This is because their main assets are still the physical cars, and advanced software and data skills are required to enter the ridesharing market (Teece, 2018). This is not feasible as they still employ full-time drivers and so their capital is tied up in an obsolete brand architecture.
An ABC News article (Cronau, Fallon & Nicholls, 019) on UberX’s legal affairs and regulation highlights the companies journey after being launched in Australia. Regulated by the NSW Roads and Maritime Services, Uber X was deemed illegal when it was launched in Sydney in 2014 because private cars were being used commercially. This was legalised in 2015 after changes were made to the existing transportation laws. After being legalised all over Australia in 2017, UberX is regulated by the National Government undo the amended transported laws. While under regulation, Uber resisted inspection by blocking access for government inspectors using spyware.
Uber’s major transformations —
From ‘stranger danger’ to ‘Uber user’
Emerging as a technology company yet establishing itself in the transportation industry as a dominant peer-to-peer ridesharing service, Uber has set a trend for the years to come. As mentioned before, it has triggered the rise of other similar ridesharing companies that have competitively taken over from traditional taxi services. Not only has Uber disturbed and dominated the transport industry and created this new type of business model online, it has also changed the norm for social interaction. Society has gone from being told to be wary of strangers due to safety issues, to literally locating and summoning a stranger to get in their vehicle and go somewhere.
Furthermore, it has made taxi call services and booking websites almost obsolete for the daily commute. Spending under a minute on Uber’s app is so much more efficient and convenient than hailing a cab or reserving one for a particular time. Some government run taxis and private taxies have tried to replicate Uber’s business model by developing their own apps, however, they are nowhere near as comprehensive, or well established as Uber is. Traditional full-time cab drivers work for longer hours than Uber drivers but the high customer frequency and demand for ridesharing means Uber drivers are way more efficient with their time in terms of income (Cramer & Krueger, 2016). This is incentive for new drivers to join Uber rather than taxi companies. Furthermore, the easy and ready availability of transport through ridesharing means there is less incentive for people to buy or rent their own cars. This has changed the concentration of capital among businesses and industries. Uber has different price ranges based on the quality and size of the car, thus catering to different income brackets.
Ubers revolutionary app is a keystone feature to the company’s success. The back end transfer of location data to via the ‘cloud,’ and real-time data computation are all features of the apps algorithm. Furthermore, the convenience of payment options, driver information, live locations etc all existing on the same interface is also credited for the apps success. The actual inner workings of the algorithm are a private secret, as this algorithm is a key innovation for the success of Uber’s business model as a ‘service enabler’ (Walsh, 2014).
In summary, Uber and its peer-to-peer ridesharing service under its technology based business model have been a major transformative and disruptive development. Uber has revolutionised the transportation industry, making it more convenient and economically efficient, thus changing it for the better. The technologies and integrated online platforms used in Ubers algorithm and app have also set precedent for future business inn todays ‘sharing-ecology’. Companies strive to work together, sharing resources and data, to lower costs and maximise consumption. Consumers experience a tradeoff between having to disclose more personal information and data, and being able to enjoy these integrated services. Furthermore, future technological advancements could make all drivers obsolete with the possibility of self-driving cars for transport.
Cramer, J., and Krueger, A.B. (2016). Disruptive Change in the Taxi Business: The Case of Uber. American Economic Review. 106 (5): p.177-82
Cronau, P, Fallon, M., Nicholls, S. (2019). How Australian transport authorities played cat and mouse with Uber’s Greyball. ABC News. Retrieved from: https://www.abc.net.au/news/2019-03-18/how-australian-authorities-played-cat-and-mouse-with-uber/10900892
Huckle, S., Bhattacharya, R., White, M., Beloff, N. (2016). Internet of things, blockchain and shared economy applications. Procedia computer science, 98, p.461-466.
Jack, S. (2017). Now what next for Uberisation? BBC News. Retrieved from: https://www.bbc.com/news/business-41359327
Mazareanu, E., (2019). Monthly number of Uber’s active users worldwide from 2016 to 2019. Statista. Retrieved from: https://www.statista.com/statistics/833743/us-users-ride-sharing-services/
Teece, D. J. (2018). Business models and dynamic capabilities. Long Range Planning, 51(1), p.40-49.