case study on uber

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Uber in 2024: From Industry Disruption to Creating Value For All Stakeholders

Dara Khosrowshahi became the CEO of Uber in August 2017, following internal turbulence and serious headwinds related to the company’s governance and reputation. Five short years later, Uber was clearly back on course, building on the success of its technology platform to reach 150 million monthly active platform users—and a market cap of $125 billion by the end of 2023.

This case study traces the remarkable transformation of Uber from its early innovation as a ride-hailing pioneer in a handful of cities, to the global expansion of Uber mobility services that required close attention to local operational and regulatory practices, to solving the complex technical challenges to drive Uber’s food delivery services forward. Interviews with Uber leadership reveals the strategic approach to work on the engineering, data science, product management, and product design challenges involved in building and maintaining a customer-friendly app and create an optimized user experience—and scale this on a global basis while factoring in local conditions and practices.

Key to this success was a culture reboot within Uber, and a renewed focus on collaboration and value creation for all stakeholders. The company that had found its initial footing by disrupting and transforming the taxi industry, more than a decade earlier, now faced a future where artificial intelligence and autonomous vehicles would likely disrupt the mobility sector once again—but Uber was preparing intensively for what the future might bring.

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How Uber Disrupted An Industry With An Explosive Approach

Table of contents.

In this strategy study, we’re going to delve into a company that impacted everything from people’s everyday lives and entrepreneurial dreams to the startup world and city legislature.

Its story and strategy are fascinating, often problematic, and definitely worth exploring. So let’s embark on a different kind of Uber ride.

Despite disrupting transport around the globe, Uber defines itself as a technology company , not a transport company - hence their legal name Uber Technologies Inc. It was one of the first companies to embrace and define “the sharing economy” concept and created a two-sided digital marketplace for drivers and riders.

Uber’s mission was to make transportation as easy to access as running water and they wanted to do it in a different way - without owning its own vehicle fleet like your regular taxi company. 

That asset-light strategy is what makes Uber so incredibly scalable and it proved to be a huge draw for investors. Since Uber’s launch in 2010, the company has attracted over $25 billion in VC funding.

Their business model and immense financial backing helped Uber achieve:

• Present in 10,500+ cities across 70 countries
• 131 million monthly active platform customers
• Nearly 23 million rides per day worldwide
• Over 5 million drivers worldwide
• 118 million users in 2021
• Annual revenue of $17.4 billion in 2021
• A 68% share of the US rideshare market .

Uber’s numbers are astronomical and the company is a perfect example of a disruptive and transformative brand. However, as we dive deeper into Uber’s strategy, you’ll see that Uber faced and is still facing many challenges - the biggest one among them being its (un)profitability.

But let us start at the very beginning...

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It all began on a cold night in Paris...

It was a snowy winter night in Paris in 2008. Two friends and successful startup founders, Travis Kalanick and Garrett Camp, were attending the annual tech conference LeWeb. More importantly, they were trying to get a cab but couldn’t find one.

What if you could just request a ride from your phone?

This idea, based on a very real need at that moment, is what sparked the creation of Uber.

After the conference, the entrepreneurs went their separate ways, but when Camp returned to San Francisco, he continued to be fixated on the idea and bought the domain name UberCab.com. 

In 2009, Camp was still CEO of StumbleUpon, but he began working on a prototype of UberCab as a side project. At the time, UberCab was still an idea for a shared luxury cab service that could be ordered via an app.

Camp had managed to persuade Kalanick to join UberCab in an advisory role and on July 5, 2010, the first Uber rider requested a trip across San Francisco. Kalanick became Uber’s CEO in December 2010, while Ryan Graves, Uber’s first CEO, assumed the role of the COO and board member.

Uber’s app, enabled its users to order a ride with a tap of a button . A GPS identified the rider’s location, and the cost was automatically charged to the card on the user account. Uber’s simplicity fueled its early popularity among users as well as investors and the startup quickly became one of the hottest companies in San Francisco.

By October 2010, the company received its first major funding of $1.25 million and in 2011 its growth skyrocketed. Early in the year, the company raised $11 million and went on to expand to New York, Seattle, Boston, Chicago, Washington D.C. as well as abroad in Paris.

Yes, just a year after the first Uber ride was requested, Uber had already launched internationally in Paris, where the idea for Uber first took root.

In December at the 2011 LeWeb Conference, the very conference “responsible for Uber’s inception”, Kalanick announced that Uber raised another $32 million in Series B and that investors like Jeff Bezos and Goldman Sachs got on board.

In 2012, Uber launched its arguably most popular service UberX. UberX provided an option of ordering a more affordable car as an alternative to its original black car service. That’s when Uber became really appealing to the mass market.

Behind Uber’s explosive growth are an innovative business model and growth strategy that we must explore before diving into Uber’s global expansion.

Key takeaway #1: build solutions for real-world problems

Successful products and services identify real problems and figure out how technology can be leveraged to solve them. Uber’s founders made sure they’re going to be able to get a ride during a cold winter night by using mobile technology to transform on-demand transportation.

All about Uber’s scalable business model

When talking about Uber’s business model, we need to mention that since its launch, Uber has expanded and diversified its services. It’s no longer just a ride-hailing service - it also offers food delivery (Uber Eats) and trucking (Uber Freight).

However, for the sake of simplicity, we’ll mostly focus on Uber's core business of ridesharing and the business model revolving around it. 

The basic idea behind Uber is to connect riders that need to get somewhere with drivers that are willing to take them there. Riders create the demand while drivers provide the “supply” and Uber acts as the marketplace where both parties can seamlessly connect.

As you can see, Uber has two key users and it has to provide strong value propositions for both drivers and passengers in order to attract enough users for the platform to function as intended.

Let’s see why passengers and drivers use Uber.

Uber’s value propositions

• Convenient on-demand ride bookings
• Real-time tracking
• Cheaper rates compared to taxis
• Accurate estimated time of arrival
• Automatic credit card rides
• Lower wait time for a ride
• Upfront pricing
• Multiple ride options

For drivers

• Highly flexible source of income for people who own (or are willing to loan) a car
• Completely flexible working hours
• Good trip allocation
• Assistance in getting vehicle loans
• Weekly or even daily payments

Uber’s target market

While the appeal of Uber is quite obvious, who exactly do they target?

As evident from the value propositions, Uber has two main target segments - passengers who want a fuss-free experience ride from A to B and drivers that want flexibility and some extra income, usually on the side.

When it comes to passengers, Uber’s website’s headline for a long time was: Everyone’s private driver . That instantly lets us know that Uber’s target market is very, very wide. It’s everyone who needs a ride .

While targeting several customer segments with different cost-conscious and more luxurious service options, what’s perhaps more important is how Uber reached its audience at the very beginning as you can’t just target everyone from the get-go.

It’s all about passionate early adopters

Uber did a masterful job attracting its first users - passengers as well as drivers. When it comes to launching a marketplace the first few weeks are absolutely crucial as there needs to be enough supply and demand for service to feel worthwhile.

Uber developed a highly targeted and localized early adopter strategy in the Silicon Valley area. They knew that launching there meant that the company will be interacting regularly with the tech community who are continually looking for new tools and services that improve their quality of life. People there were ideal early adopters and Uber reached them by sponsoring tech events, providing free rides, and in general driving awareness among this audience.

San Francisco also has notoriously spotty cab service which was perfect for Uber. As early adopters, completely fed up with the taxi situation in the city, tried Uber, they took to blogs, social media and every other way possible to tell their friends about this new way to ride.

The Uber experience became a vector for growth as early adopters impressed their friends with the ability to call a black car from their phone with a couple of taps. These new riders were immediately wowed by the experience and became new users and advocates within the span of a single car ride.

Uber also knew that attendees of their sponsored events were well connected and highly likely to share their experiences with friends, tech press, and social media audiences after trying Uber.

By seeding this audience, they were able to create a growth engine that hinged not just on word of mouth, but by showcasing the service to one's friends which quickly led to a growing network of passionate customers.

Uber combined that initial campaign with its referral marketing strategy where users can give friends free rides while earning credits themselves. This “give money-get money” program gave first-timers a more concrete reason to try the service. It’s been massively successful both for Uber and for certain “superfans”, one of whom earned over $50,000 in referral credits . Drivers also get referral incentives, thereby making acquisition on both driver and rider sides faster and easier.

That’s how Uber quickly got a lot of passionate users who were actually Uber’s first target market. Of course, every company wants passionate users, but as you’ll see, Uber needed them to win against the myriad taxi regulations in major cities.

Uber’s early adopters were people that weren’t happy with the existing state of the transportation industry in their cities. They quickly became advocates for the company in various forums as Uber fought against old regulations. It was a very clever move to identify and cultivate these customers early on. By making customer convenience and service a priority, Uber took the role of “disruptor” and turned it into a part of the company’s image and brand. They joined a broader socioeconomic movement towards changing old industries in ways that benefited consumers. 

It’s safe to say that if Uber wasn’t backed by its passionate users, it wouldn’t be able to expand nearly as fast as it did. In fact, the disruptive socioeconomic movement became a key part of Uber’s early business model.

Adapting to local markets

Despite targeting everyone, Uber still takes into account local experience. As Uber expanded it segmented its audiences and precisely targeted them by region and immediate needs.

For example, in countries like India and Thailand, the average customer must deal with higher traffic congestion and reduced purchasing power than a North American city. In these regions, Uber expanded its offerings with a rickshaw and motorbike service, which are more affordable and often faster transport options.

What enables Uber to adapt its services to the local condition? It’s arguably the most important part of Uber’s business model and quick expansion...

An asset-light strategy

As we said Uber is not a transport company and therefore does not need the assets a traditional taxi company requires.

By being “just” an online platform connecting drivers with passengers via their smartphones eliminates Uber’s need to establish a brick and mortar presence in each new city to which it expands operations. This model eliminates many barriers to Uber’s growth and drastically increases its scalability. It also unlocks the potential for Uber to expand into contiguous service segments such as food delivery (Uber Eats) without drastic changes to the company’s operating model. 

The majority of Uber drivers use their own cars which means that Uber doesn’t need to invest in a fleet of company-owned vehicles or the insurance and repair costs that come with it. It also doesn’t need dispatchers or call centers as the whole process of hailing a ride takes place on their app. 

So, compared to a traditional cab company, Uber doesn’t have to deal with:

• servicing and maintaining a fleet of taxis,
• call center agents,
• administration,
• parking fees,
• recruiting and training drivers and issuing permits.

This means massive savings in fixed and variable costs as well as the agility to respond more quickly and effectively to market changes relative to its competitors.

That’s why Uber was able to expand extremely quickly and in a span of 10 years appeared all over the globe. No taxi or transport company is able to achieve that.

Their lack of assets shows how they save money and expand at relatively low costs - but how does Uber actually make money?

How does Uber make money?

You can probably guess that Uber’s ridesharing service makes money by taking a cut of each ride that happens through their platform. While this is correct, Uber’s revenue model consists of more than just trip commissions - even without taking into account its other services like Uber Eats and Uber Freight. Let’s take a look at other revenue streams their business model enables.

Trip commissions and surge pricing

Uber provides the drivers on its platform with a robust supply of ride requests to accept, fulfill, and make income. When passengers pay for the ride through the app, Uber takes their commission and transfers the rest to the driver. Uber claims that they charge their drivers a 25% fee on all fares, yet reports vary.

However, Uber’s trip rates are not always the same. Uber utilizes a surge pricing model , which is also a cornerstone of Uber’s business model.

It takes advantage of the dynamic relationship between supply and demand and willingness to pay. When there are more passengers than available drivers in a given area, the algorithm increases rates in order to equilibrate this discrepancy. The first benefit of this model is that it attracts drivers to areas offering higher rates, thus increasing their numbers in regions of high demand. Second, it narrows the initial pool of potential passengers based on how much they value a ride, allowing Uber to more accurately segment their customer base and satisfy those users who need their service the most. 

Thus the surge pricing model serves the purpose of capturing the highest possible margins for the company and its drivers while establishing a targeted base of users that value Uber rides the most. These users might also be enticed to upgrade their chosen option to a premium one the next time they use Uber, which is considerably more profitable for the company.

Leasing to drivers

Uber runs a vehicle leasing program in many of its target countries to help new drivers get onboard faster. Drivers have to pay an upfront security deposit for the vehicle and payments are automatically deducted on a weekly basis from the driver’s earnings.

Advertising

There are millions of people around the world that interact with Uber cars every day. Not just the ones who use it for rides but also the ones who see them. That’s a huge opportunity for local as well as global brands that can take advantage of Uber’s on-car advertising .

Brands can advertise on cartop video screens, car wrappings, or car stickers. All three ways display ads on the car and are a fairly traditional form of advertisement, yet Uber with their huge number of drivers can get some money out of it. Of course, drivers that are willing to use their cars as moving ads also earn some additional income.

Understanding Uber’s business model is important if we want to understand the company’s extremely fast and aggressive global expansion, which is something Uber is quite famous for.

Key takeaway #2: plan for scalability

Building a scalable business model is critical, especially if the company’s revenue depends on the quantity of its service. Uber has built its platform in such a way that it is easy for it to expand to new markets and serve millions of users at the same time without a significant increase in its operational costs.

Uber expansion strategy

Uber’s initial global expansion it’s an amazing showcase of the company’s “ask for forgiveness instead of permission” approach . As we’ll see later, Uber’s culture has completely changed since then, but its early expansion is what brought the company mercurial success as well as plenty of backlash and issues of all kinds.

Uber employed an almost warlike mentality when going into a new market and the company’s sole focus was winning. This was first visible in San Francisco even before it went global.

Uber received a cease and desist order in San Francisco soon after its launch in 2010. It ignored it and issued the following response , that might be seen a bit on the arrogant side:

“UberCab is a first to market, cutting edge transportation technology and it must be recognized that the regulations from both city and state regulatory bodies have not been written with these innovations in mind. As such, we are happy to help educate the regulatory bodies on this new generation of technology and work closely with both agencies to ensure compliance and keep our service available for our truly Uber users and their drivers.

Our commitment is to facilitate an improved transportation option that provides safe, reliable, and convenient travel. That will not change. We will continue full speed ahead with the mission of making San Francisco city a great place to live and travel.”

They were relying on their passionate supporters and on their lobbying efforts to put things in order. Not just that, while this is playing out, they're continuing to push forward and expand into other parts of the world. That’s how aggressive they were from the get-go.

Going to Paris - because they can

Uber recognized early that international expansion should be a priority if the company wanted to achieve exponential growth and made Paris its 3rd launch city and 1st city outside the US.

In fact, when they launched in Paris, they launched as sort of a prototype, just to show that they can do it without too much difficulty. 

As Mina Radhakrishnan, Uber’s first Head of Product said in a blog post :

“At Uber, we launched our first international city, Paris, in 30 days. There was a lot of manual work to continue launching in other countries and languages while we didn’t have a core set of international systems  – we had to charge everyone in US dollars for several months. In parallel, we built out the foundations and kept moving pieces onto the new infrastructure, which allowed Uber to keep momentum and still scale.”

While Paris served as an enticing showcase for new investors it also made Uber realize they need an expansion playbook.

Uber’s unusual expansion playbook

At first Uber treated each city as an individual project. They would investigate what needed to be done on a case-by-case basis, and it involved a whole lot of work manpower. 

However, there was a market that needed to be monopolized and they needed to act quickly.

Uber soon realized that looking at each city as a project was too slow. Instead, they developed a process based on the lessons learned from their initial projects and created their aggressive expansion playbook.

Here’s Uber’s plan when expanding to a new city:

• Secretly enter a new market. Recruit drivers and customers through company ambassadors who gain commission and Uber credit. Offer first-time customers free rides to create a strong customer and to exploit a legal loophole for promotion. 
• Ignore threats of legal action. Make a case that customers want Uber to be there. 
• Ignore government sting operations. When the government threatens Uber’s drivers with fines, reassure them that Uber will cover any penalties, legal costs or other repercussions using the massive sums of money invested in the company.
• Start lobbying the state government. Start pushing for regulations that legalize its operations. Create a positive public image and gain the support of influential local charities and other key community stakeholders. Involve customers in petitions.
• Monopolize the market. Hire more drivers, pour more money into promotion, and manufacture PR stunts like delivering puppies or ice cream.
• Undermine the competition. Recruit drivers from competitors by offering them high sign-up fees and often employ other tactics to disrupt their services.

This was the overarching process, and there is obviously a multitude of smaller processes within each of the six steps. The playbook was implemented by a new, local team with a separate entrepreneurial manager who was overseen by Kalanick, the CEO at the time.

While the process was extremely aggressive it’s also how Uber increased its valuation from $3.7 to $41.2 billion in just 15 months. 

The main thing Uber did with this playbook was to launch its service seemingly out of the blue which gave the authorities no time to react before it was firmly established in the city.

While this playbook is responsible for Uber’s early success the approach was often challenged and frowned upon.

War on all fronts

Unsurprisingly Uber has been heavily criticized for aggressively lobbying, following unfair labor practices, jeopardizing the security of passengers and drivers, and playing with local laws by requiring no permits. There were too many scandals and issues to cover them all.

Uber’s warlike approach worked better in countries with legal systems based on common law. In common law countries like the US, Canada, and the UK, laws and regulations are more flexible and subject to judicial interpretation. Uber was therefore afforded greater latitude when arguing the legality of its case in the courts of law. 

In the U.S., Uber used consumer enthusiasm for its service to bring pressure on local politicians to develop rules that allow it to operate. However, such an approach is difficult in civil law countries like China, France, Germany, Spain, and much of continental Europe.

This resulted in plenty of bans, penalties, and losses on various markets .

Uber has been banned from operating in parts of France, Germany, Spain, the Netherlands, and Belgium. It has been accused of willfully ignoring and breaking the law, placing both drivers and riders in peril. In the Netherlands, the company had to pay around 2.3 million euros to settle a case, after being accused of operating an illegal taxi service from 2014 to 2015. 

Uber also faced issues in countries where the relationship between Uber and its drivers meets the definition of the employer-employee relationship. This is one of the reasons why the app was temporarily banned from operating in Colombia and faced similar legal issues in Chile and Argentina.

Its presence in various countries has generated an incredible backlash – protests, riots, and clashes with angry labor unions - especially cab drivers.

Uber also completely mismanaged their launch in China and lost billions trying to establish themselves on the Chinese market. Here’s where their process completely failed them.

When Uber came to China, it didn't fully anticipate all the changes it would have to make. In China, besides having an established competitor in Didi, Google Maps didn't work, so Uber had to completely redo their location services.

Uber also relied on credit cards for payments, and in China, consumers increasingly used apps to do their payments. However, the main apps consumers used ( WeChat and Alipay), were owned by parent companies of the rival ridesharing company, so Uber had to essentially negotiate with its rivals in order to have consumers pay for their ridesharing services.

The Chinese policy regarding competition is also very different from the policy in the United States and much of Europe. The Chinese government wants to promote domestic firms and aggressive tactics are not really an option, because when push comes to shove, the government is likely to come down on the side of the domestic company.

Despite many problems and failures, Uber made impressive headway in foreign markets. But their success also made them a target. Well-funded local challengers soon replicated and improved upon Uber’s model and quickly limited Uber’s market share or pushed them out of their markets.

Tactical retreat from some markets

After Uber hired a new CEO in 2017 and started cleaning house at the end of 2017 (more on this later), it switched to a much less aggressive expansion strategy. In 2018 they decided to retreat from some markets instead of trying to “win at all costs”.

While some may see retreat as a failure, Uber’s early and aggressively sought international position actually provided an opportunity. Instead of completely giving up on markets, Uber used its leverage as an established player to acquire stakes in local competitors . Uber acquired 15.4% of Chinese Didi, 38% of Russia’s Yandex Taxi, and 23.2% of Southeast Asia’s Grab. 

Uber also vowed to do a “reset” in Germany, where it operated a very limited service in Berlin. 

Uber is still left fighting in India against rival Ola where the two have been locked in a costly battle for years over dominance in India’s ride-hailing market. The rivalry is more awkward now that both companies share a mutual large investor: SoftBank. 

Uber’s early super aggressive expansion policies reflected its combative corporate culture which soon tarnished the brand’s image.

Key takeaway #3: being ultra-aggressive is a double-edged sword

There’s no denying that without its extremely fast expansion Uber wouldn’t be the brand that we know today. But as scandals mounted and as Uber lost millions and billions of dollars in certain markets, we should ask ourselves if things could have been done differently. Ignoring local regulations, while it did work in some cases and was extremely costly in others, was never ethical. And we can probably all agree that even if a company adopts an aggressive playbook, it should do all it can to act ethically as well.

Uber’s toxic culture comes to light

Uber needed three key elements in place if it wanted to thrive as a global business.

• A set of country managers who are responsible for their individual markets.
• An understanding of how those markets differ.
• A unified executive team, which creates a centralized command center.

Under Kalanick, Uber actually had the first two. There were strong regional managers and a decentralized command structure that allowed them to enthusiastically implement Uber’s playbook.

However, Uber was lacking a unified executive team to coordinate global operations, including the activity of the individual country managers.

Not just that, back-biting, undermining, and infighting were the rule, not the exception, and executive meetings were often canceled at the last minute.

When we look at Uber’s playbook, that’s not really surprising. Uber always played to win and they did a really good job at recruiting teams of people who really wanted to win as well.

One of the downsides of this course of action is that if you exclusively focus on winning and getting around the existing regulations it quickly blurs the line of what's ethical and what's not ethical - not just when expanding, but inside the company as well.

It also brings into the company a certain kind of people - people that enjoy treating every encounter as a confrontation . Constantly fighting skirmishes outside and inside the company is not just exhausting but affects the morale at the company and the corporate culture.

Uber’s cultural guidelines weren’t helping. They ranged from the sober “Be Yourself” to full-on bro-tastic maxims like “Superpumped” and “Always be hustling”.

As the company scaled rapidly, so did its toxic culture and questionable business tactics. These led to a constant stream of nasty and very public challenges. They included political infighting, allegations of corporate espionage, and criminal investigations.

Then there were the many run-ins with regulators, taxi firms, and even Uber’s own drivers. Uber saw a backlash in some of its key markets which came to a head with the #DeleteUber campaign.

The old Uber logo didn’t help either. It emphasized the public’s perception of Uber’s hostility, imposing itself on customers with all-caps on black background, reflecting Uber’s hyper-masculine attitude.

While Kalanick did build a hugely successful business, an increasingly toxic culture had become a poison and tarnished the brand.

“The radical scale success of Uber that was unprecedented at the time, I think, led to a culture that was highly confident, a culture that was confrontational, a culture that to some extent celebrated breaking the rules . All of which made possible what Uber built, but which created a blind spot as to individual's respect, respect for diversity of different viewpoints, et cetera, that led to Susan Fowler's blog – which by the way wasn't the only difficult occurrence happening at the company,” says Dara Khosrowshahi, the current CEO of Uber.

Exposed by a blog post

The blog post Khosrowshahi mentions was published by a former Uber engineer Susan Fowler in February 2017. She described a toxic culture at the company where sexual harassment was rampant and managers cannibalized each other. 

Her post received so much attention that Uber decided to respond by having the law firm Perkins Coie do an investigation into her allegations.

The CEO and co-founder of Uber, Travis Kalanick, began facing heavy scrutiny over Uber’s company culture. Earlier in 2017 Bloomberg also posted a video of him arguing with an uber driver over falling fare rates, which certainly didn’t help his case and further tarnished Uber’s brand.

The company finally recognized a crucial if simple truth: to maintain a sustainable brand long-term, Uber had to be honest about what it stood for. It postured itself as a cutting-edge, progressive company, yet its corporate culture was the opposite of progressive. The brand teetered on the brink of outright hypocrisy.

Kalanick resigned as CEO on June 20, 2017, and there were numerous other personnel casualties of Uber’s very public self-reflection.

The need to rebrand was clear: without a complete brand overhaul, Uber risked totaling its business and Uber decided to undergo a massive effort to restore its image and set itself up for the future.

Key takeaway #4: recognize when it’s time for a cultural shift

While the “always be hustling” mantra and “win at all costs” people might be required to succeed at a startup, there’s a time when such thinking should be left behind. As Uber grew and expanded it never really took a hard look at the corporate culture it created. It wasn’t a small startup anymore, it became a huge company and should’ve therefore acted more responsibly sooner. In the end, it was forced into an overhaul, but not before its toxic culture tarnished the brand.

Uber rebrands and goes public

When Uber decided to turn things around there were two major areas they focused on - one was their corporate culture and values and the other was their brand .

Khosrowshahi, the new CEO of Uber, said that they asked their employees what should represent the culture of Uber going forward.

He recaps the conversations and answers:

“We celebrate differences. We want to be a different company but we also celebrate differences and backgrounds and where you come from and religion and sexuality, et cetera, and we believe that no matter what you bring to the table, you should be able to contribute to what we call Uber.

The simplest answer that I hear repeated over and over is: We do the right thing, period. We didn't want to define to the employee what the right thing is. You know what the right thing is. Let's do that and, period, that's what we do.”

Listening, observing, and learning became the foundations of Uber’s cultural overhaul.

Since the change, some Uber executives even go the extra mile to participate as normal Uber drivers and experience what Uber’s drivers experience. The importance of getting one’s hands dirty is a part of the refreshed culture. 

They started calling their drivers “driver-partners”.

“Now we have a fundamental connection there that is reflected in the

organization, we have a driver product team, and we now fundamentally build our

product with the driver. We talk to them, we have a dialogue with them, and we build with

them. That kind of connectivity with our driver-partners, I think, creates a win-win and it

creates mutual respect,” says Khosrowshahi.

The current CEO also recognized that executives can get out of touch with reality and said that whenever he goes from city to city he meets with drivers and asks them what they like and what they don’t like.

Uber also changed its approach to communication with governments and regulators. Before all the conversations and the dialogue was happening through lawyers, now Uber is trying to talk about their requests and find a compromise wherever they can’t agree with authorities.

While Uber is still facing challenges and there are still many dissatisfied parties, the company has changed its warlike and aggressive approach and is trying to make things work in a different, more humane way.

A new, more emphatic brand

Uber also embarked on a major rebranding intended to capture an accessible, progressive style that reflected the best of the company. 

The company understood it faced a critical mission: it had to persuade customers that its lousy reputation left the building when its former CEO was replaced.

Uber opted for a complete redesign to overhaul the brand from the ground up. 

Their new logo is the foundation of a substantial rebranding effort – one that incorporates a sense of mobility, accessibility, and friendliness not found in previous iterations. The company’s goal was to create a cohesive brand system described as “instantly recognizable, works around the world, and is efficient to execute” .

The agency Wolff-Olins summed up the project goals on their case study site :

“The brand needed to work around the world. Its highest growth areas are in regions outside of the US, such as Latin America and India, where Wolff Olins has a considerable depth of experience. Instead of pursuing a complex identity system, localized through color and pattern, we moved towards a universal ‘beyond simple global brand. Teams in diverse markets can make it relevant to their audiences with culturally specific content.”

What began as everyone’s personal driver is now all about moving forward and moving together .

The fresh logo was supplemented by creatives that included photos of people from around the world — serving two purposes. Firstly, it represents Uber’s global market, and secondly, adding this human element made the brand a whole lot more relatable. It’s no longer just a tech startup in Silicon Valley — it’s also the drivers you meet every morning, the co-riders you pool with every evening.

Arguably the best example of Uber’s new branding direction is their marketing campaign What moves you, moves us . It’s a campaign that focuses on the drivers and is built on empathy. It acknowledges and shows appreciation for their drivers' hard work and shows the customers who and what they’re supporting when they choose to ride with Uber.

More recently, Uber acknowledged the hard work of frontline healthcare workers during the Covid-19 pandemic with a #GratefulUK campaign. The company offered them free rides and free meals during the Christmas period and encouraged people to share letters, drawings, poems, or doodles thanking the workers. 

Overhauling the brand’s image and corporate culture were not the only major changes that happened after Uber’s scandalous years and Kalanick’s resignation. Another major step towards the maturity of the company happened in 2019 when Uber decided to go Public.

Going public - to boost reputation, get more money, or both?

In less than two years after the rebrand began, Uber decided to go public. Filing for IPO was likely a part of Uber’s rebranding plan. 

Why? People tend to look at public companies as more mature. Going public also provides a sense of accountability because public companies have to report on a quarterly basis and are subject to the regulatory process. It opens the company up to an entire set of investors who drive transparency. That’s exactly what Uber needed after all the previous scandals.

Of course, the public market also provides greater liquidity and more readily available money, which Uber needed as well as it was losing billions of dollars on a yearly basis.

However, Uber's IPO didn’t go as well as expected. Uber’s valuation predictions hovered around $120 billion , which would’ve made it the most valuable company to ever go public. In the end, Uber priced its stock at $45 apiece for a valuation of $82.4 billion , which was lower than many expected yet it is still one of the most valuable exits in history. Uber’s stock began falling right away, but we won’t go further into that.

What’s more important - the company has become public which means new pressure from big investors and shareholders every quarter to stem their losses. And as we’ll see later on, Uber’s eventual profitability is not nearly guaranteed.

Before we dive into the questions of profitability, we should examine how Uber defined itself as an innovative company and how it evolved in the last 10 years.

Key takeaway #5: when you need to change, show dedication

Although the jury is still out on how successful Uber’s rebranding actually is, it’s clear that they’ve undergone major steps to repair their reputation. And there’s really no other way to do it. If you want to rescue a tarnished brand, you have to show that you’re truly dedicated to making it work and aren’t just trying to save face for your own sake.

Uber innovation & diversification strategy

Although Uber is known as the main disruptor in the transport industry, the company is actually not the ridesharing pioneer, but a fast follower in the sector.

Uber’s competitor Lyft and former competitor Sidecar (which shuttered back in 2015) are the ones that pioneered ridesharing as it is known today, which entails using non-professional, non-commercially insured vehicles and drivers. 

Uber initially worked exclusively with commercially licensed, insured, and regulated entities (known as Black Cars in many areas) before transitioning to the current ridesharing model.

While Uber was a fast follower, it expanded quicker and more aggressively and offered a better user experience which led to market dominance in many regions. 

In fact, Uber followed a market entry pattern that has proven successful for business entities in the past – Myspace preceded Facebook, Yahoo preceded Google, and Blackberry preceded Apple’s iPhone. Historical patterns of transformation suggest that being first does have its advantages, but entering the market early and iterating quickly is even more vital when it comes to dominating a market. 

Uber’s expansion playbook is a prime example of how quickly they adapted their model and grabbed the opportunity of extremely fast expansion which was possible because of the significant funding the company received.

Their activation of early adopters and passionate customers to support Uber via petitions and pressure on local authorities can also be seen as an innovative approach to one of the ridesharing market’s main challenges.

A flexible pricing model

Uber’s surge pricing model is another example of a simple yet ingenious solution to a very real problem of the taxi industry - how to get a ride when you simply can’t get a cab . That can happen during peak traffic times or during bad weather.

When Uber’s demand for rides is higher than the supply the prices surge. That means users can almost always get a ride if they’re prepared to pay enough. 

Researcher Oliver Senn analyzed satellite data on weather conditions over a two-month period, and he obtained 830 million GPS records of 80 million taxi trips. The data shows that it was not the high demand for taxis that resulted in a perceived shortage on rainy days; instead, it appeared that many cabbies simply did not pick up passengers, fearing accidents on the wet roads. However, Uber entices their drivers with higher prices and therefore higher earnings when there’s a shortage of rides. 

While plenty of users don’t like the surge pricing, it proved to be a way to get more drivers in the area to take advantage of higher earnings when there’s a shortage of available rides.

Reviews ensure a better service

Another massive differentiator between Uber and traditional taxis is that Uber has rating systems for both drivers and passengers. A review system by itself is nothing new, but it hasn’t been used in the transport industry before - especially not on an individual basis.

The system is a simple solution to the question: “How will drivers and passengers behave?”

It promotes trust in Uber and better behavior on the parts of both driver and passenger as it weeds out the bad users. 

More than just a ridesharing service

Over the years Uber has become more than just a ridesharing company. It’s leveraging its underlying technology to test new services that have the potential to generate additional revenue and fuel Uber’s ambitions.

By introducing new services that add incremental value for users, Uber creates opportunities to capture a larger share of their consumer’s wallets, while also retaining and generating additional income for drivers as well.

There are two main services that stuck around: Uber Freight and Uber Eats.

Uber Freight

Uber Freight is basically Uber for trucks. Uber launched its own on-demand trucking app in 2017 with the core idea of seamlessly matching shippers with carriers. 

In August 2018, it was spun off into a separate business unit, a move that simultaneously allowed it to gain momentum and burn more cash. After spinning off of Uber, the freight company underwent an expansion. 

In 2020 an investment firm Greenbriar Equity Group has committed to invest $500 million in a Series A preferred stock financing for Uber Freight. When announcing the investment Uber said it will maintain majority ownership in Uber Freight and will use the funds to continue to scale its logistics platform, which helps truck drivers connect with shipping companies.

Uber Eats food delivery service launched in 2016 and it was a logical next step for Uber as it aligns with its ridesharing business and helps it utilize its large fleet of drivers. It launched as a separate app and grew in popularity at a rapid pace.

Uber Eats ensured that Uber’s customers used the company’s services more often than ever before. Users who used both Uber and Uber Eats booked an average of 11.5 trips per month, versus only 4.9 trips for those using only a single Uber service.

Consumers benefited from an additional convenient service, and drivers gained a new source of trips which generated a more steady stream of bookings throughout the day, which in turn increased the overall supply of drivers.

With drivers now busier and making more consistent income, they have less reason to dual-app and drive for a competing service like Lyft.

Uber Eats was also huge for Uber during the Covid-19 pandemic. While Uber’s ride-hailing segment contracted by 24%, Uber Eats increased revenues by over 200% in 2020 and prevented a much higher loss of revenue that would have occurred if Uber hadn’t diversified its services.

Uber Revenue by Segment

YearMobilityDeliveryFreightOther2018$8.9 Billion$0.7 Billion$0.3 Billion$0.1 Billion2019$10.4 Billion$1.3 Billion$0.7 Billion$1.3 Billion2020$7.9 Billion$4.8 Billion$0.9 Billion$1.3 Billion

Dreaming of self-driving cars

You may have heard of Uber’s Advanced Technologies Group(ATG) which was established in 2016 with the purpose of developing self-driving cars. Kalanick, the CEO at the time, saw it as an essential investment and there’s no doubt that fully self-driving cars would immensely benefit Uber.

However, ATG brought high costs and safety challenges . Throughout the course of a pandemic-stricken year, Uber has made efforts to stem losses in its ride-hailing business and control business costs. That’s why at the end of 2020 ATG was acquired by its start-up competitor Aurora Innovation. In fact, Uber handed its equity in ATG to Aurora and then invested $400 million into Aurora, which will give Uber a 26% stake in the company. Uber CEO Dara Khosrowshahi will also join Aurora’s board.

“With the addition of ATG, Aurora will have an incredibly strong team and technology, a clear path to several markets, and the resources to deliver,” Chris Urmson, co-founder and CEO of Aurora, said in a statement. “Simply put, Aurora will be the company best positioned to deliver the self-driving products necessary to make transportation and logistics safer, more accessible, and less expensive.”

Uber positioned itself to be right there once Aurora develops their self-driving car, which just might be the key to Uber’s profitability in the future.

Looking towards the future

While Uber’s plans for the future after the pandemic are not set in stone, Khosrowshahi says that people should think about Uber not as a service but as a transportation platform or as an Amazon of transportation. He said that people will be able to take a bus, to take a car, to take a train or to take a taxi using Uber. It would be a win for the consumer because the more choices they've got, the more pricing they've got, the better the product is.

Uber is aiming to pivot their strategy so that it is more inclusive. How they are planning to do that is yet to be seen, but we can be certain they’re going to try and offer new services and further diversify their product as that might be their only option if the company wants to become profitable.

Key takeaway #6: keep innovating and evolving

Uber doesn’t rest on its laurels of being the first prominent rideshare app. Its founders understood really well that the competition will grow over time and they can only stay ahead if they evolve and diversify. They keep adding new features and new services while constantly looking to invest in new technologies.

Will Uber ever be profitable?

Although Uber claims that it will soon become profitable, there are many sceptics that think it won’t happen - and with a good reason.

Uber has been losing billions of dollars during the last few years. Although Uber losses improved in 2020 due to Uber Eats, the company still lost $6.77 billion . Uber plans to minimize losses in 2021, yet due to the ongoing pandemic, Uber had to spend hundreds of millions of dollars in incentives to get drivers back on the streets once the Covid situation improved and the demand increased.

Hubert Horan , a transportation industry expert who has published in-depth analyses of the company's financial outlook, has this to say about Uber’s profitability:

"Not only can I not imagine any remotely plausible explanation as to how Uber could suddenly become profitable after eleven years of massive losses, but absolutely no one has attempted to lay out a financial analysis making such a case. Not the company, not Wall Street analysts, not academics — no one."

In its S-1, a document that every company must file with the SEC if it wants to go public, Uber itself acknowledged and warned that it was possible it would never become profitable .

How come such a successful company that is a magnet for investors still struggles with such heavy losses?

The thing is Uber doesn't really have an edge over its competitors. A smartphone app that matches passengers with drivers can be — and has been — replicated by countless other companies. And once there are competitors, Uber doesn’t offer a service that would be that much more efficient. 

As it often does, it all comes down to costs-leadership . The need for human drivers that have to earn a living wage seems to be a vexing problem for the ride-hailing industry. It just costs too much. 

That's why Uber once staked so much of its future on self-driving cars, which could potentially reduce the company’s per-mile cost by 80% . But as you know, Uber has already sold its self-driving research center.

The typical explanation of the Uber model is that its focus has been on growth, not profit. Huge investments allowed Uber to keep scaling up until it was everywhere and ensured that the populace relied on its service. According to Horan, its plan was to "eliminate all meaningful competition and then profit from this quasi-monopoly power" in the exact same way that Amazon has managed to do for e-commerce. Except that it hasn't worked as competition is still here and Uber’s core service is not that different from it.

Uber’s push for profitability might be the reason that as of April 2021, the cost of a ride had increased by 40% as the New York Times reported . Why? The increase might be due to the shortage of drivers at the time. Uber is notorious for not paying drivers enough (according to the drivers), but that only works until the point that a critical number of them decide that it isn't worth any of their time. 

To counter that Uber has to raise fares, but then it runs the risk of losing a big part of their market and their revenue, even with higher per-passenger fares.

What’s the solution? That’s probably the most important question in Uber’s history and one that will define its future. It’s also the reason Uber is trying to position itself as a transportation platform and not just a ridesharing service as profitability continues to be an industry-wide problem.

Key takeaway #7: have a clear plan on how to become profitable

Although Uber is one of the fastest-growing and arguably one of the most successful companies in the last decades, it’s still not profitable and it’s a fair question if it ever will be. This shows that growth is not everything and if you want to run a sustainable business you have to know how it will eventually become profitable.

Uber’s SWOT analysis

Let’s recap everything we’ve covered during this strategy study in a concise SWOT analysis.

Global brand recognition

Uber’s brand is unmistakable and has become a synonym for “ridesharing.” Uber is present in over 60 countries worldwide and is the first ridesharing brand that comes to mind when new users are looking for ridesharing apps.

A strong market position

Uber is the largest ridesharing platform in the U.S. and worldwide. Currently, Uber’s market share in the US is 68% and 32,4% worldwide. In an industry that’s all about the quantity that’s extremely important.

Knows how to diversify

One of Uber’s key success factors is its ability to adapt and innovate to encompass changing needs. This can be seen in its diversification into logistics with Uber Freight and broadening its services to offer groceries and food delivery with UberEats. Diversification plays a huge part in Uber’s total revenue.

Dynamic pricing model

Uber’s surge pricing strategy has been good for its drivers. Drivers can earn more at night, in bad weather conditions, and during the holidays. This encourages more drivers to take ride requests to meet demand surges.

Low operational costs

Uber is based on low fixed investments and minimal physical assets. It has a fleet of cars they don’t actually own and no full-time drivers which helps to keep operational costs down. 

Convenient to use

That’s the whole point of Uber. Anyone can order a ride with a few taps on their screen, learn the price of the ride and pay it through the app.

More affordable than cabs

Uber was and still is more affordable than most cabs and its competition. However, that might change with the recent price surges.

Generally good service due to the review system

Uber riders have the ability to rate their trip and the driver. As drivers are always trying to improve their ratings, riders will most likely experience good service.

Bad publicity due to scandals

Despite Uber’s rebranding, stories of former sexual harassment scandals, driver fraud, and reports of very low driver’s wages reflect poorly on the company’s image and might alienate drivers as well as riders.

Substantial losses

Uber has lost billions of dollars year after year, which is starting to affect its image and spending. Nobody really knows if the company can become profitable and when or how it might happen.

Low-profit margins

Uber has to keep its fares low and can’t increase its commission per trip leading to low-profit margins. As we’ve seen, Uber's unprofitability has already prompted it to withdraw from China, Russia, and Southeast Asia. 

Dependency on their workforce

Uber is heavily dependent on its drivers. They are essentially Uber’s brand ambassadors 24/7. However, their behavior is unpredictable and the company’s image is hurt every time a scandalous story reaches the news. Many drivers have been accused of harassment and abuse.

The main service can be easily replicated

The ridesharing industry has a relatively low barrier of entry and Uber’s main functionality can be easily replicated by potential competitors which happened in Southeast Asia.

Opportunities

Further diversification

Uber Eats exploded during the recent Covid-19 Pandemic and significantly increased Uber’s revenue in 2020. Uber Freight also grew by 64% in Q2 of 2021 and earned $348 million. Further diversification might be one of the more viable paths towards Uber’s profitability.

Self-driving cars

While not there yet, driverless technology would significantly lower Uber’s operational costs while eliminating scandalous stories caused by their drivers’ bad behavior.

New markets

There are still many untapped growth opportunities in many countries. In fact, t he acquisition of Careem by Uber with $3.1 billion has opened the door to an incredible business opportunity for the company in the Middle East.

Local laws and regulations Uber has previously ignored

Increasing pressures from local authorities require Uber to comply with certain laws, which the company skirted when setting up in different countries. Non-compliance with local laws incurs fines and results in bad publicity. At the same time, the communities of traditional taxis are pushing heavily on the enforcement of some type of regulation. 

Low driver’s wages

Uber drivers reportedly earn less than minimum wage in many locations. Drivers have become more active in various locations in advocating for their “fair share” and are pressuring Uber to increase their wages, which would make it even harder to become profitable.

Employee retention

Unsatisfied drivers may switch to rival platforms due to better incentives from competitors from the ride-hailing market or from other parts of the sharing economy.

More and more competition

As the ridesharing market becomes more saturated, it will become more difficult for Uber to retain customers as shifting to other services if they offer lower prices is very easy. This goes for services like food delivery as well.

Final thoughts and key lessons

Uber is a fascinating company with a fascinating story. It’s one of the most famous disruptors in the last decade, yet its technology is not really disruptive. But the way it uses it and combines it with its business model certainly is!

If there’s one thing that defines Uber it’s determination .

Determination to stick to their brand strategy of a technological company and an industry disruptor. Determination to quickly expand across the globe even if it means taking on regulators and local authorities. Determination to right the ship and overhaul the culture once they recognized their mistakes.

What allowed Uber to do all of the above while adapting to different challenges and markets is its lack of assets . That’s where the company really shines - they solved a big real-world problem with the fewest possible assets. 

Uber is not a shining example of a company that did everything right. 

But no one can argue that it looked for an opening, grabbed the chance, and achieved amazing things. 

It’s a walking lesson that sometimes you have to grab the opportunity before it’s too late, learn on the flight, and do your best to correct your mistakes as you go .

In the end, Uber disrupted an entire industry and achieved a multi-billion-dollar IPO. Who knows what would’ve happened if they waited to have everything figured out?

Recap: Growth by the numbers

Uber’s 2020 data is skewed by the impact of the Covid-19 pandemic, that’s why we decided to use the data from 2019 instead.

The ultimate list of strategic takeaways:

• Create a flexible business model and stick to it.

Uber always identified itself as an asset-light technology company. That allowed it to quickly expand, adapt and diversify. Uber’s potential because of its scalability and flexibility is what made it so attractive to the founders.

• Recognize what you need to do to succeed and don’t waver.

Uber knew that it needed to scale and reach new users fast if it wanted to grab its market share before the competition. Their super aggressive expansion is controversial but it did achieve its goal and positioned Uber as the rideshare leader. 

• Don’t neglect your corporate culture.

Uber’s many scandals combined with its toxic corporate culture tarnished Uber’s image and almost ended in disaster. If your early dogma is to hustle, recognize when it’s time for a cultural shift and make sure your values, brand, and culture are in sync.

• Diversify and evolve to stay ahead of the competition.

Look for new opportunities and add new features or services to capture them. Uber’s asset-light flexible service allowed it to explore other complementary industries and Uber Eats significantly limited Uber’s losses during the pandemic. If there are low barriers to entry into the industry, the company should be proactive and take steps to stay ahead of emerging competition.

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The Real Reason Uber Is Giving Up in China

• William C. Kirby

It’s regulation, not competition.

Last September some of the world’s foremost technology industry leaders met in Seattle with Xi Jinping, president of China. In a group photograph, 30 CEOs with a combined market capitalization of $2.5 trillion smiled for the camera alongside the Chinese leader. They included Microsoft CEO Satya Nadella, Facebook CEO Mark Zuckerberg, and leaders of some of the most prominent “sharing economy” companies: Airbnb CEO Brian Chesky and Didi Chuxing CEO Cheng Wei, the head of China’s leading taxi and private car hailing app. Conspicuously absent from the photo was Uber’s CEO , Travis Kalanick.

• WK William C. Kirby is the Spangler Family Professor of Business Administration at Harvard Business School and the T. M. Chang Professor of China Studies at Harvard University. His latest book, co-authored with Regina Abrami and F. Warren McFarlan, is Can China Lead? (HBR Press, 2014). He is the co-author, with Joycelyn Eby, Adam Mitchell, and Shuang Lu, of the case study, “ Uber in China: Driving in the Gray Zone ” (2016).

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Uber Case Study: from Startup to Global Mission

by Bharat Arora · Updated on October 9, 2023

TABEL OF CONTENTS

• Introduction

From Humble Beginnings to Global Domination

• The Disruptive Wave: Challenges for Traditional Industries

Business model

Understanding the business, sharing economy business model, uber vs. regular taxi: how passengers meet drivers, introduction for uber case study:.

In 2009 a revolutionary idea was born on the streets of San Francisco.

An idea that will redefine urban mobility and challenge the non-functionality of traditional transportation.

This was the beginning of Uber, a startup that would soon become a popular name across the world.

But how did a simple app achieve such huge success in a relatively short period of time?

And what were the subsequent effects of its unique approach on established industries?

Let’s dive in deeper about the Uber Case Study.    

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When Travis Kalanick and Garrett Camp first started with Uber, it was out of a personal need: finding a reliable ride in the city.

Little did they know, this seed of an idea would sprout into a tech giant, now valued at billions.

In its early days, Uber was a luxury service, offering rides in high-end vehicles. But as the company grew, it adapted, monetized, and expanded its services while meeting the needs of a broader audience. UberX, UberPOOL and Uber EATS are just a few examples of how the company continues to innovate to meet the diverse needs of its users.

Unique business ideas: Challenges for Traditional Industries

As Uber began to gain success, it wasn’t just the transportation industry that felt losing customers due to the competition.

Traditional business models across various sectors were suddenly under trouble, being compared to this new, agile approach that Uber represented.

The company didn’t just offer rides; it offered convenience, efficiency, and a user-centric experience, all come in a mobile app that is available on the Google Play Store and Apple Store .

But innovation comes with its unique challenges. Taxi unions, regulators, and even some users were skeptical and, at times, openly hostile to the changes Uber brought.

Cities like London, Paris, and New York saw massive protests, with taxi drivers voicing their concerns about this new player in the market

However, what truly sets Uber apart was its ability to leverage technology and data, continuously refining its services based on customer feedback and behavior.

What is Uber’s business model?   Is it sustainable?

Uber operates under a platform-based business model, often referred to as the “sharing economy” or “peer-to-peer” model.

Here’s a breakdown:

• Platform-based model: Uber acts as an intermediary between drivers (service providers) and passengers (customers). who doesn’t own a vehicle; instead, it partners with drivers who use their own cars.
• Flexible pricing: Uber uses an algorithmic pricing model in which fares can change based on real-time supply and demand. This  often happens during peak hours or during unfavorable weather conditions, known as “surge price.”
• Cashless transactions: Payment is made through the app using a credit card and debit card, making the process seamless for  drivers and passengers.
• Feedback and Rating system: After each trip, drivers and riders will rate each other. This ensures a level of quality control and trust within the platform.
• Diverse services: Uber has diversified its services over the years.From luxury rides (Uber Black) to economical options (UberX) to carpooling (UberPOOL), it meets a variety of customer needs. In addition, it also expanded into other areas such as food delivery using UberEats.
• Global presence: Uber operates in many cities and countries around the world, adapting to local regulations and market conditions.

Is it sustainable? 

The sustainability of Uber’s business model has been a topic of debate for many reasons:

• Regulatory challenges: Uber has faced regulatory hurdles in many cities and countries. Traditional taxi services have protested against Uber, leading to bans or restrictions in certain areas.
• Financial concerns: As of my last update in January 2022, Uber has yet to achieve consistent profitability. Although revenue is significant, the company still spends heavily on promotions, driver incentives and expansion efforts.
• Reputation management: Uber has faced criticism and negative publicity on many fronts, from safety concerns to corporate culture issues. Addressing these concerns is critical for its long-term sustainability.
• Competition: In many markets, local competitors (such as Ola in India, Didi in China, and Lyft in the United States) are challenging Uber. These competitors often have a better understanding of local market and can offer stiff competition.
• Relationship with the driver: Classifying Uber drivers as independent contractors rather than employees has been controversial. Drivers’ desire for better pay and benefits has led to legal battles in some areas.
• Diversification: On the positive side, Uber’s diversification into areas such as food delivery (UberEats) and freight (Uber Freight) could provide additional revenue streams and enhance the company’s sustainability.

A unique Business model with sharing economic approach – The term “unique” in the business context refers to innovations that significantly change industries and markets, often displacing long-standing, market-leading companies, products, and alliances.

Uber’s business model proves this definition. Instead of following a traditional asset ownership model  (like a taxi or fleet), Uber relies on a “sharing economy” approach.

• Sharing economy:  At its core, the sharing economy is a social-economic system built around  sharing resources. This is usually a platform that makes it easy for you to borrow or rent assets owned by others.  In Uber’s case, that means connecting drivers willing to share their personal vehicles with passengers looking for a ride.
• Asset-Light model: One of the main advantages of this approach is that Uber does not incur the costs and liabilities associated with owning a fleet of vehicles. Instead, it focuses on maintaining and improving the platform that connects drivers and riders.
• Win-win scenario:  Drivers have the opportunity to work on their terms and earn money using the asset they already own (their car), while riders benefit from convenient and more affordable transportation option.

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A click from the nearest available car

The easy to use and immediate services of Uber are unbelievable in comparison with the traditional taxi industry

With the Uber app:

• Instant access: Users can hail a ride with just a few taps on their smartphone. The application interface displays the number of available vehicles in real time, helping users know the distance of the nearest driver.
• Transparent prices:  Before confirming a ride, users get an estimated fare, ensuring there are no surprises at the end of the trip.
• Real-time tracking:  Once a ride is booked, users can track the driver’s progress to their location and get an estimated time of arrival.
• Cashless transactions: The entire payment process is managed in the app, eliminating the need for cash and making the end of the ride smooth and hassle-free.

Serves All Age Groups and backgrounds

Uber’s appearance is not limited to a specific demographic. Its user-friendly design and diverse services offering target a wide range of audiences:

• For young and tech-savvy people: The convenience of booking a ride via a smartphone app attracts the younger generation,who are used to digital solutions based on their needs.
• For the elder: Even for those who aren’t tech-savvy, Uber makes an effort to make its platform accessible. Features like the ability to book a ride for someone else or the ability to hail a ride without an app in certain areas are aimed at older users.
• Diverse Service Range:  Whether it’s a luxury car service (Uber Black), a economical ride (UberX), or a carpooling option (UberPOOL), there’s something for everyone, regardless of  budget or preference. what they like.
• Wide range of services: Uber has also taken steps to ensure its service is inclusive. Features like Uber WAV (wheelchair accessible vehicle) and efforts to provide services to undeserved areas demonstrate their commitment to meeting all walks of life and needs.

Provides Financial and Economic Value

The sharing economy’s primary allure lies in its ability to unlock significant financial and economic value:

• Optimized Resource Utilization : Traditional business models often involve underutilized assets. For instance, a car might sit idle in a driveway for hours or a room might remain vacant in a house. The sharing economy taps into this dormant value, allowing individuals to monetize these underused assets by renting or sharing them.
• Cost Savings for Consumers : By bypassing traditional middlemen and infrastructure costs, services in the sharing economy often provide more competitive pricing. For example, staying in an Airbnb can be cheaper than a hotel, and using platforms like Task Rabbit can offer affordable services compared to established businesses.
• Economic Stimulus : The sharing economy injects money into local economies. Hosts, drivers, or service providers earn directly from their assets or skills, often supplementing their primary income sources.

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Attracts Investors

The potential and rapid growth of the sharing economy have not gone unnoticed by the investment community:

• High Valuations : Companies operating within the sharing economy, like Airbnb, Uber, and We Work, have achieved multi-billion dollar valuations in relatively short time frames.
• Venture Capital Influx : The innovative nature and scalability of sharing economy platforms have attracted significant venture capital. Investors see the potential for high returns, especially if these platforms can achieve dominant positions in their respective markets.
• Future Potential : As technology continues to evolve and more sectors become ripe for disruption, investors anticipate that the sharing economy model will permeate even more industries, offering further investment opportunities.

Fast Growing Industry

The sharing economy’s growth trajectory has been nothing short of meteoric:

• Rapid Adoption : The convenience, cost-effectiveness, and user-centric design of sharing economy platforms have led to swift adoption rates among consumers. Many people now prefer to hail a ride on Uber or rent a vacation home on Airbnb rather than use traditional services.
• Global Expansion : While the sharing economy began primarily in Western countries, its reach has quickly expanded globally. Markets in Asia, Africa, and South America are experiencing surges in sharing economy platforms tailored to local needs.
• Diverse Sectors : Initially, the sharing economy was most prominent in sectors like transportation and accommodation. However, its principles are now being applied to diverse areas, including finance (peer-to-peer lending), fashion (clothing rentals), and even agriculture (equipment sharing).

Uber’s Financial Value and Revenue:

• 2014: Uber reported a net revenue of $400 million.
• 2015: Uber’s net revenue surged significantly, reaching approximately $2 billion.
• 2016: The company’s growth trajectory continued with a net revenue of around $6.5 billion.
• 2017: Uber’s net revenue reached $7.5 billion, marking a steady increase.
• 2018: The revenue figures for this year stood at approximately $11.3 billion.
• 2019: Uber reported a net revenue of around $14.1 billion.
• 2020: Despite the challenges posed by the COVID-19 pandemic, Uber managed a net revenue of about $11.1 billion.
• 2021: The company’s net revenue rebounded to approximately $15 billion.
• 2022: As of the latest data, Uber’s net revenue is projected to be around $16.5 billion.

Uber Driver Earnings:

• 2014: Drivers could earn up to $20 per hour.
• 2015-2016: The earnings for drivers remained relatively stable, with many reporting earnings in the range of $18 to $25 per hour, depending on the city and demand.
• 2017: Some reports suggested that driver earnings slightly decreased to an average of $17 to $23 per hour.
• 2018: With more drivers joining the platform and increased competition, the average hourly earnings hovered around $16 to $22.
• 2019: Driver earnings saw a slight uptick, with many earning between $17 to $24 per hour.
• 2020: The pandemic impacted driver earnings due to reduced demand, with many drivers reporting earnings of $15 to $20 per hour.
• 2021: As the demand for ride share services began to recover, driver earnings ranged from $18 to $25 per hour.
• 2022: The latest data suggests that drivers can earn anywhere from $19 to $26 per hour, depending on factors like location, time of day, and promotions.

It’s essential to note that these figures are approximate averages and can vary based on several factors, including location, demand, promotions, and individual driver performance.

Attracts Investors:Since its founding,Uber has attracted investors and significant attention from the venture capital community.

Its innovative approach to transportation and  rapid growth have made it a top candidate for investment.

• Valuation:Uber’s value has skyrocketed over the years. In 2015, it was valued by investors at a staggering $51 billion, making it one of the most valuable startups in the world at the time.
• High-Profile Investments:Several leading companies soon realized Uber’s potential and decided to invest.These include:

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Menlo Ventures:An early-stage venture capital firm that has backed several successful technology companies.

Google Ventures (GV): AlphabetInc’s venture capital arm.  (Google’s parent company) has invested in Uber, strengthening its position in the technology industry.

Fidelity:A multinational financial services company saw the potential benefits of Uber’s growth.

BlackRock:Another major global investment management firm has backed Uber.

Fast-Growing Industry:Uber’s impact on the transportation industry is undeniable. Its growth metrics reflect the success and  demand for its services.

Daily Trips: According to the latest data, Uber makes an average of 25 million trips per day. This number shows the  scale of the company’s operations and the level of trust users have in the company’s services.

Total Trips:Since its founding in 2010, Uber has facilitated  42 billion trips worldwide. This number not only highlights the company’s growth but also its global reach and acceptance.

It’s important to note that while these numbers provide insight into Uber’s growth and investor interest, the company’s journey has been filled with challenges, controversies, and competition.

However, its ability to attract investors and its rapid growth in the industry have highlighted its importance in the sharing economy and the transportation sector more generally.

  Type of services from uber

Uber black:.

• Description: Uber Black is the company’s original luxury service. It offers riders  a more premium experience than standard services.

Vehicle Type: High-end black luxury sedans often come from brands such as Mercedes-Benz, BMW or Audi.

Registration & Insurance: All Uber Black vehicles are commercially registered and insured, ensuring a higher level of safety and professionalism.

Driver Requirements: Uber Black drivers typically have professional driving experience and are expected to provide a higher level of service.    

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• Description:The Uber SUV is similar to the Uber Black but offers a larger vehicle for those who need more space.

Vehicle Type: High-end black luxury SUVs like Cadillac Escalades or Lincoln Navigators.

Registration & Insurance: Like Uber Black, all vehicles are commercially registered and insured.

Capacity: Designed to accommodate larger groups or passengers with more luggage.

• Description: UberX is Uber’s  most popular and standard service, providing affordable rides for everyday use.

Vehicle Type:Typical everyday cars, which can range from a Toyota Prius to a Honda Accord. Model year requirements varies by city, but  generally it’s a 2000  or newer model (in some cities, 2005 or newer).

Driver Requirements Drivers must have a clean driving record and pass a background check.

Vehicle Requirements: Specific car brands and models are accepted, and vehicles must be in good condition.

• Description: Uber XL is designed for larger groups, offering vehicles with more seating capacity than UberX.

Vehicle Type: Larger vehicles like minivans or SUVs.

Capacity: Can comfortably fit 6 passengers or more.

Pricing: While it’s priced higher than UberX due to the larger vehicle size, it’s still more affordable than the luxury options.    

Uber Select:

• Description: Uber Select is a mid-tier luxury service, offering high-end cars without the premium price of Uber Black.

Vehicle Type: Luxury sedans and SUVs, but not as high-end as Uber Black or SUV.

Availability: Only available in select cities.

Pricing: Positioned between UberX and Uber Black in terms of pricing.

• Description: Uber Pool is a carpooling service, allowing passengers to share rides with others heading in the same direction.

Shared Rides: Passengers share the vehicle with others, making stops along the way to pick up and drop off.

Pricing: It’s cheaper than UberX since the cost is split among multiple passengers.

Availability: Only available in select cities and often in high-demand areas.

It’s important to note that the availability and specifics of these services can vary based on the region and local regulations. Always refer to Uber’s official website or app for the most up-to-date information for a specific location.

• Digital Convenience:  With Uber, the entire process is digitized. Customers use the Uber app to request a ride. Once the ride is confirmed, they can track the driver’s location in real time and know the estimated arrival time.
• Feedback system:  After the ride, customers can rate the driver, providing a feedback loop that helps ensure service quality.

Regular Taxi:

• Traditional Hailing:  Traditionally, customers hail a taxi on the street by waving or hailing an available taxi.
• Book in advance by phone:  They can also contact the taxi company in advance, who will then send the driver to the designated location. This method often requires waiting and lacks Uber’s real-time tracking feature.

Driver Options

Flexibility: Drivers use their own car, eliminating the need for a dedicated taxi license in many areas. This has democratized access to the ride-sharing economy, allowing more people to make money without large initial investments.

Regular Taxi: License: Traditional taxi drivers often require a specific taxi license to operate. It can be theirs, or they can rent one.

Dispatch service:  Many taxi drivers pay a monthly fee to a dispatch service, which provides them with booking services.  Some drivers also rent both the car and the license, which increases their overall costs.

Financially Interested Parties

Simplify stakeholders:  The main stakeholders are Uber itself (which receives a commission on each trip), the drivers, and the investors who funded Uber’s operations and growth.

Complex ecosystem: The traditional taxi model has involves many stakeholders, including  licensing agencies that manage and issue taxi licenses,  taxi companies that might own and operate fleets, individual drivers, and taxi license holders who might lease their licenses to other drivers.

The impact of the Uber model on the typical taxi industry and its key partners.

• Passengers benefit from greater reliability and convenience: With Uber, passengers have witnessed a paradigm shift in the way they hail and use transportation services. The Uber app offers real-time tracking, estimated arrival times, and transparent pricing. Passengers no longer have to stand on street corners waiting for a taxi to pass.  Instead, you’re just a few clicks away from a reliable ride, often with shorter wait times than traditional taxis.
• Drivers have higher income by Moving to Uber: Many drivers have reported higher incomes after leaving traditional taxi services for Uber. The flexibility to choose their own schedule, coupled with flexible pricing during periods of high demand, allows them to maximize their revenue.  Additionally, paying directly through the app eliminates the risk of unpaid tickets.
• Taxi companies are losing revenue:  Traditional taxi companies have faced a significant decline in revenue  due to the rise of ride-sharing platforms such as Uber. The convenience and often lower prices offered by Uber have caused many drivers to  switch, leaving taxi companies with fewer customers and reduced revenue.
• Loss of license validity: In many cities, taxi licenses (often called “medallions”) were once very valuable, sometimes costing hundreds of thousands of dollars. However, with the advent of Uber and other ride-sharing platforms,  demand for these licenses has decreased, causing their value to drop significantly.
• Licensing agency loses sales revenue due to reduced license value: As the value of taxi licenses declines, licensing authorities face a decline in revenue from selling and renewing these licenses. With fewer individuals and businesses interested in purchasing taxi licenses, these authorities have seen  their revenue sources streams.

Management: How does Uber manage Two sides of its market?

Two-way market:

Uber operates in a two-sided market, connecting drivers (supply side) and riders (demand side).

Managing this balance is crucial. Too many drivers and not enough riders can lead to driver dissatisfaction, while too many riders and not enough drivers can lead to long wait times and unhappy customers. Uber uses surge pricing  to manage this balance, raising prices at times of high demand to attract more drivers and vice versa.

Two groups of agents  interact through a “platform”, where one group’s benefit from joining the platform depends on the size of the other group joining the platform.  -Armstrong M. Regulatory approach

What do you think about Uber’s soft approach to regulation?

Uber’s business model has unique characteristics that make it difficult to classify the company into a specific industry.

Technology is at the heart of the network,delivering an unprecedented breakthrough model.

Uber has faced  criticism and backlash from taxi corporations, but has received praise and support from  customers.

By exploiting their position as a disruptive innovator, they have placed themselves in a position to influence the public.

In 2014, Uber hired David Plouffe to lead the company’s communications and public policy department.

Regulatory approach:

What’s the verdict on Uber’s cowardly approach?

Uber’s entry into the transportation market is nothing short of a revolution. But  innovation often comes with controversy, especially when it challenges established standards and regulations.

• Unique Business model:  Uber’s business model has blurred the lines between traditional taxi services and technology platforms. By positioning itself as a technology company that connects riders with drivers rather than a transportation service provider, Uber is operating in a regulatory gray area.  This has made it difficult for regulators to classify and manage companies within existing frameworks.
• Disruption at Its Core:At the heart of Uber’s model is technology.  By leveraging smartphones, GPS, and data analytics, Uber has introduced an unprecedented disruptive model to the transportation industry. This technological approach not only brings convenience to users but also poses significant challenges to traditional taxi services and regulators.
• Mixture of reactions: Although Uber has faced  criticism and backlash from taxi groups and some regulators, it has been praised by  users. The convenience, transparency, and generally lower costs associated with this platform have made it a favorite among runners.  This response dichotomy highlights the tension between innovation and regulation.
•  Exploiting the position of disruptive innovators:  Uber’s strategy isn’t just about providing rides. By positioning itself as a disruptive innovator, the company has achieved significant public influence. This influence often helps shape public opinion and, in some cases, even management decisions.
• Recruitment strategy in 2024: In an effort to strengthen its position and navigate the complex regulatory landscape, Uber hired David Plouffe in 2014 to lead the company’s public policy and communications department. Plouffe, with his political acumen,is seen as a strategic addition to Uber’s team, helping the company interact more effectively with regulators and stakeholders.

Safety Concerns and Challenges:

• Incidents related to False documents:  One of the biggest concerns that has emerged over the years has been incidents involving Uber drivers using false documents. There have been cases of drivers successfully passing Uber’s background checks using false or borrowed documents. Such incidents not only raise questions about the platform’s verification process but also pose potential risks for riders.
• Uber’s proactive response to security concerns: Uber quickly recognized its security concerns and took a number of steps to address them. The company has continuously developed its background check procedures, cooperated with law enforcement, and invested in driver safety training.  Uber’s commitment to safety is evident through its efforts to improve safety procedures and respond to feedback from passengers and drivers.
• Advanced security features: Uber has introduced several safety features to keep rider and drivers safe:
• Real-time identity check:  Periodic prompts driver to take a real-time selfie before accepting a ride, ensuring that the driver is using the app that is appropriate for the account holder.
• Driver profile:  Riders can view detailed profiles of their drivers, including ratings, compliments and number of trips taken.  This transparency allows riders to know more about the person driving them.
• Two-factor authentication:  To prevent unauthorized access, Uber has implemented two-factor authentication for its drivers. This additional layer of security ensures that only registered drivers can access the app.

The future of Ride sharing

The world of transportation is changing rapidly, and ride-sharing services, led by Uber, at the forefront of this transformation.

Traditional transportation methods are being challenged as consumers seek more convenient alternatives.

In 2019, the mobility market saw significant advancements, including record electric vehicle sales  records and regulations promoting shared mobility.

Global automakers have faced challenges such as stricter emissions regulations and trade tensions. Uber’s journey offers a insights into the future of ride-sharing.

Adapting to regulations, technology and consumer preferences will be essential.  By 2030, there is a huge opportunity for ride-sharing platforms, with highly connected vehicles worth between $450 billion and $750 billion.

Uber’s journey resembles disruptions in other industries, such as digital streaming vs. cable TV and online marketplaces vs brick-and-mortar stores.

Survival depends on the ability to adapt.

Uber identified gaps in the taxi model, used technology to fill them, and expanded rapidly.

This success demonstrates the power of innovation.

In short, the future of ride-sharing services led by Uber looks promising. As technology evolves and consumer preferences change, flexibility and adaptability will be critical.

Traditional industries may view these changes as threats or opportunities; the choice is theirs.    

Uber’s journey is a testament to innovation and adaptability in today’s rapidly evolving digital world.

Despite legal battles & internal problems, Uber has thrived, expanding to 737 cities in 84 countries, and providing more than 5 billion rides.

This shows his resilience. In the era of digital transformation, businesses must innovate to avoid obsolescence.

Uber has leveraged technology to disrupt the taxi industry, focusing on user-friendly applications and customer convenience.

However, achieving profitability remains a challenging. This emphasizes the need for adaptability.

In short, Uber’s journey highlights the importance of resilience, innovation, and adaptability.

At Protocloud Technologies , we provide website and mobile application development services.

We can help entrepreneurs and small business owners create a ride-sharing app like Uber, allowing them to successfully navigate a growing market.

Global Ride-sharing Trends

Passenger experience with uber, peer-to-peer business model, ride-sharing app development, ride-sharing future trends, ride-sharing revolution, sharing economy, two-sided market strategy, uber business model, uber financial growth, uber vs traditional taxi, uber's global impact, uber's regulatory challenges, bharat arora.

I'm Bharat Arora, the CEO and Co-founder of Protocloud Technologies, an IT Consulting Company. I have a strong interest in the latest trends and technologies emerging across various domains. As an entrepreneur in the IT sector, it's my responsibility to equip my audience with insights into the latest market trends.

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Enabling disruptive innovations: a comparative case study of Uber in New York City, Chicago and San Francisco

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Nicholas Occhiuto, Enabling disruptive innovations: a comparative case study of Uber in New York City, Chicago and San Francisco, Socio-Economic Review , Volume 20, Issue 4, October 2022, Pages 1881–1903, https://doi.org/10.1093/ser/mwab056

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Much research on disruptive innovations has focused on firms that disrupt existing industries. Yet, regulators and lawmakers are instrumental in containing or enabling market disruption, in ways that are less understood. This article examines taxi industries in New York City, Chicago and San Francisco between 2010 and 2014 to better understand the role of regulators and lawmakers in enabling Uber to disrupt these industries. Relying on 142 interviews, ethnographic observations and primary source documents, I show that regulators and lawmakers used two strategies in responding to Uber: blocking and incorporating. Blocking refers to measures that stop a firm from entering the industry. Incorporating refers to adding, subtracting or modifying regulations to align with an innovative firm’s practices. I identify three incorporating strategies: horizontal venue shifting, vertical venue shifting and reinterpreting existing regulations. Analyzing these strategies more clearly illuminates regulatory change mechanisms and lawmakers’ and regulators’ role in enabling disruptive innovations.

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Up: Home : Miscellaneous > The Rise of the ‘Gig Economy’: A Case Study of Uber

The Rise of the ‘Gig Economy’: A Case Study of Uber

Gig workers are those who work small jobs, commonly referred to as ‘gigs’, instead of, or perhaps on top of, a full-time job and are paid for the amount of ‘gigs’ they undertake. Their employment status is somewhat confusing to many. Given the digital revolution, it is becoming hard to avoid articles discussing the so-called gig economy given the increasing amount of new companies operating under such a casual structure. Certain couriers, Deliveroo, Uber and AirBnB are just some examples of companies which fall under the gig economy category and there are increasing reports discussing the legal rights of those ‘employed’ by such companies. Indeed, Uber is a prime example: a recent ruling declared that its drivers cannot be classified as self-employed, as Uber wanted, and are thus entitled to the national living wage and holiday pay. Airbnb is also undergoing legal action in New York given a new law which enables the escalating of fines on homeowners who rent out their property for less than 30 days. As court cases and employment tribunals against such companies are on the rise, this blog discusses how regulatory rules are affecting these companies. It also takes account of the huge tax windfall that the UK government could gain as a result.

There currently exists a huge disequilibrium between legislation and the gig economy. It is for this reason that recent legal cases are so substantial. The employment tribunal ruling in October last year that left Uber in defeat, declared that the two drivers involved in the case were not independent contractors but workers to whom certain employment rights are due. This undermines the advertising of ‘gig economy’ work as a new type of employment and redefines this sphere of employment for similar workers. The result is an increasing need to address how companies operating under a casual structure run their businesses given that they will need to provide some employment rights to their workers. This could potentially undermine the informal business model they currently operate under and could also affect certain rules Uber apply to their workers. For example, currently, Uber drivers must provide their own vehicle, pay all fuel costs, pay their own insurance and cover all further maintenance costs for their vehicle. They must also pay a 25% service fee to Uber. This must be done whilst meeting Uber’s car and insurance requirements. If individuals are deemed as ‘workers’ or even ‘employees’, Uber may be required to be more involved in supporting the upkeep and maintenance of their workers’ equipment. Furthermore, companies offering ‘flexible labour’ could face a 10% hike in payroll costs if recent court rulings set a new precedent.

In addition, if the Uber court ruling is to set the tone for future disputes, the UK government could land a large tax windfall. If those involved in ‘gig economy’ work are deemed as workers or employees, rather than self-employed individuals, this would mean that employer national insurance contributions will grow, meaning increased revenue for the government. This is because those defined as self-employed pay less national insurance than those employed by a company. The potential windfall could be huge. As Robert Booth from The Guardian outlines, “…the exchequer is facing a £6bn shortfall in national insurance revenue by the beginning of the next decade as a result of the rapid growth of self-employment in the UK” (Booth, 2017). Such growth has, in part, been fuelled by the rise of companies such as Uber and Deliveroo, as well as certain couriers. With around 25,000-40,000 Uber drivers in the UK, new employment rights and resulting increased national insurance contributions would be welcomed by the government.

Overall, much needs to be done to close the gap between legislation and the gig economy in order to provide clarity to both workers and companies alike. We may begin to see this slowly happening over the coming years.

Booth, R. (22 February 2017) Amazon, Deliveroo and Uber “still viable” with no gig economy workers. The Guardian

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Uber: Competing Globally

By: Alexander J. MacKay, Amram Migdal, John Masko

This case describes Uber's global market entry strategy and responses by regulators and local competitors. It details Uber's entry into New York City (New York), Bogotá (Colombia), Delhi (India),…

• Length: 29 page(s)
• Publication Date: Apr 14, 2020
• Discipline: Strategy
• Product #: 720404-PDF-ENG

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This case describes Uber's global market entry strategy and responses by regulators and local competitors. It details Uber's entry into New York City (New York), Bogotá (Colombia), Delhi (India), Shanghai (China), Accra (Ghana), and London (United Kingdom). In each instance, the case includes information about Uber's strategy in that market, existing regulations on taxis and transportation in each market, the reactions of competitors and regulators, and regional information. The case allows for instruction related to competitive strategy, global expansion, nonmarket strategy, regulation, market economics, supply restrictions, and related topics.

Learning Objectives

(1) understanding how to extend competitive advantage globally, (2) understanding how regulation differs across markets and how it shapes the market economics, and (3) providing a framework for nonmarket strategy with respect to regulation and technological innovation.

Apr 14, 2020 (Revised: Jan 25, 2022)

Discipline:

Geographies:

Asia, Central America and Caribbean, China, Colombia, England, Ghana, India, New York, United States

Industries:

Legal services industry, Transportation and distribution

Harvard Business School

720404-PDF-ENG

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The magic behind Uber’s data-driven success

Uber, the ride-hailing giant, is a household name worldwide. We all recognize it as the platform that connects riders with drivers for hassle-free transportation. But what most people don’t realize is that behind the scenes, Uber is not just a transportation service; it’s a data and analytics powerhouse. Every day, millions of riders use the Uber app, unwittingly contributing to a complex web of data-driven decisions. This blog takes you on a journey into the world of Uber’s analytics and the critical role that Presto, the open source SQL query engine, plays in driving their success.

Uber’s DNA as an analytics company

At its core, Uber’s business model is deceptively simple: connect a customer at point A to their destination at point B. With a few taps on a mobile device, riders request a ride; then, Uber’s algorithms work to match them with the nearest available driver and calculate the optimal price. But the simplicity ends there. Every transaction, every cent matters. A ten-cent difference in each transaction translates to a staggering $657 million annually. Uber’s prowess as a transportation, logistics and analytics company hinges on their ability to leverage data effectively.

The pursuit of hyperscale analytics

The scale of Uber’s analytical endeavor requires careful selection of data platforms with high regard for limitless analytical processing. Consider the magnitude of Uber’s footprint. 1 The company operates in more than 10,000 cities with more than 18 million trips per day. To maintain analytical superiority, Uber keeps 256 petabytes of data in store and processes 35 petabytes of data every day. They support 12,000 monthly active users of analytics running more than 500,000 queries every single day.

To power this mammoth analytical undertaking, Uber chose the open source Presto distributed query engine. Teams at Facebook developed Presto to handle high numbers of concurrent queries on petabytes of data and designed it to scale up to exabytes of data. Presto was able to achieve this level of scalability by completely separating analytical compute from data storage. This allowed them to focus on SQL-based query optimization to the nth degree.

What is Presto?

Presto is an open source distributed SQL query engine for data analytics and the data lakehouse, designed for running interactive analytic queries against datasets of all sizes, from gigabytes to petabytes. It excels in scalability and supports a wide range of analytical use cases. Presto’s cost-based query optimizer, dynamic filtering and extensibility through user-defined functions make it a versatile tool in Uber’s analytics arsenal. To achieve maximum scalability and support a broad range of analytical use cases, Presto separates analytical processing from data storage. When a query is constructed, it passes through a cost-based optimizer, then data is accessed through connectors, cached for performance and analyzed across a series of servers in a cluster. Because of its distributed nature, Presto scales for petabytes and exabytes of data.

The evolution of Presto at Uber

Beginning of a data analytics journey.

Uber began their analytical journey with a traditional analytical database platform at the core of their analytics. However, as their business grew, so did the amount of data they needed to process and the number of insight-driven decisions they needed to make. The cost and constraints of traditional analytics soon reached their limit, forcing Uber to look elsewhere for a solution.

Uber understood that digital superiority required the capture of all their transactional data, not just a sampling. They stood up a file-based data lake alongside their analytical database. While this side-by-side strategy enabled data capture, they quickly discovered that the data lake worked well for long-running queries, but it was not fast enough to support the near-real time engagement necessary to maintain a competitive advantage.

To address their performance needs, Uber chose Presto because of its ability, as a distributed platform, to scale in linear fashion and because of its commitment to ANSI-SQL, the lingua franca of analytical processing. They set up a couple of clusters and began processing queries at a much faster speed than anything they had experienced with Apache Hive, a distributed data warehouse system, on their data lake.

Continued high growth

As the use of Presto continued to grow, Uber joined the Presto Foundation, the neutral governing body behind the Presto open source project, as a founding member alongside Facebook. Their initial contributions were based on their need for growth and scalability. Uber focused on contributing to several key areas within Presto:

Automation: To support growing usage, the Uber team went to work on automating cluster management to make it simple to keep up and running. Automation enabled Uber to grow to their current state with more than 256 petabytes of data, 3,000 nodes and 12 clusters. They also put process automation in place to quickly set up and take down clusters.

Workload Management: Because different kinds of queries have different requirements, Uber made sure that traffic is well-isolated. This enables them to batch queries based on speed or accuracy. They have even created subcategories for a more granular approach to workload management.

Because much of the work done on their data lake is exploratory in nature, many users want to execute untested queries on petabytes of data. Large, untested workloads run the risk of hogging all the resources. In some cases, the queries run out of memory and do not complete.

To address this challenge, Uber created and maintains sample versions of datasets. If they know a certain user is doing exploratory work, they simply route them to the sampled datasets. This way, the queries run much faster. There may be inaccuracy because of sampling, but it allows users to discover new viewpoints within the data. If the exploratory work needs to move on to testing and production, they can plan appropriately.

Security: Uber adapted Presto to take users’ credentials and pass them down to the storage layer, specifying the precise data to which each user has access permissions. As Uber has done with many of its additions to Presto, they contributed their security upgrades back to the open source Presto project.

The technical value of Presto at Uber

Analyzing complex data types with presto.

As a digital native company, Uber continues to expand its use cases for Presto. For traditional analytics, they are bringing data discipline to their use of Presto. They ingest data in snapshots from operational systems. It lands as raw data in HDFS. Next, they build model data sets out of the snapshots, cleanse and deduplicate the data, and prepare it for analysis as Parquet files.

For more complex data types, Uber uses Presto’s complex SQL features and functions, especially when dealing with nested or repeated data, time-series data or data types like maps, arrays, structs and JSON. Presto also applies dynamic filtering that can significantly improve the performance of queries with selective joins by avoiding reading data that would be filtered by join conditions. For example, a parquet file can store data as BLOBS within a column. Uber users can run a Presto query that extracts a JSON file and filters out the data specified by the query. The caveat is that doing this defeats the purpose of the columnar state of a JSON file. It is a quick way to do the analysis, but it does sacrifice some performance.

Extending the analytical capabilities and use cases of Presto

To extend the analytical capabilities of Presto, Uber uses many out-of-the-box functions provided with the open source software. Presto provides a long list of functions, operators, and expressions as part of its open source offering, including standard functions, maps, arrays, mathematical, and statistical functions. In addition, Presto also makes it easy for Uber to define their own functions. For example, tied closely to their digital business, Uber has created their own geospatial functions.

Uber chose Presto for the flexibility it provides with compute separated from data storage. As a result, they continue to expand their use cases to include ETL, data science , data exploration, online analytical processing (OLAP), data lake analytics and federated queries.

Pushing the real-time boundaries of Presto

Uber also upgraded Presto to support real-time queries and to run a single query across data in motion and data at rest. To support very low latency use cases, Uber runs Presto as a microservice on their infrastructure platform and moves transaction data from Kafka into Apache Pinot, a real-time distributed OLAP data store, used to deliver scalable, real-time analytics.

According to the Apache Pinot website, “Pinot is a distributed and scalable OLAP (Online Analytical Processing) datastore, which is designed to answer OLAP queries with low latency. It can ingest data from offline batch data sources (such as Hadoop and flat files) as well as online data sources (such as Kafka). Pinot is designed to scale horizontally, so that it can handle large amounts of data. It also provides features like indexing and caching.”

This combination supports a high volume of low-latency queries. For example, Uber has created a dashboard called Restaurant Manager in which restaurant owners can look at orders in real time as they are coming into their restaurants. Uber has made the Presto query engine connect to real-time databases.

To summarize, here are some of the key differentiators of Presto that have helped Uber:

Speed and Scalability: Presto’s ability to handle massive amounts of data and process queries at lightning speed has accelerated Uber’s analytics capabilities. This speed is essential in a fast-paced industry where real-time decision-making is paramount.

Self-Service Analytics: Presto has democratized data access at Uber, allowing data scientists, analysts and business users to run their queries without relying heavily on engineering teams. This self-service analytics approach has improved agility and decision-making across the organization.

Data Exploration and Innovation: The flexibility of Presto has encouraged data exploration and experimentation at Uber. Data professionals can easily test hypotheses and gain insights from large and diverse datasets, leading to continuous innovation and service improvement.

Operational Efficiency: Presto has played a crucial role in optimizing Uber’s operations. From route optimization to driver allocation, the ability to analyze data quickly and accurately has led to cost savings and improved user experiences.

Federated Data Access: Presto’s support for federated queries has simplified data access across Uber’s various data sources, making it easier to harness insights from multiple data stores, whether on-premises or in the cloud.

Real-Time Analytics: Uber’s integration of Presto with real-time data stores like Apache Pinot has enabled the company to provide real-time analytics to users, enhancing their ability to monitor and respond to changing conditions rapidly.

Community Contribution: Uber’s active participation in the Presto open source community has not only benefited their own use cases but has also contributed to the broader development of Presto as a powerful analytical tool for organizations worldwide.

The power of Presto in Uber’s data-driven journey

Today, Uber relies on Presto to power some impressive metrics. From their latest Presto presentation in August 2023, here’s what they shared:

Uber’s success as a data-driven company is no accident. It’s the result of a deliberate strategy to leverage cutting-edge technologies like Presto to unlock the insights hidden in vast volumes of data. Presto has become an integral part of Uber’s data ecosystem, enabling the company to process petabytes of data, support diverse analytical use cases, and make informed decisions at an unprecedented scale.

Getting started with Presto

If you’re new to Presto and want to check it out, we recommend this Getting Started page where you can try it out.

Alternatively, if you’re ready to get started with Presto in production you can check out IBM watsonx.data , a Presto-based open data lakehouse. Watsonx.data is a fit-for-purpose data store, built on an open lakehouse architecture, supported by querying, governance and open data formats to access and share data.

1 Uber. EMA Technical Case Study, sponsored by Ahana. Enterprise Management Associates (EMA). 2023.

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Uber Investigating Breach of Its Computer Systems

The company said on Thursday that it was looking into the scope of the apparent hack.

By Kate Conger and Kevin Roose

Uber discovered its computer network had been breached on Thursday, leading the company to take several of its internal communications and engineering systems offline as it investigated the extent of the hack.

The breach appeared to have compromised many of Uber’s internal systems, and a person claiming responsibility for the hack sent images of email, cloud storage and code repositories to cybersecurity researchers and The New York Times.

“They pretty much have full access to Uber,” said Sam Curry, a security engineer at Yuga Labs who corresponded with the person who claimed to be responsible for the breach. “This is a total compromise, from what it looks like.”

An Uber spokesman said the company was investigating the breach and contacting law enforcement officials.

Uber employees were instructed not to use the company’s internal messaging service, Slack, and found that other internal systems were inaccessible, said two employees, who were not authorized to speak publicly.

Shortly before the Slack system was taken offline on Thursday afternoon, Uber employees received a message that read, “I announce I am a hacker and Uber has suffered a data breach.” The message went on to list several internal databases that the hacker claimed had been compromised.

The hacker compromised a worker’s Slack account and used it to send the message, the Uber spokesman said. It appeared that the hacker was later able to gain access to other internal systems, posting an explicit photo on an internal information page for employees.

The person who claimed responsibility for the hack told The New York Times that he had sent a text message to an Uber worker claiming to be a corporate information technology person. The worker was persuaded to hand over a password that allowed the hacker to gain access to Uber’s systems, a technique known as social engineering.

“These types of social engineering attacks to gain a foothold within tech companies have been increasing,” said Rachel Tobac, chief executive of SocialProof Security. Ms. Tobac pointed to the 2020 hack of Twitter, in which teenagers used social engineering to break into the company. Similar social engineering techniques were used in recent breaches at Microsoft and Okta.

“We are seeing that attackers are getting smart and also documenting what is working,” Ms. Tobac said. “They have kits now that make it easier to deploy and use these social engineering methods. It’s become almost commoditized.”

The hacker, who provided screenshots of internal Uber systems to demonstrate his access, said that he was 18 years old and had been working on his cybersecurity skills for several years. He said he had broken into Uber’s systems because the company had weak security. In the Slack message that announced the breach, the person also said Uber drivers should receive higher pay.

The person appeared to have access to Uber source code, email and other internal systems, Mr. Curry said. “It seems like maybe they’re this kid who got into Uber and doesn’t know what to do with it, and is having the time of his life,” he said.

In an internal email that was seen by The New York Times, an Uber executive told employees that the hack was under investigation. “We don’t have an estimate right now as to when full access to tools will be restored, so thank you for bearing with us,” wrote Latha Maripuri, Uber’s chief information security officer.

It was not the first time that a hacker had stolen data from Uber. In 2016, hackers stole information from 57 million driver and rider accounts and then approached Uber and demanded $100,000 to delete their copy of the data. Uber arranged the payment but kept the breach a secret for more than a year.

Joe Sullivan, who was Uber’s top security executive at the time, was fired for his role in the company’s response to the hack. Mr. Sullivan was charged with obstructing justice for failing to disclose the breach to regulators and is currently on trial.

Lawyers for Mr. Sullivan have argued that other employees were responsible for regulatory disclosures and said the company had scapegoated Mr. Sullivan.

Kate Conger is a technology reporter in the San Francisco bureau, where she covers the gig economy and social media. More about Kate Conger

Kevin Roose is a technology columnist and the author of “Futureproof: 9 Rules for Humans in the Age of Automation.” More about Kevin Roose

A Guide to Digital Safety

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Protect your most sensitive accounts by creating unique passwords and adding extra layers of verification .

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Here’s how the state’s suit against Uber and Lyft could impact ride shares in Massachusetts

W hether ride-share company drivers are independent contractors or employees is at the core of a case in court, which is in trial before a judge at Suffolk Superior Court. The ramifications of whether or not ride-share workers are classified as employees could upend the industry, changing the way customers interact with the companies in the future.

The state Attorney General’s Office argues that classifying drivers as employees will entitle them to minimum wage and overtime, reimbursements for business expenses such as fuel and car maintenance, and adequate paid sick leave. 

Uber and Lyft lawyers argue that updating the employment status would lead to higher prices, reduced service areas, longer wait times, and possibly the end of the companies’ operations in the state altogether. 

According to a state report , ride-share companies provided 91.1 million rides in the state in 2019 and collected more than $18.2 million in taxes within the same year. 

The trial is expected to last nearly a month.

What the Attorney General’s Office is arguing

In the summer of 2020, then Attorney General and now Gov. Maura Healey filed a suit that Uber and Lyft misclassified their drivers as independent contractors rather than employees. 

“Uber and Lyft have built their billion-dollar businesses while denying their drivers basic employee protections and benefits for years,” Healey said in a statement at the time. “This business model is unfair and exploitative.”  

The Attorney General’s Office argues that Uber and Lyft cannot meet a three-part test under state law, dubbed the “ABC test.” Under the test, an independent contractor is a worker free from direction and control who performs duties outside the usual course of the business and is engaged in an independent company. 

Although ride-share companies say that drivers set their own schedules, the attorney general argues that they are closely monitored through their apps and the companies offer incentives to induce drivers to work shifts that benefit the business. The companies also penalize drivers for not accepting enough rides, canceling too many rides, and not maintaining customer satisfaction ratings. In addition, the ride-share companies benefit from the fee-splitting arrangements. 

As independent contractors, drivers are not entitled to the state minimum wage, overtime, or necessary business expense reimbursements. Even though the companies have offered drivers temporary paid leave for the COVID-19 pandemic, those policies fail to meet the Massachusetts Earned Sick Time Law. 

The complaint argues that the drivers will earn these rights and more by becoming classified as employees. 

Drivers aren’t the only ones who could benefit from employee status. State Auditor Diana DiZoglio released a report earlier this month showing how ride-share apps like Uber and Lyft could have contributed $266.4 million over the past decade to employee protection programs.  

However, the Attorney General’s Office has not commented on how the change in employment status could affect consumers. 

What Uber & Lyft are saying 

Lawyers representing Uber and Lyft argue that reclassifying drivers as employees would raise questions about the companies’ continued existence in the state.

The inefficiencies caused by an employment model, such as fixed shifts, would drive costs up, lower the number of drivers available, reduce service areas, and increase riders’ wait times. 

“If the Attorney General wins this case, millions of Massachusetts riders would suffer severe service reductions and pay significantly higher costs, while tens of thousands of drivers would lose access to flexible work,” Theane Evangelis, the Uber lawyer, said in a statement sent to Boston.com. 

Evangelis argues that the attorney general is forcing employment on drivers, even when the vast majority say they don’t want it. 

Evangelis pointed to a study from Beacon Economics , which found that reclassifying Massachusetts ride-share and delivery drivers as employees would result in the loss of at least 58% of these jobs in the commonwealth and could result in the loss of up to 87% of all ride-share and delivery jobs in the state.

If the ruling favors the attorney general, Uber would need time to adapt, requiring at least a temporary platform shutdown. 

What is happening elsewhere in the country

So far, the ride-share platforms have circumvented the dilemma elsewhere in the country by funding ballot initiatives and settlements. 

In California, lawmakers reclassified many independent workers as employees in 2019. Following a campaign by Uber and Lyft in 2020, voters passed Proposition 22 , a ballot measure that allows ride-share platforms to classify their workers as independent contractors rather than employees. However, the debate over the ballot initiative remains in court. 

According to New York’s Attorney General’s Office , Uber and Lyft struck a $328 million deal with the office last year to resolve claims they cheated workers out of pay. As part of the deal, drivers in the state also received mandatory paid sick leave, minimum wage, and other benefits. 

In 2022, Uber and Rasier (a subsidiary of Uber) paid $100 million to the New Jersey Department of Labor and Workforce Development’s Unemployment Trust Fund after an audit found the ride-share companies improperly classified hundreds of thousands of drivers as independent contractors, depriving them of safety-net benefits. It was the state’s most significant payment ever received, covering 297,866 drivers.  

The court ruling will not be the end of the debate

Uber, Lyft, DoorDash, and Instacart are funding an industry-backed ballot question committee called Flexibility and Benefits for Massachusetts Drivers, which will support state ballot measures that would keep app-based drivers as independent contractors at this November’s election. 

The ballot initiative, as outlined on the organization’s website , would also establish an earning floor equal to 120% of the state’s minimum wage, or $18 an hour in 2023 before tips. Drivers would also receive health care stipends, occupational accident insurance, and paid sick time. 

A Beacon Research survey , paid for by Flexibility and Benefits for Massachusetts Drivers, found that 85% of drivers believe passing a law to protect their status as independent contractors would be a change for the better. 

Through a ballot initiative, Uber’s lawyer Evangelis says ride-share companies should provide driver benefits and protections, such as earning protections and sick pay.  

“Uber is ready right now in Massachusetts and throughout the country to support new laws to make that happen,” Evangelis added. 

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What Happened With Uber?

May 13, 2024 — 07:37 pm EDT

Written by Motley Fool Staff for The Motley Fool  ->

In this podcast:

• Motley Fool analyst Tim Beyers and host Mary Long take a look at earnings reports from Uber and Toast .
• Motley Fool analyst Alicia Alfiere and host Ricky Mulvey ask if AI will kill Chegg , the homework-helper.

To catch full episodes of all The Motley Fool's free podcasts, check out our podcast center . To get started investing, check out our quick-start guide to investing in stocks . A full transcript follows the video.

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Mary Long: Uber hits a speed bump. You're listening to Motley Fool Money. I'm Mary Long joined live from Colorado in our podcast studio today with the one, the only, the fully caffeinated ready-to-go coffee mug in hand, Tim Beyers.

Tim Beyers: Hi Mary.

Mary Long: Good to have you here, Tim. We're talking Uber today. They reported earnings this morning.

Tim Beyers: Yep.

Mary Long: Going in, analysts seemed to think that Uber was on a smooth ride. They anticipated quarterly net income of over 470 million. Instead, Uber goes out and posts a loss for the quarter. CEO Dara Khosrowshahi has been cutting costs, cutting jobs, cutting driver bonuses. What went wrong? What happened?

Tim Beyers: They had an equity loss and what this means, there was an unrealized net equity loss, so they have a bunch of investments. Uber has put a lot of money into a lot of different companies. Some of those companies have not done so well, Mary. Because of that, they recorded a $721,000,000 unrealized net equity loss. That's an accounting treatment, they're revaluing investments. That shows up on the income statement. It takes what was a profit to a loss. Because of that, they surprised everybody. As we know, the market doesn't like it when you act like a bad boyfriend and decide to be unprofitable when everybody thought you were going to be profitable. The market has a little bit of a meltdown. It's, well, wait a minute, you promised us X, now you're showing us Y and we don't like that very much. But in reality, what Dara has said is he did something that sounds like and very often is a classic trick from a CEO to say, hey, you know what, I know, this looks bad, but look over here. But in this case, he's not wrong. Essentially, what he's saying is, if you look at our income statement, you're going to see the $721 million unrealized loss and it's going to look really bad. But what you need to realize is that, yes, we have investments that got revalued, but no cash went out the door. We didn't sell anything. Because we didn't sell anything, if you look at the cash flow statement, what you're going to see is that our operation is still generating plenty of cash, and he's right. If you were to look at it, a little over $1.4 billion in cash from operations. You take out the CapEx, you're really at about 1.3. If you really want to be conservative, and I don't disagree, if you want to be this conservative, take out another $450 million for stock-based compensation. You're still over $800 million in free cash flow in just a single quarter, Uber is doing just fine.

Mary Long: That's all fair. I think that all suggest that the market is overreacting, but is it? Should we be asking what these investments are in?

Tim Beyers: Sure. I took a look at this and it's hard to say, nobody's really saying here, but there are a couple of potential culprits here, Mary. One of them could be Silvergate Capital . When I looked at Capital IQ this morning, which is a database that we use here at The Motley Fool that a lot of institutional investors use. They have a list of Uber's direct investments in one of those is listed as Silvergate Capital. For those who don't remember, Silvergate Capital was caught up around the time the Silicon Valley Bank had its big meltdown. But what Silvergate is best known for is getting caught up in the FTX meltdown because they were the crypto bank. They got really overextended, really overexposed, and things just completely imploded. What got revalued? Silvergate is a real possibility here. Another is the former Uber Elevate, which is now a public company called Joby Aviation . Joby since becoming public, is doing OK. But they are not raking in the cash here Mary. If you look at the stock chart for Joby, ticker J-O-B-Y, you are going to see a big slope down and to the right. That is not the kind of chart that investors like to see.

Mary Long: I want to pivot a bit and focus on the different segments that Uber breaks its revenue into. They've got mobility, delivery and freight. I am incredibly curious about this freight business, although admittedly, I don't know that much about it. Here's what I do know, mobility and delivery for revenue and gross bookings rose in each segment this quarter. In freight, it was down 8%. Both of those metrics were down 8% a piece. What's going on there? Is that something that we should be paying attention to, care about?

Tim Beyers: It's the minority piece of the Uber business and it's the one that's struggled the most. I do think there is a market for last-mile logistics here, but in the case of Uber Freight, what we're talking about is a substitute for your classic Courier business. Delivering packages, delivering urgent messages, delivering maybe legal documents, things like that. I don't know exactly what's being carried in an Uber Freight. But as much as I believe in last-mile logistics, this is not something that Uber has proven out very well over the last few quarters. The biggest drivers of the business continued to be mobility and to a lesser extent, and surprisingly so, the Eats business, that delivery business has been improving and I think we will continue to improve. This one has been the boat anchor. It is something to watch. I think you're right to point it out because it's the anchor on the business that we haven't seen deliver great unit economics yet. Can it at some point? Yes. But let's remember that delivery is a really hard business and some companies that have to do a lot of deliveries have chosen to build out their own logistics networks because it is so hard and dealing with a partner can be difficult. Your classic case here, Mary is Amazon . Amazon has built its own logistics business just to handle this. I want to believe in it, but at this point, it's more of a rounding error than it is a significant contributor. But I don't like seeing the boat anchor in the financials and we'll see how long this lasts.

Mary Long: You mentioned Uber Eats. Yesterday. Uber and Instacart announced a partnership to offer restaurant delivery. Seemingly they're coming for DoorDash . Is this a big deal, you mentioned them?

Tim Beyers: I think it is. I like it a lot because what we want from Uber Eats is as many options as possible for drivers to deliver something that is profitable. Here's another way. You can think of it as another go-to-market option for the Uber Eats business, which is essentially a market-maker to say, hey, you need food, we have a way to get that food to you, so what are the choices here? You can order direct delivery from restaurants. You can order your groceries through us. Everything that Uber does to make its market more vibrant and the opportunities richer for drivers is ultimately a really good thing. I love this partnership. I don't know that it means that they're gonna kill DoorDash. But what I do like is that you have yet another option for a driver that is using Uber. You want to make Uber as attractive as possible for the driver who has choices. If a driver has the choice to deliver a person or deliver food, but their time on the road is optimized and the amount of time that is dead, in other words, they're just driving someplace or they're sitting someplace waiting for a fair, if you can reduce that as much as humanly possible and optimize the driving hours for the driver, you're going to make Uber way more attractive. Partnerships like this, that broaden the ecosystem are ultimately good for drivers and drivers drive Uber.

Mary Long: You're talking food, let's leave the delivery space and head to another stock that doubles in that. Tim, I've got you today and I know that one of your favorite stocks to talk about is Toast.

Tim Beyers: Thank you for taking my opportunity to buy off the table.

Mary Long: My pleasure. Toast reported yesterday. My headline here is Toast is good. They beat on revenue, they expanded gross margins, narrowed operating losses. What's your top-line takeaway?

Tim Beyers: Similar, the unit economics look to be improving 6,000 net new locations.

Tim Beyers: This would have been a better quarter. I think it would even have been a profitable quarter if they didn't have $41 million worth of restructuring charges because they did have some layoffs. They cut some people during the prior quarter. That did take things down a little bit but overall, this is a business that's getting more efficient. They do talk about something interesting that we are going to have to watch and we don't have real numbers on a yet, Mary, so I would like to be able to tell you exactly what they're looking at, but they're not reporting it yet. They've talked about average revenue per user. They are starting to look really carefully at the cohorts of size of restaurant groups that they are serving, and they're trying to get down to unit level data on average revenue per user. They're not telling us what those numbers are, but the fact that they are focusing on that, can we help a restaurant generate higher average revenue per user? If those restaurant-level economics go up, then our revenue per those restaurants also goes up, so we both win. I think it's interesting that they're focusing on that. I'd really liked them to report some numbers on it because what they've done that is the replacement for what was before where they were reporting at the restaurant level. What's the percentage of restaurants that use say like six or more Toast products and the Toast suite, that's gone away. They're not even talking about that anymore. They're saying, "We are focused on average revenue per user." Interesting, I want to see more data from this, but the fact that the expansion in locations keeps going up, that revenue growth is still over 30%, and in their core businesses, the subscription business and in the Fintech business, they continue to grow meaningfully, that's very useful. I think the restructuring charges hide the profitability this quarter. It also hurt the cash-flow number. So there was cash burn this quarter and they had been generating free cash flow. It's a mixed quarter, but I think once they get on the other side of this, you're going to see up into the right in terms of profitability, generation. I do think Toast is scaling exactly the way we want it to.

Mary Long: Last quarter when these layoffs that caused the restructuring charges came about, one of the things that management was hitting home on was there were emphasizing efforts to "Manage our stock-based compensation expense with the same discipline that we approach all our expense lines."

Tim Beyers: Music to my ears.

Mary Long: That's the flip side of this restructuring charge, is that you can clean up and tighten other areas.

Tim Beyers: This is one of the things I've loved about Toast, is that they pay really close attention, Mary, to what we call unit economics. They pay attention to getting more profitable with each new restaurant and customer that they serve. They're trying to make it where when the restaurant wins, they win. They would like the restaurant to win even more, the more business that the restaurant does, so that they can win more, the more business that that restaurant does. That's unit economics. That's how you roll up profitability and consistent cash generation and improve your margins over time. This is another area, stock-based compensation is a real expense. If they're trying to optimize how they use every dollar effectively, I say phenomenal, great, keep doing it because that's how you grow a business effectively, whether times are good or times are bad.

Mary Long: So another thing that Toast highlighted was that their adjusted EBITDA is up to $57 million. So it was 29 million in quarter 4, negative 17 million a year ago. Toast says that this is a key metric. I hear adjusted EBITDA and my head goes, are we supposed to take that with a huge bucket of salt? Should we be taking that with a huge bucket of salt or is there a reason why Toast is highlighting this and we should actually care about that?

Tim Beyers: Yes and no. You should take it with a huge bucket of salt. However, it does matter the way that Toast defines it. It also matters how management gets paid. You want to understand how management is measuring itself in order to get paid for incentive pay, and adjusted EBITDA is how they do it. You should really pay attention to this. But in this case, let's talk about how they define it. They do strip away some things that are going to make a classic value investor really squint and grimace like stock-based compensation. I think that's fair enough. However, adjusted EBITDA for them is really big part of what they call their core profitability metric because of the way that Toast business works. Rewinding really quickly. When Toast goes in and serves a new restaurant group, what they do is they bring in a bunch of hardware. You've probably seen them. You've seen the tablet that has the Toast brand on it. It's a whole bunch of hardware. Then they bring in a whole bunch of service providers to set everything up. All of that stuff, Mary, is at a loss. Toast makes no profits on all of that hardware and all of those professional services, that is at their cost. They do that because they believe once you have started with Toast, you end up paying more and staying with the Toast platform longer, so you pay more subscription fees. Because of the way the Toast platform prices, which is the Fintech part of the business, where when there are transactions on the Toast platform, they take a little bit, 55 basis points, so a little more than half of a percent. So they pay to get into those restaurant groups so they can grow relationships over time and profit as that restaurant group uses Toast over time. Back to adjusted EBITDA. Adjusted EBITDA focuses on, they take out the revenue and the expenses from the hardware business, loss leader and the professional services business also loss leader and focus on the subscription business core to the business and the Fintech business core to the business. Adjusted EBITDA in this case, even though there is some stuff that's a little bit funny, it is actually much closer to the core profitability metric and how they measure themselves. So you really should pay attention to it.

Mary Long: Tim, thanks so much for talking Toast, with me today.

Tim Beyers: Thanks Mary.

Mary Long: Appreciate it.

Next up, Alicia Alfiere and Ricky Mulvey, Cheggout, homework-help tool getting beaten up by Artificial Intelligence.

Ricky Mulvey: Chegg is an online tech company known for subscription homework help. That is right now Alicia being treated in absolutes. It's an easy headline, Students Don't Need Chegg Because They Can Find Their Answers on ChatGPT. Stock's been having a rough go of it. First, we'll talk about the business that we're going to talk about the stock. But for those who are less familiar with this company, they hear homework help, they're like why can't you just ask ChatGPT for the answer, as many in the media might be asking right now? What does Chegg do that ChatGPT for free does not?

Alicia Alfiere: I think Wall Street, in general, would agree with you, this idea that AI is coming to eat Chegg's lunch, but not everything is AI coming to eat the world. This isn't a story about Chegg versus AI. This is actually a story about Chegg leveraging AI. Chegg believes it has the largest learning data-set in the world, due to the millions of users who have asked millions of questions on the platform over the course of several years. That data gets bigger every day, that students ask Chegg questions. That's a big competitive advantage in the world of learning. The idea here is that Chegg can pair AI or leverage AI with this massive data-set and create something that really benefits students.

Ricky Mulvey: They made a move earlier where they're going to partner with OpenAI. Then now they've walked side back and they said, "You know what, we're going to make our own models and maybe that makes the company a little bit more unique."

Alicia Alfiere: Yeah, I think it's really smart to not just shoehorn whoever's model into your platform. Instead, to build the model, it allows you to have a lot more control over the experience, over the model and then a lot of flexibility in the future as well. You don't have to worry about having to change partners later.

Ricky Mulvey: I'm basically dealing with two things as I think about the company. I don't own stock in it, Alicia. But on the one side, we've seen the story where investors treat a trend in terms of absolute. Sometimes it's correct. We'll use Blockbusters as the example, but over the pandemic, we've heard nobody's going to the office again. Zoom is absolutely the future; nobody's going to go to the gym again. Peloton , Peloton's here. I'm more interested in the story because it's being treated in absolutes. Then there's a part of my brain where I'm going, "This thing is a falling knife. This thing is going to get kicked by ChatGPT because that is also getting smarter and this costs money." One differentiator though, that Chegg is talked about more is a premium subscription. What would that look like?

Alicia Alfiere: The AI subscription, if it is a premium subscription, would allow students and other learners to have a more personalized and conversational learning experience. Imagine being in a statistics class in college and you're struggling with certain parts of the class. An AI-infused Chegg could potentially have a personalized learning experience for you, where it knows that, let's say you're killing it on z-tests or z-scores, but struggling with probability. It could walk you through how to better understand probability and based on its interactions with you, it could create a practice test for you that focuses on probability to see if you've really got it down before your actual exam. That's the idea that Chegg is trying to accomplish.

Ricky Mulvey: Instead of, "Answer this question, give me an answer." It's a little bit more of a personalized training with the Artificial Intelligence.

Alicia Alfiere: They'll definitely have that part too of just ask it a question and have it have it help you understand the answer. But yeah, more of a personalized approach, is what they're trending toward.

Ricky Mulvey: There's some, there's some transition going on in the C-suite of Chegg right now, current CEO, Daniel Rosensweig is gonna be succeeded by Nathan Schultz on June 1st. This is an interesting time for a CEO transition and a little bit sudden, a month. What's going on here, I imagine some investors might be frustrated by this.

Alicia Alfiere: Yeah. I'm slightly annoyed and it was a bit of a surprise that this change was coming. But this is a good example of why it's important to step away from your emotional brain and look at the information. As you said, the former CEO is becoming the Chair of the Board and his base salary is around $850,000. That's quite a lot more than some of what the other directors get for their base or for their retainers, which surrounds $70,000 to $80,000. But there are few things to point out here. Again, he is the former CEO. He's been with Chegg for 14 years and the company clearly wants to incentivize him to stay around and hopefully be active in Chegg's AI transformation, because this is a transformation that's going to take some time. Also, this is a pay cut from his prior base of around $1.1 million. Also, the new CEO is the former COO. He's been with the company in various roles for about 15 years. They hired from within, so that's good. Do I love this change? Not yet, but I'm willing to give the new leadership team a chance since the company has practiced smart capital allocation in the past, which to me is a sign of smart management team.

Ricky Mulvey: They've bought back debt in the past. That was one of the positive stories about this company was, "You know what, maybe we're not in growth mode anymore, but this can be a good capital allocation story." Now they're not buying back stock. Is that a bad sign considering your stock is, to put it kindly, in the bargain bin right now.

Alicia Alfiere: First, let's say that Chegg is a cash-generating business. One of the things that we've liked about Chegg over the past year is what you've talked about. They've done a good job with what they do with that cash. They've bought back shares, they've bought back debt at a discount, which we like to see. As of the end of this quarter, share count was down 15% year over year. This quarter, the company still generated cash, but as you said, they didn't really do anything with it. That's not necessarily a bad thing. But I'll tell you what, I hope they're buying back shares this quarter, their stock price's down. But did no buybacks or no debt pay-downs mean anything in the quarter? Maybe it means nothing. But it looks like management is being more conservative with its cash. That could potentially mean that things could get worse before it gets better, maybe.

Ricky Mulvey: I feel like we're in a little bit of a negative place right now. I know you're bullish on Chegg. Are there any green sheets in the story?

Alicia Alfiere: Yeah, definitely. As I said, the company is still generating cash. By the way, that's not something that all companies do. Remember that Chegg is doing that despite lower year-over-year revenues and subscribers. They're also early positive signs for the company's AI, so Chegg's automated answers, which was released in late December, addresses new student questions immediately. We're talking about this earlier. For the full quarter, Chegg had 9 million questions asked and answered versus last year's quarter it was 3.9 million. The company believes that more questions means more content, which means more traffic, and could lead to new customers in future quarters. I think that is a positive sign.

Ricky Mulvey: For those of us watching like me from the sidelines because, to me, it's the AI story. We want winners and losers. I'll tell you the winner, ItVideo, big winner. We want a loser, Chegg loser. We need these buckets. For those of us watching on the sidelines, what are some metrics that we should be paying attention to?

Alicia Alfiere: Well, I'd love to see the company continue to generate cash. I think that's really important. The company pointed to encouraging retention trends. They were up 100 basis points year over year. They talked about engagement being better. They didn't give any concrete numbers there though. That was frustrating. I think as well, the questions asked and answered, that's important to look at because they can be a funnel for new customers. They can also give students a chance to see the user experience and how it's changed.

Ricky Mulvey: Hundred basis points, one of these days we're gonna get them just say 1%. We can just sit around. Alicia Alfiere, thank you for your time and your insight. Appreciate your chat with us.

Alicia Alfiere: Thanks, glad to be here.

Mary Long: As always, people on the program may have interest in the stocks mentioned and The Motley Fool may have formal recommendations for or against, so don't buy or sell stocks based solely on what you hear. I'm Mary Long. Thanks for listening. We'll see you tomorrow.

John Mackey, former CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. Alicia Alfiere has positions in Chegg and Peloton Interactive. Mary Long has no position in any of the stocks mentioned. Ricky Mulvey has positions in Toast. Tim Beyers has positions in Amazon, Peloton Interactive, Toast, and Zoom Video Communications. The Motley Fool has positions in and recommends Amazon, DoorDash, Peloton Interactive, Toast, Uber Technologies, and Zoom Video Communications. The Motley Fool recommends Chegg. The Motley Fool has a disclosure policy .

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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Mass. trial over whether Uber, Lyft drivers are independent contractors begins Monday

• Chris Lisinski, State House News Service

The judicial front in the long-running battle over Uber and Lyft's treatment of Massachusetts workers has been a flurry of paperwork for nearly four years. That's about to change.

Monday marks the start of a massively impactful Suffolk Superior Court trial about whether the companies that redrew the transportation landscape, both here and across the country, did so by misclassifying their Bay State drivers as independent contractors instead of employees, with all of the pay and benefits that status entails.

For nearly a month, high-powered attorneys for Massachusetts, Uber and Lyft will argue over a question with implications for workers, businesses, lawmakers and a big-dollar political campaign, not to mention passengers and businesses who for more than a decade have made use of the apps.

"If the Attorney General wins this case, it will mean millions of Massachusetts riders would either see major reductions in service and a significant increase in costs, or lose ridesharing completely. All for something that the vast majority of drivers don't even want," said Theane Evangelis, legal counsel for Uber.

When she first filed the lawsuit, then-Attorney General Maura Healey alleged that Uber and Lyft "have gotten a free ride for far too long."

"For years, these companies have systematically denied their drivers basic workplace protections and benefits and profited greatly from it," she said at the outset of the fight.

Attorneys expect the trial will stretch several weeks with hours of testimony each day of proceedings. In that span, they expect to call on nearly five dozen people to testify about the ins and outs of ride-for-hiring driving, business models and labor law.

Several current or former drivers for Uber and Lyft in Massachusetts are set to speak, as are academic experts with experience studying management, corporate finance, economic modeling, marketing and more.

Lauren Moran, the chief of Attorney General Andrea Campbell's fair labor division, is expected to testify. Uber's head of U.S. city operations, Chad Dobbs, is on the witness list, as are a handful of Lyft executives.

The case hinges on a landmark section of state law often referred to as the "ABC test," which predates the 2012 Massachusetts launch of Uber and the 2013 launch of Lyft in the Bay State.

For an employer to treat a worker as an independent contractor instead of an employee, they must be able to prove three points : that the worker was "free from control and direction"; that the service provided is "performed outside the usual course of business of the employer"; and that the individual has their own independent business or trade.

Campbell's office plans to argue that Uber and Lyft cannot fulfill all three prongs of that test, suggesting in particular that the on-demand rides provided by drivers represent the core of the companies' business.

In response, the ride-hailing apps will contend that their models are too novel to be defined as traditional employment. They say drivers have — and widely prefer --the flexibility to work as little or as much as they want, set their own hours and decline rides at will, plus pick up trips for direct competitors.

That practice, sometimes referred to as multi-apping, is widespread. Between Nov. 30, 2019 and Feb. 1, 2020, nearly 47% of drivers who used Lyft also used Uber on the same day, according to data Lyft included in a court filing.

Attorneys will make their case to Judge Peter Krupp, a Gov. Deval Patrick appointee who joined the court in 2013. He's presided over a range of topics, including a woman falsely claiming to be a victim of the Boston Marathon bombings, police witness intimidation and overtime fraud. He was also involved in the high-profile Karen Read trial, ruling in November that the blogger Aidan "Turtleboy" Kearney could continue to attend proceedings but must stay away from witnesses he allegedly intimidated.

Before he joined the bench, Krupp worked for the Committee for Public Counsel Services, the law firm Mintz, Levin, Cohn, Ferris, Glovsky & Pompeo, at his own private practice, and as an assistant federal public defender, the State House News Service previously reported.

Uber and Lyft have named lawyers from Massachusetts, including several from the firm Wilmer Cutler Pickering Hale and Dorr, and other states to their team.

Much has changed in the nearly four years since Campbell's predecessor, now-Gov. Healey, filed a lawsuit against Uber and Lyft in July 2020.

Facing orders to comply with a law in California that would have defined drivers as employees, Uber and Lyft joined with fellow gig economy power players to pump $200 million into a campaign behind Proposition 22, a ballot question that allowed the companies to define drivers as independent contractors. California voters approved the measure in November 2020, but it remains tied up in litigation en route to the California Supreme Court.

In September 2022, after New Jersey alleged Uber misclassified drivers as independent contractors, the company agreed to pay the state $100 million in a settlement . Just more than a year later, Uber and Lyft together paid $328 million to settle a wage theft case in New York.

And here in Massachusetts, Uber, Lyft, DoorDash and Instacart are pursuing a ballot question that would establish a law declaring their drivers to be independent contractors, not employees, potentially while outlining some new benefits as well.

Their first pass collapsed in 2022 when the Supreme Judicial Court ruled that the measure improperly combined too many topics, running afoul of relatedness requirements that all ballot questions must fulfill. The successor proposal now faces a similar challenge.

Campaign organizers have kept five different drafts of the ballot question in the mix, hoping that at least one will survive the court challenge. They've said they only intend to submit a single measure to voters.

If Judge Krupp sides with the attorney general, it could transform the conversation around the ballot question from a hypothetical (should statute officially define drivers as independent contractors, which is the status quo even though parties disagree whether it's legal?) into something more concrete (should Uber and Lyft be forced to treat drivers as employees as a judge suggested, or should the law change to allow for the model they prefer?). The inexact timing of a ruling is also a factor.

There's also uncertainty about whether the apps would continue to operate in Massachusetts — where transportation network companies provided more than 60 million rides in 2022, according to the most recent state data — if both the attorney general's lawsuit and the ballot campaign do not go their way.

Uber Director of Driver Policy Lucas Munoz in March told lawmakers he could not answer that question directly, adding that "there isn't any jurisdiction where drivers operate as employees" currently.

• Teamsters union jump into rideshare drivers' rights fight
• Worker groups ask judge to block app-based driver ballot question

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Massachusetts takes Uber, Lyft to trial over whether drivers are employees

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Reporting by Nate Raymond in Boston; Editing by Josie Kao, Alexia Garamfalvi and Bill Berkrot

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Nate Raymond reports on the federal judiciary and litigation. He can be reached at [email protected].

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‘It was terrifying’: Blind woman says Uber driver dropped her off at wrong location and left

RALEIGH, N.C. (WRAL) - A blind woman in North Carolina says she was put in a frightening situation after her Uber driver dropped her off at the wrong location and left her there.

Kamille Richardson has been blind since birth and has handled everything life has thrown her way ... with one exception.

“I always said the only thing I cannot do is drive,” she said.

For that, Richardson relies on ride-sharing services like Uber.

Last Sunday, she requested an Uber to drive her to the Verizon store.

Richardson said she has a note in her profile that lets the driver know she’s blind.

“I also have a white cane,” she said.

According to Richardson, the driver did walk her to a door that day, but she said she knew something wasn’t right.

Instead of being dropped off at the Verizon store, Richardson was at an apartment complex, more than a mile north of where she expected.

“I told him this was not the right place,” she said. “But he said he had to pick up another person and took off.”

Richardson added, “I couldn’t even tell you what I was near. I didn’t know the vicinity. He just dropped me and ran away. It was terrifying.”

Aviance Brown, Richardson’s attorney, said they are looking for Uber to make changes and not put people with disabilities in vulnerable positions.

“How could you just abandon somebody like that? Knowing good and well that I was not in the right spot,” Richardson said.

Copyright 2024 WRAL via CNN Newsource. All rights reserved.

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