Uber Business Model - How Uber Makes Money?

Uber Business & Revenue Model - Explained

On-demand taxi booking giant, Uber, started to transform ground transportation operations. Uber managed to evolve as a successful business model and inspired many startups to develop a similar business model.

According to the New York Times report, Uber earned an astonishing $8.8 bn in revenue in the first quarter of this year and generated around $32 bn in the previous year, as per stats from Business of Apps.

The above stats represent the popularity of Uber, and it has managed to reach a record-breaking market cap in a short time, thanks to its scalable revenue model.

Uber business model is multi-functional, with an active commissioning system as a revenue model that connects drivers and passengers for transportation. 

Further down this line, what is Uber, how it became a successful on-demand taxi-booking app, its business model, and its future are discussed.

What is Uber?

Uber is the most popular on-demand taxi booking application that enables passengers to avail of transportation services from Uber-approved drivers. 

In addition, the Uber platform offers technical and non-technical support services for users and drivers to help them resolve their queries within a short time.

How does Uber Work?

Uber collaborates with cab drivers and offers transportation services via the Uber app (available on native platforms). Uber works in the following simple ways.

1. Cab Request

Users can open the Uber app to book transportation services and select a suitable service. Uber processes the request and connects it with the nearby driver when the user selects the options.

2. Driver confirmation

Next, the driver accepts the request and visits the pickup customer's location.

3. Ride Initiation

On reaching the user location, the driver verifies the ride and starts by validating the OTP.

4. Payment

Finally, the payment process is done when the user arrives at the destination. The user can give feedback or suggestions based on the ride.

What does Uber Offer?

The main reason behind the glory of Uber is its unique business model and the scalable solutions that no other transportation firm has offered.

Some customer-oriented services of Uber that made it achieve many ground-breaking achievements are:

1. A user can effortlessly book a cab with a single tap on the Uber application.

2. Once the driver accepts the request, the user info is sent to the driver and vice-versa.

3. Users can track the total number of transportation services available within a location.

4. The payment can be done at the start or end of the ride.

5. Cost-effective and luxury packages available for the target audience.

6. Options for feedback, tips, rating, etc., are available on the application.

7. A driver or user can stop the ride at any moment, and a 24/7 support team is available to resolve the concern of the user and driver.

Some Stats & Facts on Uber

(i) According to the Stock Analysis report, the net worth or total market cap of Uber is $75.77 bn (an increase of 67.42% from the previous year).

(ii) The brand recognition of Uber is higher in many nations and is available in nearly 70 countries. Convenience and affordability are Uber’s success factors.

(iii) The balancing of fares based on demand helps them amplify their profits. In addition, Uber also offers various transportation services like UberBlack, UberX, UberPool, etc.

(iv) As per a report from Backlinko, Uber has more than 93 mn monthly users, and the figure might increase by 25% if it accounted for other services. 

(v) Currently, there are more than 7 mn Uber drivers and various modes of transportation like ships, helicopters, etc.

Uber Business Model Analysis 

Uber’s flexible business model makes the app much more than a taxi-booking platform. The scalability of Uber's business model helps any business to incorporate it irrespective of the niche. The aspects of various components of Uber's business model are simplified.

Stakeholder Analysis 

The business model of Uber enables easy integration of stakeholders into the process. The stakeholder structure consists of 

User - Customers who need cab services and book a taxi on the app.

Driver- Partners who use the app & earn income based on their rides.

Technical Supporters - Provide necessary support required for the app development.

Service Providers - Helps to organize the ride service management.

Authority - Helps govern the processes & core of the business model.

Investor - Provide adequate financial & decision-making support.

Main Focus

The main focus must be placed on the following tasks or processes, and the development of a top-notch taxi booking application should be given priority.

1. Creation of a technical architecture with an appropriate Tech stack.

2. Collaboration with the taxi drivers for ride completion.

3. Creation of digital tools to provide & manage ride service.

4. Integration of payment gateways.

5. Focused marketing activities and brand promotion

Value Proposition

Uber is an attractive business model that not only helps investors to earn a profit but allows app users and partners to benefit from

Users

1. Fare estimate before booking

2. Various payment options & cashback offers.

3. Economical ride options and a variety of packages

4. Quick cab hiring and less waiting time & arrival at the destination

5. Complete support throughout the journey

Driver

1. Partners can earn additional or secondary income based on their commitment.

2. Instant Registration and approval.

3. Flexible working options.

4. Preferred payment option.

Prime Resources

Some critical resources of Uber's business model that provide the necessary support & expertise to ensure the business's success are:

1. Cutting-edge app or platform on the native platform,

2. Taxi partners with advanced digital tools or smartphones. 

3. Third-party associates & web portals

Customer Management

The business model of Uber helps the admin to effectively manage the customer to ensure the success of the app through

1. Increasing brand awareness with marketing

2. Social media & referral promotion.

3. Better customer support

4. Review & feedback system

Customer Overview 

The customer overview section of the Uber business model helps the investor identify the target customers and partners.

Target Customer

1. Customers who are unable to drive cars

2. Customers who need luxury and comfortable journeys.

3. Customers who need affordable yet convenient taxi services.

Target Partners

1. Drivers with cars & looking to earn attractive income

2. Part-time drivers with adequate earning opportunities.

Medium

Some digital channels required for the achievement of the requirements of the taxi-booking or taxi-hailing business are:

1. Application on IOS and Android platforms with updates.

2. Web portals or platforms for drivers, users & partners.

3. Admin dashboard for business management.

How Uber Makes Money?

The scalable and profitable Uber revenue model helped them maximize their ROI and make money while offering reasonable prices for their services for increasing the user base.

Commission 

Uber charges a commission fee of 25% for every ride and the remaining amount for partner and commercial expenses. The percentage of commission varies between 15-20% based on location.

Price Hike

The most attractive revenue source is based on the algorithm. The algorithm contains a dynamic pricing structure and increases the charge based on peak hours and demand. It helps Uber and its partners earn extra money.

Premium Rides

With premium service, Uber enables users to get more convenient & safer rides in branded vehicles (luxury cars) for which they pay extra. This revenue source helps Uber earn a maximum amount of profits.

Revenue from Ads & Promotions 

Uber’s intuitive platform design enables Uber to provide space for sponsored content to display and popularize its brand. It generates maximum revenue for Uber, which makes up one-third of its total earnings.

Uber - Evolution & the Future expectation 

Uber thrives in the taxi booking business due to the above on-demand business model & revenue source. In addition, the Uber management structure was customized according to the geographic location.

Uber saw the demand and conquered the ground transportation niche with its unique & effective business model. The milestones and success of the platform encouraged many entrepreneurs to develop and deploy an Uber-like business model that became the trending solution in the app development space. Further, the business model of Uber will expand based on the ground transportation market evolution and demands. 

In case if you want to learn more about the Uber business model and explore the possibilities of scaling the Uber business infrastructure based on your business requirement, contact us.

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