What do Airbnb, Uber, Google, Facebook, YouTube, eBay, Alibaba, PayPal have in common apart from the fact that they are some of the most valuable start-ups of the recent (or coming) years? They are all platforms businesses! The success of these envied companies has made the platform business model the holy grail of business models. Uber started the delivery business in April 2014 and is now expanding its delivery business as well. In this post, we will first discuss the Uber transportation business model. Then, we will talk about the Uber delivery business model. Source: underconsideration.com Key Elements Of Uber Transportation Business Model Uber Offerings For Riders.
As Uber has grown to become one of the world’s most valuable start-ups, its ambitions often seem limitless.
But of all the ways that Uber could change the world, the most far-reaching may be found closest at hand: your office. Uber, and more broadly the app-driven labor market it represents, is at the center of what could be a sea change in work, and in how people think about their jobs. You may not be contemplating becoming an Uber driver any time soon, but the Uberization of work may soon be coming to your chosen profession.
Just as Uber is doing for taxis, new technologies have the potential to chop up a broad array of traditional jobs into discrete tasks that can be assigned to people just when they’re needed, with wages set by a dynamic measurement of supply and demand, and every worker’s performance constantly tracked, reviewed and subject to the sometimes harsh light of customer satisfaction. Uber and its ride-sharing competitors, including Lyft and Sidecar, are the boldest examples of this breed, which many in the tech industry see as a new kind of start-up — one whose primary mission is to efficiently allocate human beings and their possessions, rather than information.
Various companies are now trying to emulate Uber’s business model in other fields, from daily chores like grocery shopping and laundry to more upmarket products like legal services and even medicine.
“I do think we are defining a new category of work that isn’t full-time employment but is not running your own business either,” said Arun Sundararajan, a professor at New York University’s business school who has studied the rise of the so-called on-demand economy, and who is mainly optimistic about its prospects.
Uberization will have its benefits: Technology could make your work life more flexible, allowing you to fit your job, or perhaps multiple jobs, around your schedule, rather than vice versa. Even during a time of renewed job growth, Americans’ wages are stubbornly stagnant, and the on-demand economy may provide novel streams of income.
“We may end up with a future in which a fraction of the work force would do a portfolio of things to generate an income — you could be an Uber driver, an Instacart shopper, an Airbnb host and a Taskrabbit,” Dr. Sundararajan said.
But the rise of such work could also make your income less predictable and your long-term employment less secure. And it may relegate the idea of establishing a lifelong career to a distant memory.
“I think it’s nonsense, utter nonsense,” said Robert B. Reich, an economist at the University of California, Berkeley who was the secretary of labor during the Clinton administration. “This on-demand economy means a work life that is unpredictable, doesn’t pay very well and is terribly insecure.” After interviewing many workers in the on-demand world, Dr. Reich said he has concluded that “most would much rather have good, well-paying, regular jobs.”
It is true that many of these start-ups are creating new opportunities for employment, which is a novel trend in tech, especially during an era in which we’re all fretting about robots stealing our jobs. Proponents of on-demand work point out that many of the tech giants that sprang up over the last decade minted billions in profits without hiring very many people; Facebook, for instance, serves more than a billion users, but employs only a few thousand highly skilled workers, most of them in California.
To make the case that it is creating lots of new jobs, Uber recently provided some of its data on ridership to Alan B. Krueger, an economist at Princeton and a former chairman of President Obama’s Council of Economic Advisers. Unsurprisingly, Dr. Krueger’s report — which he said he was allowed to produce without interference from Uber — paints Uber as a force for good in the labor market.
Dr. Krueger found that at the end of 2014, Uber had 160,000 drivers regularly working for it in the United States. About 40,000 new drivers signed up in December alone, and the number of sign-ups was doubling every six months.
The report found that on average, Uber’s drivers worked fewer hours and earned more per hour than traditional taxi drivers, even when you account for their expenses. That conclusion, though, has raised fierce debate among economists, because it’s not clear how much Uber drivers really are paying in expenses. Drivers on the service use their own cars and pay for their gas; taxi drivers generally do not.
The key perk of an Uber job is flexibility. In most of Uber’s largest markets, a majority of its drivers work from one to 15 hours a week, while many traditional taxi drivers work full time. A survey of Uber drivers contained in the report found that most were already employed full or part time when they found Uber, and that earning an additional income on the side was a primary benefit of driving for Uber.
Dr. Krueger pointed out that Uber’s growth was disconnected to improvements in the broader labor market. “As the economy got stronger, Uber’s rate of growth increased,” he said. “So far, it’s not showing signs of limitations in terms of attracting enough drivers.”
One criticism of Uber-like jobs is that because drivers aren’t technically employees but are instead independent contractors of Uber, they don’t enjoy the security and benefits of traditional jobs. The complication, here, though, is that most taxi drivers are also independent contractors, so the arrangement isn’t particularly novel in the ride business. And as on-demand jobs become more prevalent, guildlike professional groups are forming to provide benefits and support for workers.
The larger worry about on-demand jobs is not about benefits, but about a lack of agency — a future in which computers, rather than humans, determine what you do, when and for how much. The rise of Uber-like jobs is the logical culmination of an economic and tech system that holds efficiency as its paramount virtue.
“These services are successful because they are tapping into people’s available time more efficiently,” Dr. Sundararajan said. “You could say that people are monetizing their own downtime.”
Think about that for a second; isn’t “monetizing downtime” a hellish vision of the future of work?
“I’m glad if people like working for Uber, but those subjective feelings have got to be understood in the context of there being very few alternatives,” Dr. Reich said. “Can you imagine if this turns into a Mechanical Turk economy, where everyone is doing piecework at all odd hours, and no one knows when the next job will come, and how much it will pay? What kind of private lives can we possibly have, what kind of relationships, what kind of families?”
The on-demand economy may be better than the alternative of software automating all our work. But that isn’t necessarily much of a cause for celebration.
Uber was scandalized this week by a scoop from The Verge revealing its aggressive way of poaching drivers from rival Lyft. But the other thing that caught my eye was an ad on the side of a bus. In the ad, a black Toyota Prius spews cash, accompanied by an Uber logo and the words 'Drive & Make $5,000.'
In smaller letters, the ad clarified the money was 'guaranteed' during the first month driving for Uber, the ride-hailing app-maker that's battling with local governments, taxi cab companies, and direct competitors like Lyft in an effort to reinvent transportation. I checked out the ad's link and discovered more fine print. The offer was limited to new UberX drivers who worked at least 40 hours per week and accepted at least 90 percent of the rides requested. This works out to about $30 per hour, a little more than some roughestimates of an UberX driver's typical wage.
However Uber's guarantee ends up working out for drivers, the ad unambiguously signals how Uber is spending its billion-dollar hoard of VC cash. Uber needs drivers, and the startup isn't afraid to shell out for them, whether by paying contractors to take rides in Lyfts or promising fixed payouts to drivers even as it slashes prices for passengers. In the case of its recruiting ride-alongs, part of what the company calls Operation Slog, Uber also must bear the cost of the public relations hit it took in the eyes of those who saw the tactic as underhanded.
But the real peril to Uber isn't bad PR. It's the costs of recruiting drivers and what that says about Uber's business model compared to those of traditional software companies. More drivers don't equal more value added. They simply equal staying alive.
The Burden of the Real World
To get, keep, and expand its roster of drivers, Uber must sink money into marketing, operations, and insurance in a way that, say, Google or Facebook never had to. Such on-the-ground expenditures don't carry the obvious promise of an exponential return on investment. In tech, spending on product, R&D, and talent create what entrepreneurs and investors like to describe as asymmetrical leverage.
![Work Work](/uploads/1/2/3/5/123524503/199476796.png)
Take Dropbox. The file-syncing startup only needed a few hundred employees and a few data centers to hit a multi-billion-dollar valuation. Uber needs that, plus an army of drivers in cars. (Uber says its 'generating 20,000 new driver jobs every month.') Though Uber is a tech company, its product doesn't make sense without the piece that inhabits the physical world. And the physical world is notoriously inefficient.
In the brief history of online businesses, competitive advantage typically has been gained by virtualizing away the costs of the physical, or lost by failing to shed that real-world weight. Amazon used the web to eliminate the overhead of brick-and-mortar retail stores. Newspapers were weighed down by the costs of paper and ink. But Uber isn't really using tech to make something that was once physical virtual. It's simply taking an existing service—hailing and dispatching rides—and making it better by leveraging mobile tech to make it more efficient. The need for a physical operation on the ground doesn't shrink.
![How Does Uber How Does Uber](https://static1.squarespace.com/static/51913f1ce4b07b22f5332872/t/5526948ae4b0eb506c135a6b/1428591779212/Facebook-Business-Model.png)
On the contrary, Uber's physical footprint keeps growing. On Thursday, it announced its expansion into 24 more cities, bringing the worldwide total to 205 cities in 45 countries. Uber, as the company itself says, wants to be everywhere.
'Today we are one step closer to our vision of UberEverywhere—— a bold idea that no matter where you are, a reliable ride with Uber is just 5 minutes away,' the company said in a blog post.
Bold, yes. But also unobtainable without enough drivers.
Reliability Is Everything
Uber's algorithmic effort to match driver supply to passenger demand has many moving parts. Some pieces are complex, others not so much. One of the simpler equations: more people wanting to take Uber rides means more drivers needed to give them. Yes, Uber must compete with rival services like Lyft for the limited supply of willing and able drivers—a drain on the potential talent pool that has received most of the attention recently.
But it must also simply keep pace with the demand it's generating itself. And more than any kind of criticism it receives for how it gets those drivers, falling behind in meeting that demand is the error that could end Uber.
That, at least, was the dynamic in play during another Uber PR shitstorm, when a fare spike during a New York City blizzard provoked accusations of price-gouging. At the time, Uber co-founder and CEO Travis Kalanick defended the company's 'surge pricing tactic as a necessary tool for managing supply and demand, a way to nudge the system toward equalizing the number of drivers available and passengers who want rides. The issue, Kalanick told WIRED, came down to reliability: 'If you are unreliable, customers just disappear.”
>In the brief history of online businesses, competitive advantage typically has been gained by virtualizing away the costs of the physical.
In a way, driver recruitment is that blizzard writ large. For Uber, reliability means that any users at any time in any city the company serves must be able to open the app and see they can get a ride within minutes. The more times they can't, the more likely they are to stop opening the app. Whatever the ethics of its recruitment tactics, Uber's fear of being perceived as unreliable clearly outstrips any concern it may have about being seen as underhanded.
Consider the subset of Uber customers who heard the story of how it's poaching drivers, and then the subset of that group who actually cares, and then the subset of that group upset enough not to use Uber again. Historically, moral outrage has a spotty track record as a catalyst for changing consumer behavior. Speed, convenience, and price, on the other hand, build billion-dollar empires.