Are You an Entrepreneur Trying to Figure Out the Business Model Of Uber?

Are you an entrepreneur trying to figure out what Uber is and trying to deduce the uber business model? If you are, please continue to read. If you are not, I suggest you move on to the next article.

Uber is a company that developed a similarly named smart phone app which provides on-demand transportation (private car) services to its users. It connects willing passengers to private drivers and taxi cab drivers (we shall call them Uber drivers). Uber drivers use their cars to provide transportation service to riders (passengers) and Uber typically gets between 20 to 25 percent of the fare.

The overall process is very simple, registered Uber users ask for a car pickup using the Uber app, an Uber driver then dispatches to the passenger’s site and takes the passengers to his/her destination. For payment, Uber directly bills the passenger for the total miles driven (as measured/monitored) by the drivers’ GPS on his phone. No cash is exchanged between the driver and passenger!

The Uber Business Model in a Nutshell: uber business model

• The Uber Driver - anybody with a driver’s license and a car can apply to be an Uber driver and become an uber driver in any city where Uber has a presence. Once approved by Uber, the driver is listed in the Uber system and provide a phone (if he/she doesn’t have one). Essentially, anyone with an uber approved car or an uber black car can be an Uber Driver. (Click here to Apply to be an Uber Driver).

• The Passenger - Registered Uber users download the Uber app to their phone and if they need a ride, they call for one through the Uber app. They can also track the car on their phone as it approaches. This service is suitable for the passengers: It provides a reliable, safe and cheaper way of transport than the traditional taxi cab.

• Fare and Payment - Uber sets the fare for the Uber service you use (depending on the city you are in). There is a premium fare at peak hours and a flat rate for off peak hours (Uber calls this surge pricing). Passengers pay their fares through their credit cards automatically (via the Uber app) and don’t have to exchange any cash with drivers. Also, the fare is base on car type, distance and peak hour.

• Dividing the Profits between uber partners and drivers - Uber divides the fare, typically 80% to the driver and 20% to Uber (for the UberX service). Even after a 20% commission, the taxi drivers earn more than the customary taxi services.

• Future Growth for the uber partner – At present, Uber does not own any taxi companies or cars and is essentially a data management company. Uber is growing fast and is likely to displace taxi companies in most cities across the globe baring regulation or law suits that prevent this growth.