Uber Business Model: How Does Uber Make Money?

Uber currently operates in 71 countries globally. It is prominent to use taxi-hailing apps. The companies like Uber made us realize that innovation is the key to success as it made a shift from traditional taxis to modern technological cab-hailing apps.

After Uber, there arrived many e-riding apps in the market, out of which Bolt is the one which is alike and successful. Uber and Bolt are the toughest competitors who have disrupted the way we look at hailing a taxi in various cities. Still, the hottest question runs in the market- Uber Vs Bolt, where people are keen to know the differences between the two.

But in this article, we would like to emphasize Uber’s business model and revenue model.

First, history is something that we should look at to know the origin of thought by which Uber came into existence.

History of Uber

Uber began its journey to success in 2009 when two friends, Travis Kalanick and Garrett Camp, came up with the idea. One winter night, they went to a pub after which they faced trouble in availing the taxi. So, that is why the thought stuck in their mind, “what if people can request a cab via their mobile phone?”. At that point, Uber’s inception took place, which changed the whole scenario.

Approximately ten years later, in 2019, Uber became a public company. If we look at the recent earnings of the business in 2021, its net income was $1.1 billion while the revenue was $3.9 billion on average, with 1.5 billion trips per year.

Uber is available as a mobile app for the end users in android or ios whichever is in access.

But, How do you access the Uber app to hail a taxi?

Here are the easy steps by which it is possible:-

• Login/Register:- The rider needs to log in or register from the mobile app in his android or iOS.

• Destination:- The e-rider needs to enter their current destination and the place where the journey will end.

• Select a Taxi:-  The end user needs to select the type of taxi they want to avail, which is UberX, UberXL, UberSelect, UberBlack and UberSUV.

• Approval of Request:- The customer must confirm and wait for the driver to accept the request.

• Real-time tracking:- Soon after accepting the request, check the time of the driver’s arrival.

• Multiple payment options:- Whether the customer wants to pay in cash or go cashless there are many options by which the end user can do the payment.

Making such a profitable business requires a refined business model so let us delve into it.

Business Model of Uber

Uber has a bilateral model that acts as a connector between driver and customer. However, Uber does not own any of the vehicles. But any local driver can get the opportunity to register their vehicle and start driving.  

The Uber service is now available in more than 10,000 cities globally. It is a unique business model because it makes the commutation from Point A to B more feasible.

Through its business platform, Uber offers:-

• A number of drivers
• Lower wait timing and fare charges
• Higher opportunity to earn for drivers

Uber has made such a simple user interface to accelerate its mission “To ignite the way the world moves in a better direction.”

Now, the most prominent question in your mind would be, “How Uber earn its revenue?”. So let’s explore the revenue model for a deeper understanding.

Revenue Model of Uber

Uber prominently earns its profit with trip commissions which are the trip fare given by the riders. Uber and the driver associated tend to share the trip fare availed at the end of the trip.

The company share is 20% which will be revenue from the trip fare, and the other 80% will be for the driver.

The fare calculation of Uber is dependent on the location it is operating.

Base Fare + {(Cost*Time/ min) + ( Cost*Time/km)} + Booking Fees = Surge Multiplier.

The surge multiplier is a bridge that aligns with the needs of the rider and driver.  

Let’s know-how!

The driver’s screen is in the division of a Hexagon Model, and the fare prices are accordingly divided. So for each hexagon area, the price is stipulated, which grows 3x as the demand rises. The driver is attracted to the area, which helps the rider meet the need to hail a taxi.

But as the rider meets the demand for the taxi, the demand will be equivalent to the supply so that the surge price will decrease gradually. However, the surge multiplier benefits Uber drivers during peak hours and they can fetch a tiptop amount.

However, Uber has also started Fractional Investing in the areas where the cars are not in high operation to meet the rider’s taxi needs. Fleet marketing is also in constant growth by Uber to ignite the commutation without any worries.

How does Uber Benefit the Customer and Driver?

Uber not only generates a colossal revenue but is also beneficial for the driver and customer.

Benefits for Driver

• They tend to follow a flexible schedule.
• While registering with Uber, it takes care of the vehicle’s wear and tear.
• Uber will help you get health insurance, and drivers can have proper financial management.
• A driver can allot the trip to the customer at his convenience.

Benefits for Customer

• It can help customers hail a taxi within minutes.
• They will have a low ideal time as the bookings are quick.
• It is associated with multiple payment options for convenience.
• Uber can help in saving on petrol charges on your vehicle.

These key points help understand why Uber is an amicable choice for people commuting globally.

Wrap Up

“You must be ready for hard work and frugal spending to get the idea of the ground.” – says Garrett Camp, Founder of Uber.

Uber’s business model was so successful that it has been a mantra for all the people entering the on-demand taxi-hailing services. By its business model and revenue model, it is clear to forecast that Uber is here to stay for years to come.

However, The number of e-riding apps is constantly increasing after the success of Uber in many countries globally. Many cities in the USA also have discrete e-riding apps as per the geographical location like Newyork taxi apps, Miami taxi apps, and many more.