How uber business model is generating massive revenue?

There are two ways to look at problems, one is to complain about the problem and another way is to solve it.

Garrett Camp struggled to find a cab on new years eve and had to pay $800 for a private driver. He thought how can we get cab on cheaper price and that’s how the idea of UberCab started. The concept of Uber Cab was to share the cab with people to make the cost of travel less. That’s the origin story of Uber.

Garrett Camp and Travis Kalanick, Founders Uber
Garrett Camp and Travis Kalanick, Founders Uber

Uber is an American based company which provides peer-to-peer ridesharing, ride service hailing, food delivery, and a bicycle-sharing system service. Uber was founded by Garrett Camp and Travis Cordell Kalanick in March 2009.

Uber is car service where you can get a ride on short notice. Ride use the uber app to request a car to their current location, once a driver sees the request and accept it the rider gets GPS update on the whereabout of their car.

Uber has different type of car, you can request Uber X, Uber SUV, Uber Black etc. The fare of the cab differs as per the different cabs you order.

How Uber makes money?

Although uber makes a lot of money from advertisement on their websites but their main source of revenue is percentage share on ride fare.

Uber does not own taxi which decreases the cost for uber. They act as a third party or service provider for riders and drivers.

Riders can use the app to order a cab and driver’s also use app to find if any demand for their service is their or not.

Drivers are not the employee of uber but as uber says they are the partners. Uber provides the platform which customers uses to search for vehicles and in return driver agree to share their fare charges.

The ride fare is shared in the ratio of 75:25. Driver’s keep 75 percent of the fare received from customers and uber receives 25 percent of the fare as commission.

What are the qualifications to be Uber drivers?

If you want to make extra bit of money, then you can try your hands driving cars for Uber. You need to fulfill certain qualification to register on Uber as a driver. The qualifications to be Uber drivers are mentioned below:

• Pass a background check
• Have a driver’s license
• Have their own personal car insurance
• Own a car

Business model of Uber

For any company to be successful it needs a stable business model. Uber also had made compact business model which made it possible for uber to grow.

Uber’s business model is augmented in many ways. The business of uber depend upon solving problem of many people. Uber takes people from one place to another without any hassle.

Uber did what smartphones did to telephone to taxi service. It took out hassle from taxi industry, made it easier for customer to get cab on affordable price.

Not only the riders are customers for uber but the drivers are also their customers. Drivers are the ones who ride for them and give uber share of revenue.

Uber doesn’t own cars, so the cost is comparatively low. The drivers are not the employees as they work on contract basis with the firm. The cost of uber is the maintenance of their app, tech platform, marketing and personnel.

Uber key partners in the business are Payment processor and API providers. Customer use payment processor to pay for their fare of uber cab.

The business model of uber includes revenue stream of uber. The major share of uber revenue comes from the percentage share of fare.

Is being Uber driver worth it?

Work on your own condition, set your own working hour- sounds great right?

Well that’s how driving car for Uber seems like. It can be true, but there are couple of things you need to consider before you start driving car for uber.

Uber advertise that they only take 25 percent of fare. However, when you take into account their booking fee, the number is lot higher.

Despite the claim of uber to take just 25 percent commission on rides, Uber actually take up to 42.75 percent of their drivers. That’s just for a minimum-price fare ride in San Francisco.

Let me explain this other way, Short rides are becoming less and less profitable for drivers. For many ride sharing drivers in San Francisco (and elsewhere), almost half of a driver’s earnings are lost to Uber.

So before starting to drive for uber, you need to consider the pay structure of the company first.

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