Ways Uber makes money

[vc_row type=“full_width_background“ full_screen_row_position=“middle“ bg_color=“#ffffff“ scene_position=“center“ text_color=“dark“ text_align=“left“ top_padding=“2%“ overlay_strength=“1″ shape_divider_position=“bottom“ bg_image_animation=“none“ shape_type=““][vc_column column_padding=“no-extra-padding“ column_padding_position=“all“ background_color_opacity=“1″ background_hover_color_opacity=“1″ column_link_target=“_self“ column_shadow=“none“ column_border_radius=“none“ width=“1/1″ tablet_width_inherit=“default“ tablet_text_alignment=“default“ phone_text_alignment=“default“ column_border_width=“none“ column_border_style=“solid“ bg_image_animation=“none“][vc_row_inner column_margin=“default“ text_align=“left“][vc_column_inner column_padding=“no-extra-padding“ column_padding_position=“all“ background_color_opacity=“1″ background_hover_color_opacity=“1″ column_shadow=“none“ column_border_radius=“none“ column_link_target=“_self“ width=“1/2″ tablet_width_inherit=“default“ column_border_width=“none“ column_border_style=“solid“ bg_image_animation=“none“][/vc_column_inner][vc_column_inner column_padding=“no-extra-padding“ column_padding_position=“all“ background_color_opacity=“1″ background_hover_color_opacity=“1″ column_shadow=“none“ column_border_radius=“none“ column_link_target=“_self“ width=“1/2″ tablet_width_inherit=“default“ column_border_width=“none“ column_border_style=“solid“ bg_image_animation=“none“][nectar_gradient_text heading_tag=“h2″ color=“extra-color-gradient-2″ gradient_direction=“diagonal“ text=“There are however many dynamics of Uber that have not been understood well including how it makes money and its profitability.“][/vc_column_inner][/vc_row_inner][vc_row_inner column_margin=“default“ text_align=“left“][vc_column_inner column_padding=“padding-3-percent“ column_padding_position=“top-bottom“ background_color_opacity=“1″ background_hover_color_opacity=“1″ column_shadow=“none“ column_border_radius=“none“ column_link_target=“_self“ width=“1/1″ tablet_width_inherit=“default“ column_border_width=“none“ column_border_style=“solid“ bg_image_animation=“none“][vc_custom_heading text=“Have grown in popularity“ font_container=“tag:h2|font_size:18|text_align:left|color:%23000000|line_height:2″ google_fonts=“font_family:Comfortaa%3A300%2Cregular%2C700|font_style:700%20bold%20regular%3A700%3Anormal“ css_animation=“none“][vc_column_text css_animation=“none“ css=“.vc_custom_1552693023033{margin-top: 20px !important;margin-bottom: 5px !important;}“]Uber and other ride-sharing companies have grown in popularity in the recent past. Uber, in particular, has created a lot of uproar in the Silicon Valley and has faced fast-paced growth. There are however many dynamics of Uber that have not been understood well including how it makes money and its profitability.
Despite the market position, Uber still has the audacity to give its drivers and users in general incentives. Maybe that has also contributed to its massive growth. The fact that it has done diversification through Uber eats, it may also have led to its success rate.[/vc_column_text][vc_custom_heading text=“How Uber works“ font_container=“tag:h2|font_size:18|text_align:left|color:%23000000|line_height:6″ google_fonts=“font_family:Comfortaa%3A300%2Cregular%2C700|font_style:700%20bold%20regular%3A700%3Anormal“][vc_column_text css=“.vc_custom_1552693071710{padding-right: 10% !important;}“]Uber acts as an intermediary between buyers and sellers through an app and it collects a fee from every transaction. Uber acts as a connection between taxi drivers and passengers and saves passengers the inconvenience of having to hail a taxi in order to do a ride.
Uber embraced the double-sided marketplace by making sure: customers have a qualitatively better experience, there is a better marketplace and there is every reason for people to do transactions on the platform. Uber’s greatest strength in the double-sided marketplace is the efficiency it brings on the table.
As compared to other cab services in the market, uber gives more value as it has a large network of cabs which translates to more drivers on the road and faster pickup times. More drivers on the road make it charge low commission rates which still makes it get more revenue in the long run. That makes it very ideal for the marketplace since it provides the convenience that people are looking for.
The traditional model for taxis meant that taxis had to drive around to find customers or just pack at designated parking spots. Unless a driver is called by their customer. That, therefore, means that supply can meet demand either directly or through a middleman. What disadvantages the traditional model of taxis includes Less work for the drivers as they only have passengers like 30 – 50% of the time. There is a lack of access to taxi services in some areas like areas where there are no taxi stands or centralized dispatchers.
When users have uber, they can easily get a cab regardless of where they are as long as they have an app. That makes it have good supply allocation for the drivers and also ease of getting a ride. When there are fluctuating levels of demand and supply, there is surge pricing. This makes drivers earn more and users to pay slightly more for the services as drivers are few hence have to cover a long distance. The surge pricing keeps demand in check as customers who are not willing to pay extra have to find other alternative methods. It is possible for Uber to hire flexible contractors because of surge pricing as it acts as an incentive to drivers and may encourage them to change locations as price surge normally happens in certain areas at a given time.
Apart from the normal taxi services, other products that Uber has is Uber pool and Uber eats. Uber pool makes carpooling easier. Uber eats is where drivers deliver foods.[/vc_column_text][/vc_column_inner][/vc_row_inner][/vc_column][/vc_row][vc_row type=“full_width_background“ full_screen_row_position=“middle“ equal_height=“yes“ content_placement=“middle“ scene_position=“center“ text_color=“dark“ text_align=“left“ top_padding=“1%“ bottom_padding=“2%“ overlay_strength=“0.3″ shape_divider_position=“bottom“ bg_image_animation=“none“ shape_type=““][vc_column column_padding=“no-extra-padding“ column_padding_position=“all“ background_color_opacity=“1″ background_hover_color_opacity=“1″ column_link_target=“_self“ column_shadow=“none“ column_border_radius=“none“ width=“1/2″ tablet_width_inherit=“default“ tablet_text_alignment=“default“ phone_text_alignment=“default“ column_border_width=“none“ column_border_style=“solid“ bg_image_animation=“none“ offset=“vc_col-xs-12″][image_with_animation image_url=“14899″ alignment=““ animation=“Grow In“ border_radius=“none“ box_shadow=“medium_depth“ max_width=“100%“][/vc_column][vc_column column_padding=“no-extra-padding“ column_padding_position=“all“ background_color_opacity=“1″ background_hover_color_opacity=“1″ column_link_target=“_self“ column_shadow=“none“ column_border_radius=“none“ width=“1/12″ tablet_width_inherit=“default“ tablet_text_alignment=“default“ phone_text_alignment=“default“ column_border_width=“none“ column_border_style=“solid“ bg_image_animation=“none“ offset=“vc_col-xs-12″][/vc_column][vc_column column_padding=“no-extra-padding“ column_padding_position=“all“ background_color_opacity=“1″ background_hover_color_opacity=“1″ column_link_target=“_self“ column_shadow=“none“ column_border_radius=“none“ width=“5/12″ tablet_width_inherit=“default“ tablet_text_alignment=“default“ phone_text_alignment=“default“ column_border_width=“none“ column_border_style=“solid“ bg_image_animation=“none“ offset=“vc_col-xs-12″][vc_row_inner column_margin=“default“ text_align=“left“][vc_column_inner column_padding=“no-extra-padding“ column_padding_position=“all“ background_color_opacity=“1″ background_hover_color_opacity=“1″ column_shadow=“none“ column_border_radius=“none“ column_link_target=“_self“ width=“1/1″ tablet_width_inherit=“default“ column_border_width=“none“ column_border_style=“solid“ bg_image_animation=“none“ enable_animation=“true“ animation=“fade-in-from-bottom“][vc_custom_heading text=“Koks sprendimas yra geriausias trišalių – bendrovės, agento (arba pardavėjo) bei kliento – santykių kontekste?“ font_container=“tag:h3|text_align:left|color:rgba(0%2C0%2C0%2C0.75)“ use_theme_fonts=“yes“ css_animation=“none“][/vc_column_inner][/vc_row_inner][vc_row_inner column_margin=“default“ text_align=“left“][vc_column_inner column_padding=“no-extra-padding“ column_padding_position=“all“ background_color_opacity=“1″ background_hover_color_opacity=“1″ column_shadow=“none“ column_border_radius=“none“ column_link_target=“_self“ width=“1/1″ tablet_width_inherit=“default“ column_border_width=“none“ column_border_style=“solid“ bg_image_animation=“none“ enable_animation=“true“ animation=“fade-in-from-bottom“ delay=“50″][/vc_column_inner][/vc_row_inner][/vc_column][/vc_row][vc_row type=“in_container“ full_screen_row_position=“middle“ scene_position=“center“ text_color=“dark“ text_align=“left“ overlay_strength=“0.3″ shape_divider_position=“bottom“ bg_image_animation=“none“][vc_column column_padding=“no-extra-padding“ column_padding_position=“all“ background_color_opacity=“1″ background_hover_color_opacity=“1″ column_link_target=“_self“ column_shadow=“none“ column_border_radius=“none“ width=“1/1″ tablet_width_inherit=“default“ tablet_text_alignment=“default“ phone_text_alignment=“default“ column_border_width=“none“ column_border_style=“solid“ bg_image_animation=“none“][vc_custom_heading text=“Uber’s cost model“ font_container=“tag:h2|font_size:18|text_align:left|color:%23000000|line_height:4″ google_fonts=“font_family:Comfortaa%3A300%2Cregular%2C700|font_style:700%20bold%20regular%3A700%3Anormal“][vc_column_text css=“.vc_custom_1552693101514{padding-right: 10% !important;}“]The best part about Uber’s cost model is the fact that it was able to cut down on costs of traditional taxi service since it pays its drivers as independent contractors. This is due to the fact that it is more of an intermediary and it is not a company that owns cars or any physical assets to manage.
In as much as Uber is very profitable and making huge profits, it is also making losses. For example, last year, it made a loss of over $1 B which is still high. Some of the reasons it is still making losses include:
Poor driver retention: there is a lot of competition from other taxi-hailing apps and most of the time you will find drivers are in several apps or they move where there are better incentives. That means that Uber has to go an extra mile and spends an average of 10% on sales and marketing to attract more drivers on the platform.
Geographical growth: Uber is set to expand physically and that means that it has to spend more in order to enter new unfamiliar markets.
Since profitability is one of its main concerns, it has had to expand to other areas s such as introducing bikes and scooters to its platform.[/vc_column_text][vc_custom_heading text=“Uber Drivers“ font_container=“tag:h3|font_size:16|text_align:left|color:%23000000|line_height:6″ google_fonts=“font_family:Comfortaa%3A300%2Cregular%2C700|font_style:700%20bold%20regular%3A700%3Anormal“][vc_column_text css=“.vc_custom_1552693129269{padding-right: 10% !important;}“]Uber has spent a lot of money trying to give drivers incentives so as to make them part of their platform. When Uber was still new, drivers would get signup bonuses but this has been phased out. Uber still spends a lot of money on marketing to attract new drivers. Their major challenge is maintaining those drivers as only about 20% remain with them after a year. The company, however, has a way of earning back what it spent on driver acquisition making the driver earn even less than they should. Because of the low retention rate and high take rate, it becomes hard to cut down on driver acquisition costs. The high costs in driver acquisition and low wage rates for drivers is a big threat to Uber, especially in the long-run.[/vc_column_text][vc_custom_heading text=“Uber Customers“ font_container=“tag:h3|font_size:16|text_align:left|color:%23000000|line_height:6″ google_fonts=“font_family:Comfortaa%3A300%2Cregular%2C700|font_style:700%20bold%20regular%3A700%3Anormal“][vc_column_text css=“.vc_custom_1552693221019{padding-right: 10% !important;}“]Uber has a high market share of over 70% and customer acquisition has been mainly due to financial incentives. Despite the incentives, the cost of customer acquisition is still relatively low. In the United States, there are over 80k new signups every week. There are many types of uber promotions and some of them just spur of the moment. The promotions have however gone down as a cost-cutting strategy.
Uber’s strategy for maintaining its customers is making sure its services remain reliable and that itself is a marketing strategy as most of the uber’s customers are referrals.
Uber just like any other business has had its fair share of scandals such as the DeleteUber campaign which has reduced its market share which is still relatively high.
There are also new services that are a threat to Uber such as Lyft. This apps especially get a stronger font when Uber gets involved in a scandal. Upon comparison of the two, Uber still takes the lead as Lyft only has a market share of 28%.[/vc_column_text][vc_custom_heading text=“Uber Expansion“ font_container=“tag:h3|font_size:16|text_align:left|color:%23000000|line_height:6″ google_fonts=“font_family:Comfortaa%3A300%2Cregular%2C700|font_style:700%20bold%20regular%3A700%3Anormal“][vc_column_text css=“.vc_custom_1552693274576{padding-right: 10% !important;}“]Since it started, Uber has faced aggressive expansion. It started off doing two cities and in three years it was in more than 150 cities. It has spent a lot of money in capturing the global markets. Some of its strategies in expanding to new markets included: giving high commissions to drivers, giving incentives, focusing on sales and marketing. Those have also been the main costs including insurance and operating expense costs. When expanding to a new market, Uber has to spend a lot of money to attract both new drivers and users which makes it lose a huge amount of money. That led to both bad contribution and revenue margins of which in this case contribution margin accounts for all the direct costs in the certain area. Some areas were definitely more expensive than others, for example, the Chinese market. The Chinese market was a hard nut for Uber since it did not have experience dealing with the Asian market and hence it had to invest in trying to overcome entry barriers and attracting users.
Since 2016, Uber decided to exit challenging markets and focus on core markets. That made it exist in the southeast Asia market because of the challenges and the high competition. This has helped Uber as its profits have gone up from $2B to $2.5B.
The reason for high expansion costs is also due t the fact that once Uber expands to a different market, it becomes more on its own since every location has different regulations, needs, and cultures. That poses a big challenge to Uber.[/vc_column_text][vc_custom_heading text=“Regulation costs“ font_container=“tag:h3|font_size:16|text_align:left|color:%23000000|line_height:6″ google_fonts=“font_family:Comfortaa%3A300%2Cregular%2C700|font_style:700%20bold%20regular%3A700%3Anormal“][vc_column_text css=“.vc_custom_1552693313556{padding-right: 10% !important;}“]In as much as Uber acts as an intermediary company with no physical assets, expanding to a new city is still not the easiest as it has to do a lot of background check. Normally it goes for a location that has restrictive transport regulations. That s due to the fact that Uber has had a lot of legal problems already. The regulations in the European and Asian market have not been the easiest for Uber. For example, in Germany, it was faced in a situation where it had to make sure that every driver had a commercial driving license. There have been cases where Uber drivers have been imprisoned and their cars impounded and Uber had to foot the bill for that. That has been a major setback for Uber in terms of cost. In some cases, it has had to spend on diplomatic measure so as to make sure that it is on the same page with the local authorities in that location.[/vc_column_text][vc_custom_heading text=“Ubers revenue“ font_container=“tag:h3|font_size:16|text_align:left|color:%23000000|line_height:6″ google_fonts=“font_family:Comfortaa%3A300%2Cregular%2C700|font_style:700%20bold%20regular%3A700%3Anormal“][vc_column_text css=“.vc_custom_1552693313556{padding-right: 10% !important;}“]In as much as Uber acts as an intermediary company with no physical assets, expanding to a new city is still not the easiest as it has to do a lot of background check. Normally it goes for a location that has restrictive transport regulations. That s due to the fact that Uber has had a lot of legal problems already. The regulations in the European and Asian market have not been the easiest for Uber. For example, in Germany, it was faced in a situation where it had to make sure that every driver had a commercial driving license. There have been cases where Uber drivers have been imprisoned and their cars impounded and Uber had to foot the bill for that. That has been a major setback for Uber in terms of cost. In some cases, it has had to spend on diplomatic measure so as to make sure that it is on the same page with the local authorities in that location.[/vc_column_text][vc_custom_heading text=“Ride rates“ font_container=“tag:h3|font_size:16|text_align:left|color:%23000000|line_height:6″ google_fonts=“font_family:Comfortaa%3A300%2Cregular%2C700|font_style:700%20bold%20regular%3A700%3Anormal“][vc_column_text css=“.vc_custom_1552693398563{padding-right: 10% !important;}“]There are many factors that influence the costs of a ride such as the distance, time of the day, time spent, location and personal profile. There is a variable base rate that covers the distance and the tax rate. There is an average of 70% that goes to the driver and the rest goes to the company. The 30% commission that Uber charges is what it used to cover all its expenses plus revenue. There are however surge rates that are determined by the demand.
Uber Black
This was the first series of cars that were there before UberX. Currently uber black contributes a marginal percentage of the total revenue and volume of Uber. As much as it offers premium luxury transportation, it has higher costs. The costs are brought about by the fact that in some cities their drivers have to have commercial driver’s licenses and also the cost of running those cars are expensive. Its demand is low since the inception of UberX. The fall in demand made the rates to also go down.
Uber X
This is like the cheapest uber. This has made it be used by more than 80% of users. It attracted many users as it is generally cheaper than hailing any other cab. This is the main contributor to Uber’s growth. The price of a ride is based on the metro area’s base rate, the distance and time rate and any taxes and fees. There is a minimum charge in case the ride falls below the minimum fare threshold. Normally the base rates and minimum taxes are higher in big cities with more traffic. The fact that UberX offers a low price to users, it also means that it gives a relatively lower payout to drivers.
Uber Pool
This is the latest option of uber giving users the chance to carpool. The charges are influenced by the number of people in the car. In as much as it is cheap for users, it is a good concept for Uber as it enables them to earn more revenue per trip. Uber pool is a good concept but, in some markets, it is taking longer to be embraced. In 2016 alone, only up to 2015 of uber rides were uber pool. Pool is a good strategy of cutting down the costs but the marketing bit is what needs more energy into it.
Uber eats
This is the latest and is a food delivery app. It has been reported to the fastest growing and most profitable within uber. What has contributed to its success is that people love the convenience of things being delivered to them while Uber has a network of drivers. With uber eats, users can be able to order food from a restaurant for a short delivery time of between 20 minutes to an hour. According to uber, Uber eats alone generates up to 15% of the total revenue.
Not only does uber eats get revenue from the customer and the rider but it also gets 30% as a commission from the restaurant. The delivery fee for a user is based on the distance that will be covered. Uber eats mainly uses uber pool to cut down on the costs. If there are several customers, it will be treated as a batched order meaning the price will generally be lower. As much as it is a lower price to the customer, it is still more revenue for Uber.
What has also given Uber eats a competitive edge is the fact that not all restaurants are able to afford enough riders for delivery. So, in a way, it helps the restaurant business to grow as well.[/vc_column_text][/vc_column][/vc_row][vc_row type=“full_width_background“ full_screen_row_position=“middle“ equal_height=“yes“ content_placement=“middle“ scene_position=“center“ text_color=“dark“ text_align=“left“ top_padding=“1%“ bottom_padding=“2%“ overlay_strength=“0.3″ shape_divider_position=“bottom“ bg_image_animation=“none“ shape_type=““][vc_column column_padding=“no-extra-padding“ column_padding_position=“all“ background_color_opacity=“1″ background_hover_color_opacity=“1″ column_link_target=“_self“ column_shadow=“none“ column_border_radius=“none“ width=“1/2″ tablet_width_inherit=“default“ tablet_text_alignment=“default“ phone_text_alignment=“default“ column_border_width=“none“ column_border_style=“solid“ bg_image_animation=“none“ offset=“vc_col-xs-12″][image_with_animation image_url=“14903″ alignment=““ animation=“Grow In“ border_radius=“none“ box_shadow=“medium_depth“ max_width=“100%“][/vc_column][vc_column column_padding=“no-extra-padding“ column_padding_position=“all“ background_color_opacity=“1″ background_hover_color_opacity=“1″ column_link_target=“_self“ column_shadow=“none“ column_border_radius=“none“ width=“1/12″ tablet_width_inherit=“default“ tablet_text_alignment=“default“ phone_text_alignment=“default“ column_border_width=“none“ column_border_style=“solid“ bg_image_animation=“none“ offset=“vc_col-xs-12″][/vc_column][vc_column column_padding=“no-extra-padding“ column_padding_position=“all“ background_color_opacity=“1″ background_hover_color_opacity=“1″ column_link_target=“_self“ column_shadow=“none“ column_border_radius=“none“ width=“5/12″ tablet_width_inherit=“default“ tablet_text_alignment=“default“ phone_text_alignment=“default“ column_border_width=“none“ column_border_style=“solid“ bg_image_animation=“none“ offset=“vc_col-xs-12″][vc_row_inner column_margin=“default“ text_align=“left“][vc_column_inner column_padding=“no-extra-padding“ column_padding_position=“all“ background_color_opacity=“1″ background_hover_color_opacity=“1″ column_shadow=“none“ column_border_radius=“none“ column_link_target=“_self“ width=“1/1″ tablet_width_inherit=“default“ column_border_width=“none“ column_border_style=“solid“ bg_image_animation=“none“ enable_animation=“true“ animation=“fade-in-from-bottom“][vc_custom_heading text=“Koks sprendimas yra geriausias trišalių – bendrovės, agento (arba pardavėjo) bei kliento – santykių kontekste?“ font_container=“tag:h3|text_align:left|color:rgba(0%2C0%2C0%2C0.75)“ use_theme_fonts=“yes“ css_animation=“none“][/vc_column_inner][/vc_row_inner][vc_row_inner column_margin=“default“ text_align=“left“][vc_column_inner column_padding=“no-extra-padding“ column_padding_position=“all“ background_color_opacity=“1″ background_hover_color_opacity=“1″ column_shadow=“none“ column_border_radius=“none“ column_link_target=“_self“ width=“1/1″ tablet_width_inherit=“default“ column_border_width=“none“ column_border_style=“solid“ bg_image_animation=“none“ enable_animation=“true“ animation=“fade-in-from-bottom“ delay=“50″][/vc_column_inner][/vc_row_inner][/vc_column][/vc_row][vc_row type=“in_container“ full_screen_row_position=“middle“ scene_position=“center“ text_color=“dark“ text_align=“left“ overlay_strength=“0.3″ shape_divider_position=“bottom“ bg_image_animation=“none“][vc_column column_padding=“no-extra-padding“ column_padding_position=“all“ background_color_opacity=“1″ background_hover_color_opacity=“1″ column_link_target=“_self“ column_shadow=“none“ column_border_radius=“none“ width=“1/1″ tablet_width_inherit=“default“ tablet_text_alignment=“default“ phone_text_alignment=“default“ column_border_width=“none“ column_border_style=“solid“ bg_image_animation=“none“][vc_custom_heading text=“Revenue alternatives“ font_container=“tag:h3|font_size:16|text_align:left|color:%23000000|line_height:6″ google_fonts=“font_family:Comfortaa%3A300%2Cregular%2C700|font_style:700%20bold%20regular%3A700%3Anormal“][vc_column_text css=“.vc_custom_1552693474234{padding-right: 10% !important;}“]Just like any other company, Uber also has revenue-generating strategies. Its bet is in scooters and autonomous vehicles. In 2018, it acquired a dockless bike startup for a value of up to $200M. Its strategy in taking bikes is due to the fact that bikes are less expensive than cars meaning it should be way cheaper. For the company, the profits may not be as high but it may be able to scale on the numbers.
For autonomous cars is the fact that they offer a moving fleet of cars without the cost of drivers which can cut down the costs for up to 80%. Uber has already done a test with that and the future is bright[/vc_column_text][vc_custom_heading text=“Uber’s revenue distribution“ font_container=“tag:h3|font_size:16|text_align:left|color:%23000000|line_height:6″ google_fonts=“font_family:Comfortaa%3A300%2Cregular%2C700|font_style:700%20bold%20regular%3A700%3Anormal“][vc_column_text css=“.vc_custom_1552693508681{padding-right: 10% !important;}“]As much as Uber is generating a lot of money, not all geographical areas are the same. Most of the time it prospered in urban and suburban areas. Areas that have a high potential for Uber are areas that: have high unemployment rates as uber creates labor, has poor public transport as uber gives a good alternative and have a high degree of urban sprawl.
Uber’s strong markets are North America and Europe. This is because there is a high degree of urban sprawl and most of the population are middle class with high disposable income. Uber also concentrated in building a stronger brand in those areas.
Since uber has had a strong font in the urban areas of American cities, it has been easy for it to expand to the suburban and rural areas.[/vc_column_text][vc_custom_heading text=“Uber’s market position and profitability“ font_container=“tag:h3|font_size:16|text_align:left|color:%23000000|line_height:6″ google_fonts=“font_family:Comfortaa%3A300%2Cregular%2C700|font_style:700%20bold%20regular%3A700%3Anormal“][vc_column_text css=“.vc_custom_1552693543237{padding-right: 10% !important;}“]Profitability is all about costs and revenues. There can be two twists when it comes to Uber’ story. The first one being the fact that Uber has to work hard to achieve dominance in the market. And the second one the fact that uber is slowly building a network that will be worth more in the future.
Contribution margin
This is a measure of revenue and variable costs. Many startups when looking for profitability rule out fixed costs as they tend to rise with time and may raise more than revenue. The contribution margin is dependent on the market. For uber, the contribution margin profitability has been on the rise since the service basic economic is profitable.
What gave uber a strong frontier is the fact that the revenue it was generating from its new and existing customers was more than what it was losing from those exiting the app. That means that those who have ever used the app are more likely to use the app again.
Competition
Uber has faced a lot of competition since its drivers are not its employees rather independent contractors. That means that they can use any other taxi-hailing app at a time or they can exit the app at any time. In order to deal with competition, it has had to do scaling so as to remain relevant in the market. It has, therefore, had to lower prices when other apps lower prices since many end users care more about prices. It has also had to have surge prices in order to keep more drivers on its platform. That is how it has been able to deal with Lyft which is like its main competitor.[/vc_column_text][vc_custom_heading text=“Conclusion“ font_container=“tag:h3|font_size:16|text_align:left|color:%23000000|line_height:6″ google_fonts=“font_family:Comfortaa%3A300%2Cregular%2C700|font_style:700%20bold%20regular%3A700%3Anormal“][vc_column_text css=“.vc_custom_1552693583719{padding-right: 10% !important;}“]Uber is working on different strategies so as to remain relevant. Competition is not something that we can do away with completely since there are new innovations coming up every day. Some of the strategies it is using include:
Scooters: They are fairly common in some areas of the world. They will give convenience as users don’t have to necessarily use cars. It is much cheaper than UberX and users who are very tight on a budget can afford it.
Uber Eats: it is a meal delivery service that is growing very fast in the US. As mentioned, before it is very profitable for uber as it accounts for up to 15% of the profits. Not only does it act as a complimentary service to uber but is a strategy for driver retention. It means that they have more work as they can either do Uber or Uber eats.
The position of the investors has a lot of bearing on Uber as a company. It is up to the company to find ways it cut down on costs further and increase revenues. Its success in the future is influenced mainly by this as profitability is what will keep it in business. It is also its responsibility to be creative to make drivers stay rather than coming up with new incentives every day that is costly for the company. Maybe delivery, carpooling, using scooters and autonomous cars is what will be the game changer for Uber.[/vc_column_text][/vc_column][/vc_row][vc_row type=“full_width_content“ full_screen_row_position=“middle“ scene_position=“center“ text_color=“dark“ text_align=“left“ top_padding=“3%“ bottom_padding=“3%“ overlay_strength=“0.3″ shape_divider_position=“bottom“ bg_image_animation=“none“ shape_type=““][vc_column column_padding=“no-extra-padding“ column_padding_position=“all“ background_color_opacity=“1″ background_hover_color_opacity=“1″ column_link_target=“_self“ column_shadow=“none“ column_border_radius=“none“ width=“1/1″ tablet_width_inherit=“default“ tablet_text_alignment=“default“ phone_text_alignment=“default“ column_border_width=“none“ column_border_style=“solid“ bg_image_animation=“none“][vc_column_text css=“.vc_custom_1552693994535{margin-top: 60px !important;margin-bottom: 60px !important;}“]

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