Biz Model for Uber Technologies Inc. A REAL-TIME RIDESHARING SERVICE AMBRE FISCHER | ARNAUD LEGRIS | CHRISTOPHER LAURENTIUS | JOYCE LIM | KEONG PEI QUAN | RAYMOND UNG Business models for other ride sharing companies such as Ola Cabs (http://www.slideshare.net/Funk97/presentations) and for different types of ride sharing such as multi-passenger ride sharing (http://www.slideshare.net/Funk97/presentations) can be found on my slide share accounts.
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Biz Model for Uber Technologies Inc.A REAL-TIME RIDESHARING SERVICE
A M B R E F I S C H ER | A R N AU D L E G R I S | C H R I STO P H ER L AU R E NT I U S | J OYCE L I M | K EO NG P E I Q UA N | R AY MOND U N G
Business models for other ride sharing companies such as Ola Cabs (http://www.slideshare.net/Funk97/presentations) and for different types of ride sharing such as multi-passenger ride sharing (http://www.slideshare.net/Funk97/presentations) can be found on my slide share accounts.
1. Background of taxi services and real-time ridesharing
2. What does Uber Technologies Inc do?
3. Value Proposition
4. Customers and Market
5. Value Capture
6. Competition
7. Strategic Control
8. Uber, an issue?
9. Improvements & Alternatives
10. Q&A
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Agenda
Background – Taxi Services
More convenient than other modes of public transport when going at a specific destination
Higher fees than other modes of public transport Fixed price based on base fare, distance, time, peak
hours/weekends & public holidays, advanced booking fees
Requires a government license to be a taxi driver
Car rented by the taxi operator
Taxis can be hired Hailing on the street
Waiting at specific taxi stations
For immediate booking by SMS, phone call, app
For advanced booking by phone call, apps
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1. Background of taxi services
2. What does Uber Technologies Inc do?
3. Value Proposition
4. Customers and Market
5. Value Capture
6. Competition
7. Strategic Control
8. Uber, an issue?
9. Improvements & Alternatives
10. Q&A
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Agenda
What does Uber Technologies Inc do?
Network Orchestrator, connecting passengers with drivers Manages a network of drivers and passengers through a phone application
Provides options and varieties in the transportation service
US 2013/0246207A1 (pending grant) System and Method for Dynamically Adjusting Prices
for Services
Pricing algorithm automatically detects situations of high demand and low supply and hikes the price in increments, depending on the scale of the shortage. Algorithm results in increased supply and reduced
demand.
“Through these two mechanisms, the company is able to (a) increase supply, (b) assure reliability, a key tenet of the company, and (c) maximize the number of completed rides.” – Bill Gurley, Uber investor and board member
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Source of image: Patent No: US 2013/0246207A1 by Uber Technologies Inc, System and Method for Dynamically Adjusting Prices for Services
E.g. prices to be changed if utilization rate falls below 60% or
above 80%; or demand and supply model that compares the number of drivers to passengers.
Price adjusted relative to a fixed price i.e. using a multiplier
Value Proposition – Surge Pricing: Patent Pending
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Value Proposition – Surge Pricing Example(1) Demand –Supply Equilibrium
$10
Normal Fare
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$10
Fare Increases
$15
Value Proposition – Surge Pricing Example(2) Demand > Supply
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$15
Fare Decreases$10
Value Proposition – Surge Pricing Example(3) Demand < Supply
1. Background of taxi services
2. What does Uber Technologies Inc do?
3. Value Proposition
4. Customers and Market
5. Value Capture
6. Competition
7. Strategic Control
8. Uber, an issue?
9. Improvements & Alternatives
10. Q&A
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Agenda
So who do you think are Uber’s customers?
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1) Drivers 2) Passengers 3) Both?
Source: Google Search Definitions
Uber’s definition of customer:
Individuals requesting or ordering an on-demand service, where a service provider refers to individuals or entities that can provide the requested service e.g. car/taxi service.
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Passenger Uber Driver$$$ Commission
CUSTOMERPaying for the service (transportation)
PARTNERSComplementary Service Provider, NOT customer
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Customer Segments (by needs)
I want a ride (Taxi, UberX, UberTaxi, Lyft)
I want a luxury ride (Limousine Taxi, UberBlack)
I’m willing to pay more to get a ride NOW (UberX, Lyft) I want the highest probability of getting a ride
I want a taxi NOW
I want to share the ride to reduce cost (UberPool)
I want a scheduled ride (Taxi)
I want a consistent good user experience (Uber, Lyft)
Key Differentiators between the different options:
Price
Time
User experience
Options
EARLY ADOPTERS
Tech-Savvy Users
Smartphone Users
Users who value time People who appreciates having a ride confirmation
shortly after the need arises
Users with (limited) spending power. They are either People who wish to save money but still get the
convenience or
They have the power to hail a ride at any price
EXAMPLES OF CUSTOMERS
UberPool – Non-working group e.g. students, young adults
UberX – e.g. working adults, people in a rush
UberTaxi – e.g. the usual taxi passenger
UberBlack (Premium) – e.g. professionals, people who wish to show off
Both increases supply during high demand periods but the limit of Prime Time also means that comparatively, Uber partners would earn more during the same period if demand is extremely high.
Differences Surge Pricing: no cap (except for “abnormal disruption
of the market” – more on that later)
Prime Time: 200% price surge i.e. cap of 3x fare NYE 2014: 400% increase i.e. cap of 5x fare
The success of Uber’s Surge Pricing 2 million matched rides on NYE 2014 (worldwide)
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Source of image: http://blog.uber.com/cheersto2015
Competitive Analysis – Uber vs Lyft (2) Surge Pricing vs Prime Time
Competitive Analysis – Uber vs Lyft (3) Prices in different states
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$0.00
$0.50
$1.00
$1.50
$2.00
$2.50
$3.00
CO
ST
Source of image: Uber and Lyft websites
Overall Competitive Analysis
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0
1
2
3
4
5
6
AdvanceBooking
Law &Regulation
Hiring Method(User
Friendliness)
CashlessPayment
Fare Sharing Driver’s Flexibility
Go-to MarketCar Flexibility
UserExperience
RideInformation
RA
TIN
G
Strategy Canvas for Uber, Lyft and Taxi
Uber Taxi Lyft
Uber Taxi Lyft
Advance Booking 0 5 0
Law & Regulation 3 5 3
Hiring Method (User Friendliness) 5 3 5
Cashless Payment 5 3 5
Fare Sharing 5 3 5
Driver’s Flexibility 5 3 5
Go-to Market Car Flexibility 5 3 3
User Experience 5 3 5
Ride Information 5 3 5
1. Background of taxi services
2. What does Uber Technologies Inc do?
3. Value Proposition
4. Customers and Market
5. Value Capture
6. Competition
7. Strategic Control
8. Uber, an issue?
9. Improvements & Alternatives
10. Q&A
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Agenda
First mover advantage Accumulate a larger parnter installed base, and real-
time ridesharing apps thrive on the size of customer base
Barrier to entry Patent applications If granted, Uber will be the only company in this line of business to
have related patents
But most patents refer to business methods
Network Effects Customer
Partner
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Source of image: http://patentvue.com/2014/03/04/sidecar-and-uber-patent-portfolios-lead-the-ride-sharing-industry/
Source of image: http://www.taxi-deutschland.net/images/presse/Infografik_Uber-legal-issues_EN_v12_RGB_2015-02-06_final.jpg, used under the CC BY-SA 4.0 Intl Licence
Uber came under fire for the surge pricing algorithm during the events: Hurricane Sandy
(elsewhere) Sydney Hostage Siege
Capped surge pricing from Jan 2015 for “abnormal disruption of the market” events “If Uber puts surge pricing into effect during an abnormal disruption of the market, Uber will not set the price for
any transportation option above a multiple of the base fare to the determined…based on the prices set by Uber for the same transportation option…during the sixty days preceding the commencement of the abnormal disruption of the market. To determine the price cap for a transportation option in a city and surrounding area, Uber shall first identify the three highest prices it set, on different days…Price cap shall be the next highest price that was set for the same transportation option …not including the days on which the three highest prices were set.”
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i.e. If in the past 60 days, the 4 highest multipliers were 3x, 4x, 5x and 6x, Uber will charge a maximum of 3x the normal fare for such events.
1. Background of taxi services and real-time ridesharing
2. What does Uber Technologies Inc do?
3. Value Proposition
4. Customers and Market
5. Value Capture
6. Competition
7. Strategic Control
8. Uber, an issue?
9. Improvements & Alternatives
10. Q&A
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Agenda
UberGarage - Experimentation
UberFRESH & UberESSENTIALS Delivery lunch & various products
At an experiment stage
No delivery fee for Essentials fixed $3 fee for Fresh, no tips to the driver
Make money with product margin
Based on the same business model (drivers, app: location, payment, rating)
Create value to customers: convenient, very fast (10 minutes)
UberCARGO
UberRUSH
UberPOOL
Uber Business Reliable ride for your employees
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Improving Existing Business
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UBER
DRIVERS PASSENGERS
Extra Insurance Coverage
Uber Mobile App ProtectionDriver/Rider Preference
Incentive Program
Alternative Business Models – Customer Segments
UberAlternate Similar to UberX but using other forms of transport
e.g. bicycles or motorbikes.
Target segment: Passengers in developing countries / countries where public transport is not well established
UberAlternateX High end luxury transport
Target segment: Niche segment: luxury
Available for high end car
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Alternative Business Models – Customer Segments
UberTour UberX for tourist attractions within the city/country
Planning of ride itinerary and following available tour vehicles
Target segment: Tourists with their own (flexible) itinerary
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Alternative Business Models – Value Capture
UberCredits Passenger can buy $100 of UberCredits and be rewarded with an extra $20.
Entice more passengers to use Uber, which will increase demand and make drivers happy.
UberAdvertising Advertisements on the app and within the car
Advertising revenue
In the Future (10-15 years)....
Driverless Uber Use driverless car, when driverless car is available & legalized
Uber Next Predict the need of a ride based on data, schedule, etc
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Alternative Business Models – Long Term
Lastly, if anyone is interested…. Apply now through: https://www.uber.com/jobs/54600/apply?gh_jid=54600
In San Francisco, there can a high number of requesters at a certain time where transportation services are requested so that there is a spike in demand, while supply remains the same.
In comparison, in a nearby city, such as San Jose, there is no spike in demand for the transportation services or food services at the same time.
Due to the limited availability (e.g., inventory) of drivers and vehicles, the system can adjust the price for the service (e.g., increase the cost) for the requesters in San Francisco (or to requesters in a region within San Francisco).
For those requesters and service providers, the price for the particular service can be adjusted (e.g., increased), while the price (e.g., the default price value) for other requesters and services providers in other areas remains the same. The parsed data can also be stored in one of the system databases, such as a pricing data database, so that the price adjustment can retrieve previously parsed data at different times.
Data is stored in appropriate system databases so that a historical record can be maintained. The historical record can include requester data and provider data received at particular dates and times previously received.
In some examples, the historical data can also be used to approximate the amount of requesters and the amount of service providers at a particular geographic region at a certain time and/or date.
In this manner, information can be collected, stored, and maintained for future use (e.g., for price adjustment at a later time or for predicting future supply and demand for the service).
For example, the data collected on Friday evenings can be useful in predicting supply and demand for future Friday evenings (e.g., can be used to determine trends). Forecasting future spikes in demand, for example, can be useful in making sure a sufficient amount of service providers are available at the future time to meet the high demands.
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Source of image: Patent No: US 2013/0246207A1 by Uber Technologies Inc, System and Method for Dynamically Adjusting Prices for Services
Backup Slide: Surge Pricing System
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Source of image: Patent No: US 2013/0246207A1 by Uber Technologies Inc, System and Method for Dynamically Adjusting Prices for Services