In this blog we will answer the question “How Does Uber Make Money?”We will also discuss the business model of uber as well as the services it offers. If you are interested in the topic then keep on reading.

How Does Uber Make Money?

Uber generates money by providing transportation services to its clients. As a result, Uber receives a portion of the income generated. The corporation also has a food and delivery business, which includes UberEats, as well as a freight shipping operation.

What is Uber?

Uber, sometimes known as Uber Technologies, is a mobility firm established in San Francisco, California, that provides a ride-hailing service to its customers. The company has offices in more than 900 places throughout the globe.

Among the company’s services are vehicle hailing, food delivery via Uber Eats and Postmates as well as package delivery, courier services, freight transportation, electric bicycles, and motorized scooters. This is made possible via a partnership with Lime and Ferry transportation companies.

Uber does not own any of its vehicles and instead collects around 25 percent of all money generated by its customers.

Customers are informed of the fare in advance, but the company uses a very dynamic pricing technique that depends on supply and demand at the time the client buys a trip to determine the price.

Uber has more than 100 million active users as of the second quarter of 2021, according to the company. When it comes to the food delivery business, Uber has a market share of 68 percent in the United States and a 26 percent market share in Canada.

With its widespread usage in the sharing economy, Uber has become so well-known that it has been nicknamed “uberisation,” which refers to the process of commoditizing service industries via the use of computer platforms. New entrants to the service-based company market are commoditizing old businesses via the use of computer-based platforms, which is referred to as “uberization.”

Uber, like other companies in the industry, has been criticized for how it treats its drivers and employees. The company has been reprimanded for generating traffic bottlenecks and participating in other unethical behavior in the community.

Facts about Uber

Former Name of the companyUbercab
Current Name of the companyUber
TypePublic
IndustryTransportation as a service
Founded inMarch of 2009
FounderGarrett CampTravis Kalanick
Headquarters of UberSan Francisco, California, U.S.
Area served900 Metropolitan areas
Key People of UberRonald Sugar (Chairman)Dara Khosrowshahi (CEO)Nelson Chai (CFO)Tony West (CLO)
Products of UberMobile App, website
Services offered by UberVehicle for hireFood deliveryPackage deliveryCourierFreight transport
RevenueUS$11.139 billion
Operating IncomeUS$-4.863 billion
Net incomeUS$-6.768 billion
Total AssetsUS$33.252 billion
Total EquityUS$12.967 billion
Number of Employees26,900
SubsidiariesCareemCornershopJumpPostmatesUber EatsZomato
Link to official Websitewww.uber.com

Uber Business Model

In this business approach, forging collaborations and allowing partners to function under Uber is more important than developing and extending the service on its terms. However, Uber does not have any autos; rather, it is a network of taxi drivers who operate their vehicles but who are affiliated with the Uber brand.

However, although the actual service is provided by the partners, it ensures that the service criteria are met, that the taxis arrive on time, that they are clean, that they drive the appropriate route, and that the customer’s safety is ensured, among other suggestions to improve taxi service.

In addition to being a distinct business model, Uber’s business model is sometimes referred to as the Uber for X business model. In its most basic form, the business model is based on Passenger, driver and payment, let us discuss each of it in detail.

Passenger as the initiator

The service is requested by the passenger. A traveler who downloads the Mobile application may use it to book a taxi whenever he or she needs one. Clients who utilize online taxi services must feel comfortable and confident since the company is focused on the needs of the consumer. When this option is made available, it makes the process of developing loyalty and maintaining consumers much easier to complete.

The driver as the driver of the service

Drivers are critical to Uber’s business strategy, as seen below. To become an Uber driver, you must own a vehicle and have a valid driver’s license. Drivers are then chosen for consideration based on the results of their background checks. They are given Uber phones to contact customers.

Payments as the means of earning revenue

Bank cards, card payments, cash, and digital wallets are all accepted modes of payment for flying passengers. The total fee is determined by several criteria, including the kind of automobile, its location, the driver’s requirement, busy hours, weather conditions, and the driver’s distance traveled.

The Passenger Value Propositions of Uber are designed to guarantee that passengers spend as little time waiting as possible. It also offers lower costs than regular taxis and allows customers to watch the ETA as well as a feature that enables users to follow the Cab on a map, among other things.

Uber’s Driver Value Propositions

If you’re a driver, this offers up new opportunities for earning money. People are increasingly looking for payment options that are simple to use and that allows for flexible working hours and part-time jobs. While drivers are not paid for their online time, they are rewarded for the time they spend on the road.

How does Uber make money?

Uber is practically on par with any other taxi service in terms of cost. Uber’s business model, on the other hand, is unique from those of other ride-hailing companies.

Uber’s revenue strategy is commission-based, with the firm receiving around 25 percent of all sorts of fares. However, the cost of a trip varies depending on the location of the travel, the type of car used, and the type of service offered.

Riders and drivers are connected via Uber, which takes payments by credit cards and wallets and provides a user-friendly application that includes instructions and an expected arrival time. When it comes to costs, Uber charges between 20 percent and 25 percent of the trip rate, plus extra expenses such as safe ride fees, booking fees, and so forth. Furthermore, it is not the responsibility of drivers to determine the fee for a route.

Riders are compensated

In addition to typical taxi services, Uber’s business plan includes Uber Black, Uber ridesharing, Uber taxi, Uber X, and Uber SUV, among other services.

Uber charges a fee to its drivers for each travel they make when using any of these services. The amount of this fee is subtracted from the overall cost of the travel.

Uber also employs surge pricing to calculate how much the final price will cost you to ride. Customers will be required to pay additional costs during periods of excessive traffic, poor weather, public holidays, or high demand, among other things.

Uber’s pricing strategy is transparent, and consumers are notified in advance of any price increases that may occur. Uber’s Mobility division is in charge of the company’s primary ride-hailing service, which is called UberX. As the most profitable sector for Uber, it will contribute 55 percent of total income in 2020, a fall of 43.1 percent from the previous year. Segment-by-segment adjusted EBITDA data is provided by Uber for each segment.

Uber Freight operates as a transportation company.

Uber Freight is a logistics platform that links shippers and carriers. It was founded in 2010. Thousands of shippers and half a million truck drivers rely on the platform to help them save time and money throughout the whole shipping process.

Freight brokers, who act as a middleman in the transportation of goods, are often used by shipping companies to do business. These “Middle Men” serve as a link between businesses and drivers in return for a fee.

According to Uber, Uber Freight will generate more than 9 percent of the company’s total income in 2020. Despite this, it is rising at a pace of 38.3 percent every year on average. Uber Freight reduces the need for middlemen by connecting shippers and truck drivers directly.

Uber Eats is a food delivery service.

Uber Eats is a food delivery business that has the potential to be the most lucrative part of the corporation. In 2018, the firm achieved $7.9 billion in gross bookings, making it the biggest meal delivery company in the world outside of China.

An online-based meal delivery service, this company delivers meals to customers’ homes. It acts as a link between restaurants and prospective customers, facilitating communication.

Customers may place orders for meals from nearby eateries, which will be delivered right to their doorstep. Uber’s current driver network is being used to give value-added services to its passengers, which has made this sector successful. Uber charges a fee to restaurants for bringing in customers.

This fee is computed based on the total amount of the order. In addition, Uber charges a fee to food delivery drivers who utilize the company’s infrastructure. The delivery charge and the driver’s earnings are used to establish the cost for this item. Delivery of meals from more than 220,000 restaurants in more than 500 locations is made possible by Uber Eats, which depends on local drivers to make deliveries. In the fourth quarter of 2018, Uber Eats provided meals to more than 16 percent of the company’s active clientele.

In conclusion, we answered the question “How does Uber make money? “We found out that uber makes money by providing transportation services to its clients. As a result, Uber receives a portion of the income generated. The corporation also has a food and delivery business, which includes UberEats, as well as a freight shipping operation.

Frequently asked questions (FAQ): How does Uber make money

How does Uber earn profit?

As a result of a comeback in the ride-hailing industry and high demand in its delivery business, Uber Technologies reported its first profit as a publicly-traded company on an adjusted basis.

How much money does Uber make per ride?

A typical Uber driver will make about $11 each completed journey after paying all of their fees and Uber’s split. The higher your hourly pay, the more journeys you make in each hour. However, if there isn’t much going on at that hour, you may wind up waiting a long time for fares.

Why does Uber make no money?

In 2020, Uber and Lyft lost a lot of money. That’s hardly surprising, given that COVID-19 paralyzed several ride-hailing businesses, restricting demand for people to go about.

Is Uber losing money in 2021?

Uber expects a profit of $25 million to $75 million in the fourth quarter of 2021, adjusted.

Is Uber bigger than LYFT?

In November 2021, Uber sales were up 124 percent year over year and Lyft sales were up 101 percent year over year.

Does Ubereat pay for gas?

No, you will not get reimbursed for petrol. During tax season, however, the IRS credit is 48 cents per mile.

References

Bhasin, H. (2021, October 13). Business Model of Uber – How does Uber make Money? Retrieved from Marketing91: https://www.marketing91.com/business-model-of-uber/

What was missing from this post which could have made it better?

John has 22 years of experience in financial services. This spans across financial research, financial services (As a qualified mortgage broker and underwriter), financial trading and sales at global investment banks. While working as a publishing research analyst, he covered European bank credit and advised institutional clients on investment strategies at both JP Morgan and Societe Generale. John has passed all three levels of the CFA (Chartered Financial Analyst) programme.

John has 22 years of experience in financial services. This spans across financial research, financial services (As a qualified mortgage broker and underwriter), financial trading and sales at global investment banks. While working as a publishing research analyst, he covered European bank credit and advised institutional clients on investment strategies at both JP Morgan and Societe Generale. John has passed all three levels of the CFA (Chartered Financial Analyst) programme.