From San Francisco to International Disruption
Silicon Valley entrepreneurs Garrett Camp and Travis Kalanick had a big year in 2007. Garrett Camp had completed the sale of StumbleUpon to eBay and Travis Kalanick had sold Red Swoosh to Akamai Technologies. In December 2008, the two found themselves in Paris for the annual LeWeb conference for startups and web entrepreneurs (Kalanick).
“What’s next?” That was the question both were asking themselves. In a blog posting, Travis Kalanick wrote, “Garrett’s big idea was cracking the horrible taxi problem in San Francisco — getting stranded on the streets of San Francisco is familiar territory for any San Franciscan.” The conversation between the two co-founders marked the conceptual founding of Uber.
The initial vision to address the “taxi problem” involved connecting passengers with drivers using mobile technology. Over the next several months, Camp worked with a small team on a prototype for a mobile application. Travis Kalanick joined in 2009 to assist in guiding the initial product launch, which involved building up a network of drivers and refining the business model. In June 2010, 18 months after the founders began discussing the idea in Paris, Uber officially launched in the San Francisco market as a disruptive, mobile technology enabled alternative to the traditional taxi and transportation options available.
Leveraging Mobile Technology
Mobile technology has been a source of disruption in many industries. Prior to the launch of Uber, the taxi industry operated without major threats for decades. Uber leveraged mobile technology to disrupt the long-established taxi industry by offering an alternative that excels in providing convenience for passengers. Since its launch, Uber has continued to enhance the functionality of its mobile application, incorporating the latest in mobile technology to further improve the experience for its users. Using the power of mobile, Uber has been able to offer consumers several distinct advantages, including:
- Quick and reliable ride booking – GPS and mapping technology
- Transaction convenience and simplicity – Mobile Payments
- Driver Feedback Enables Improved Experience
Quick and Reliable Ride Booking - GPS and Mapping Technology
After downloading the application and setting up an account, users can easily book a ride through the mobile application with a couple of taps. GPS makes the Uber application location aware, which eliminates the need for passengers to manually type in or communicate their current location. Before and after booking a ride, users can view the location of Uber drivers in the area. Sophisticated algorithms, GPS, and mapping technology allow Uber to quickly match passengers with a nearby driver and provide real-time estimates for pickup times.
Transaction Convenience - Mobile Payments
The mobile application was also used to simplify the transaction process. Users attach a credit card to their account as part of the sign-up process, which eliminates the transfer of cash. The transaction is further streamlined by a pricing structure that builds the fare and tip into a single price point. In April 2012, Uber further streamlined the transaction related process by incorporating Card.io technology to simplify sign-up. Card.io allows the Uber application to read credit cards by placing them in front of the phone’s camera, instead of having users manually type in their credit card information (Perez).
Driver Feedback Enables Improved Experience
In addition to offering superior convenience, the Uber mobile application provides functionality for passengers to rate their satisfaction after each trip, as well as offer up any additional feedback. This functionality allows Uber to manage the quality of its drivers, ensure drivers are meeting standards, and manage the customer experience as a whole.
Uber was the first major player in the mobile on-demand transportation space, but new mobile players have been quick to enter to offer customers with additional options when contemplating the question “Who do I contact for a ride?” Among Uber’s most notable new competitors are Lyft, Sidecar, and Flywheel. Lyft and Sidecar each entered the market with peer-to-peer mobile ridesharing applications. All of these companies share a common characteristic in that they provide an alternative to the traditional taxi cab industry, which remains Uber’s primary competition. Among the newer entrants, Uber is the clear leader right now in this space.
|Available Locally, Expanding Globally||Your friend with a car||A better way to get around|
(view updated location list)
|Atlanta, Boston, Chicago, Indianapolis, Los Angeles, Phoenix, San Diego, San Francisco, Seattle, St. Paul, Washington D.C
(view updated location list)
|Boston, Charlotte, Chicago, Los Angeles, San Diego, San Francisco, Seattle, Washington D.C|
|Base Fare + Per Minute + Per Mile (amounts vary by city and demand)||After each ride, a suggested donation is displayed|
|Credit Card attached to the User’s Account|
In recognition of the threat posed by second movers into the market, Uber has been aggressive with its growth both domestically and internationally. Since launching in 2010, Uber has expanded its reach to include cities in 26 different countries. Uber’s expansion has been met both with excitement and major blocks resulting from lawsuits, technological limitations and government regulation.
Funding the Expansion
To fuel its growth, Uber has raised over $300 million in capital through multiple rounds of funding (CrunchBase - Uber).
|$200,000 was invested by co-founders Garrett Camp and Travis Kalanick.||$1.25 million raised from various investors.||$11 million was raised, placing the pre-money valuation of Uber at $49 million||$37 million raised from various investors, including Amazon founder Jeff Bezos||$258 million was raised, led by Google Ventures. Series C funding put Uber’s pre-money valuation at $3.4 billion.|
Product and Service Changes
As Uber has grown, the company has adapted and enhanced its mobile application and service offerings over time based on input from users, key learnings, and technological advancements. Specific adaptations have been required in order to support international growth, a priority for Uber.
Device Compatibility: When Uber first launched, it was available exclusively on the iPhone. Four months later, Uber launched an Android application and in September 2013, Uber officially launched its first native BlackBerry app (Mina). This multi-system support is key to Uber’s ability to maximize the growth of its domestic and international user base. Many countries in Asia, a market in which Uber hopes to expand, the have lower numbers of smartphones in circulation. In response, Uber adapted their business model to allow SMS messaging as a way to use their services, but hesitates to invest significant resources to expand this as the use of an app is preferred. This is likely to become less of a problem in the future as smartphone usage continues to grow at a fast rate (Milian).
Cultural Adaptations - Localization: Expanding internationally has involved a series of changes to the mobile application and business model in order to localize it to the market and culture. Most obviously, Uber has had to make changes to accommodate different languages, currencies, and distance measures (e.g. miles vs. kilometers). International expansion requires must more than this however.
Travis Kalanick wrote about Uber’s international expansion in a blog posting: “As we started expanding, it became clear that individual cities were the unique factor in our launches. Each city is unique in its transportation pain points, its density, its transportation alternatives, regulation, even its transportation culture.” (Kalanick, We’re Going Global With Big Funding)
In September 2013, Uber CEO Travis Kalanick announced a key hire to support Uber’s global vision. The company hired Ed Baker, the head of international growth at Facebook (Tam). In addition to bringing in experienced talent from the tech sector, Uber has hired locals in each market it expands to in order to help them adapt their product and service offerings to meet the needs of each market.
Mobile Payment Options: When Uber launched, one of its appeals involved the cash free transaction, which required users to setup a credit card on their account. In some countries however, such as Germany, credit-card adoption is much lower than it is in the United States. In response to this, Uber announced a deal in November 2013 with PayPal, the online payment service. The deal will allow Uber to offer an alternative payment option to users in select countries (Kucera), thereby continuing to broaden its base of potential users and enhancing its ability to expand internationally.
Mobile Connectivity Challenges: In some cities, mobile connectivity has proven to be less reliable than in others. Uber responded to this in July 2012 with an update to its mobile applications that introduced a new “Favorite Locations” feature. The feature allowed users to save pickup locations after requesting a ride, so that when connectivity problems cause delays in loading of maps, users can simply select from their location from a pre-saved list and proceed with requesting a ride (Uber IPhone App Update 1.0.48).
More Vehicle Options and Price Points: When the Uber concept originated, Garrett Camp envisioned providing users with access to drivers of luxury vehicles and limousines. By the time Uber actually launched, the network was composed mostly of “black car” vehicles, like Lincoln town car sedans. Over time, Uber has made changes to provide users with more options in terms of vehicle and price. Most notably was the recent introduction of UberX, a lower priced option that involves less luxurious vehicles. By offering a variety of options, Uber has been able to broaden the range of customers to whom it appeals.
Regulation and Legal Challenges
Uber has been pursued an aggressive growth strategy both domestically and internationally, but its successes have not come without several challenges. The company has battled against regulatory powers in many cities.
In Washington D.C., a proposed amendment to a taxi bill threatened to restrict Uber’s ability to charge competitive prices in 2012 (Wilhelm). In the same year, Uber was served with a cease and desist letter by the city of Boston (Weber). Uber has had similar challenges in San Francisco and several other cities. In many instances, the company has come out successful.
Vancouver and British Columbia set minimum fares or setting limitations for how frequently patrons can use the application. Uber responded in true start-up tech firm form using social media such as twitter, to leverage popular opinion to change government regulation. The e-mails and tweets have been effective not only causing change in regulations but also generating more attention and publicity for the company’s launch into each city (Abudheen).
Uber has also faced a number of legal actions against them not only from external figures, but also from within the industry. Other cab companies that exist in cities don’t want Uber to enter saying their wages create an unfair advantage for them and steal the existing work force. Internally cab drivers say they are cheated out of taxes which Uber claims are already included in the fare. Uber’s solution to this concern also is based on technology. Uber considers itself a technology platform, not a taxi company. Uber only provides the branding and platform for independent people create a small business using the technology. This absolves Uber of requiring them to pay anything as each individual cab driver sets their own wages (Streitfeld). Currently, Uber is classified as a taxi company not a technology platform, a ruling which Uber has appealed.
What is Next for Uber?
Uber’s branding and utilization of mobile technology has made its solution to transportation headaches more than successful. It has created a platform that has generated envy that displays itself in copycat competition and worried taxi companies trying to create regulation to shut them down. Uber is not a cab company, of merely an application that marries other popular technology apps and creations together. Uber’s global success is noteworthy and it seems there is no stop in sight.
By Yasmin Hyder | February 7, 2014 | IDSC 6050: Information Technology & Solutions
- Abudheen, Sainul K. "After Bangalore, Delhi & Hyderabad, online car hire service Uber expands to Chennai." 31 January 2014. techcircle.in. 2 February 2014.
- Arrington, Michael. "Huge Vote Of Confidence: Uber Raises $11 million From Benchmark Capital." 14 February 2011. TechCrunch. 3 February 2014.
- CrunchBase - Uber. n.d. CrunchBase. 5 February 2014.
- Kalanick, Travis. "Uber's Founding." 22 December 2010. Uber Blog. 2010 February 3.
- —. "We’re Going Global With Big Funding." 7 December 2011. Uber Blog. 3 February 2014.
- Kucera, Danielle. "PayPal Nabs Uber Partnership in Pursuit of Mobile Growth." 18 November 2013. Bloomberg. 3 February 2014.
- Milian, Mark. "Uber Steps on the Gas in Asia Expansion." 21 January 2014. Bloomberg. 1 February 2014.
- Mina. "Uber Is Now Available For BlackBerry 7!" 18 September 2013. Uber Blog. 1 February 2014.
- Perez, Sarah. "Uber Simplifies Sign Up Process: Just Hold Up Your Credit Card & You’re In!" 4 April 2012. TechCrunch. 2 February 2014.
- Streitfeld, David. "Rough Patch for Uber Service’s Challenge to Taxis." 26 January 2014. New York Times. 1 February 2014.
- Tam, Donna. "Uber hires former Google, Facebook, Klout executive." 3 September 2013. cnet. 1 February 2014.
- Uber IPhone App Update 1.0.48. 27 June 2011. Uber Blog. 3 February 2014.
- Weber, Harrison. "Uber under legal pressure from a city again, this time it’s Boston over GPS tech." 14 August 2012. The Next Web. 3 February 2014.
- Wilhelm, Alex. "The DC Council has unanimously passed a “legislative framework” that will keep Uber on the city’s roads." 5 December 2012. The Next Web. 3 February 2014.