Uber is one of the most divisive and controversial brands to emerge from the sharing economy and the aftermath of the global economic crisis, causing disruption to urban transportation, including taxi firms and car rental players. The question is can the brand survive the ride-share storm and transform itself into a business that local governments want to actively promote and nurture, rather than stamp out completely?
Riding fast and furious
Despite the controversy it causes, Uber – a taxi and ride share app, founded in San Francisco in 2009 – has gone from strength to strength. By the end of 2014, the company was valued at US$40 billion, following a new round of fundraising, with it doubling its worth in just six months. Uber now has a value several times higher than that of traditional car rental players, such as Hertz and Avis, and even that of some airlines, according to the Financial Times.
Since starting its international expansion in 2011, Uber has proliferated across the world and operates in 250 cities in 53 countries as of early 2015. Its reach is impressive: in terms of app downloads, the company reached the number one rank in 79 countries (January 2015) and was the most popular travel app in the US in 2014, according to App Annie.
Uber may just be one of many rideshare apps, with competitors including ZipCar, Lyft, Blablacar and Hailo, amongst others. However, Uber has become synonymous with car sharing, in the same way that Airbnb has with private rentals.
Car sharing brands have benefited from a convergence of trends, stemming from the rise in peer-to-peer services, rising urbanisation and a decline in car ownership, a move towards mobile travel, and the importance of social reviews and online communities.
Car ownership is on the wane in developed markets, having peaked in the boom year of 2007 before the global economic crisis. New car registrations in Western Europe and North America are falling, while passenger cars in use in North America were in perpetual decline over 2007-2014.
Key Car Metrics 2007-2014
Source: Euromonitor International
No such thing as bad publicity?
There are many claims levied against Uber, especially regarding the legality of the company, which has led to outright bans on a countrywide level in Spain, Thailand and the Netherlands and at individual city level in the likes of Brussels. In Delhi, there was a high-profile alleged rape of a female passenger by an Uber taxi driver in December 2014, which has led to a state ban on taxi apps.
The company faces ongoing lawsuits across the world, even in its home town of San Francisco, particularly concerning the peer-to-peer carpooling side of its business, UberPOP, due to the unlicensed nature of its drivers. France banned UberPOP from 1 January 2015, while the brand has seen its temporary injunction lifted in Germany.
The taxi industry has not taken lightly to Uber’s incursion, and protests by angry taxi drivers have been witnessed in major cities including London, Paris and Seoul, with the latter even being a self-proclaimed “Sharing City”.
Governments have taken issue with Uber’s business model because of claims that it encourages the black economy in the form of tax avoidance, lack of regulation, fraud, unregulated payments and a lack of consumer protection, to name but a few. The case against the company has not been helped by recent headlines about a dirty tricks campaign directed at journalists.
In the company’s defence, Uber says that it fights for the liberalisation of anti-competitive taxi markets, creates jobs, reduces car ownership, thus supporting the sustainable urban economy, and opens up services to lower middle-income groups.
Finding legitimacy through partnerships
Despite the tailwinds against it, Uber continues to draw investors such as Google and Goldman Sachs, so how will it survive such a bumpy ride in the medium term?
One way to ensure survival is to make the brand sticky. Uber, thanks to its API, has been very active in establishing partnerships through its affiliate programme with iconic global brands. According to the Uber blog, ‘any app with a map’ is a potential partner, which creates a very extensive reach for the company to become part of the fabric of modern day life.
Uber partners to date include Starbucks, airlines like United, hotels such as Hyatt, TripAdvisor, and OpenTable, which is owned by Priceline. One very interesting development is the move into managed business travel, with partnerships with Expensify, Concur and TripCase by Sabre. Through its alliance with Concur and the like, Uber claims to save businesses US$1,500 per employee for expense-related rides.
Uber is also one of the brands lined up to be launched on Apple Watch, which is set to take wearable technology to the masses later in 2015 and is expected to cause a step-change in the acceptance of contactless mobile payments, which again is likely to work in Uber’s favour.
How to win friends and influence people
If Uber is to ride out the storm, it needs to strike a more conciliatory approach with local governments, which means being part of the urban transport solution rather than being deemed to be a problem.
One way is to become more involved with the integrated transport solution in key urban areas, and Uberpool is an interesting concept that will help endear Uber services to local regulators in a bid to reduce congestion and pollution. Uberpool is where Uber algorithms match passengers travelling on a similar route and pair them up together in one car to split the cost, rather than them hailing separate rides. CNN reports this will allow passengers to share rides, enjoying fares of up to 40% less than usual, with the company claiming that one million cars will be taken off the streets of New York as a result of more efficiencies gained. The service has already been launched in San Francisco and New York, so regulators should be watching its progress carefully to view the impact of such innovative technology.
Following the Delhi rape allegation, Uber could embrace women’s rights in India as part of its corporate social responsibility strategy to promote equality and highlight the importance of women and children’s safety. As a first step, this could take the form of a women-only Uber brand, driven by women for female passengers.
With Uber’s vast war chest, the company could make vertical or horizontal acquisitions so that it moves up or along the distribution chain. For example, it could purchase ground transportation companies, or buy up car rental brands or even a car manufacturer, which would mark a significant role reversal compared to Avis’s acquisition of ZipCar. A more likely scenario is that Uber will focus on improving its B2B technology so that it becomes more embedded in the travel and leisure industries, building on its existing affiliate partner programme.
In the short term, it is not likely that we will see Uber folding or going Uber and out, but one thing that the global economic crisis has taught us is that no company is too big to fail.