Uber continues its global march, now available in 250 cities across 55 countries as of the end of February 2015. It is bullish in its expansion approach, releasing its app to consumers and dealing with local regulators after its consumer awareness campaign to promote downloads. Many view this business style as combative and the company courts controversy, facing bans, lawsuits, challenges and protests across the world from Seoul to San Francisco to Madrid.
Making money start-up style
Controversy has not dissuaded investors, who, following the company’s latest round of funding, valued the company at US$41.5 billion, not bad for a company that was set up five years ago. With its country penetration at 25%, and more than 150 more countries that it could potentially enter, investors clearly see a promising future for the taxi and ride-share app that matches drivers with riders at the lowest possible price.
Uber has low operating costs, being an app-based platform. It has invested heavily in its technology platform, and its algorithms work on demand prediction, matching supply and demand along with dynamic pricing, claiming to offer taxi fares up to 40% cheaper than traditional taxis. Its strategic focus is to drive efficiencies through building scale.
How does it make its money? As an aggregator, Uber takes 20% of fares paid by riders, with the rest going to its contractor drivers. Revenues were reported to be US$100 million in 2014, doubling every six months, and sales are forecast to be US$2 billion by end of 2015.
Many tech start-ups like Uber have enjoyed eye-watering valuations without even entering the public market, with Airbnb set to be valued at US$20 billion in its next round of funding. The question is why don’t these large private companies bite the bullet, and take the responsible path like Facebook and put themselves up for public and investor scrutiny? In the short term, Uber has hired heavyweights from the political and Silicon Valley community to help it navigate the major uphill challenges it faces, including political campaigning, privacy and safety.
Facing privacy concerns
Following comments made by an Uber director regarding journalists, there was a Senate inquiry into the company’s data privacy and management practices. The results of the inquiry by law firm Hogan Lovells on behalf of the company found that there was no misuse of geo-location data by the company.
The case raises an interesting point regarding technology companies that collect and store real-time geo-location consumer data, essentially tracking the whereabouts of users. After the inquiry, the company committed to the following changes – to delete user data when terminating accounts and to ensure that consumer data was anonymised so that the “god view” was not accessible to Uber employees.
Questions about safety
The company stresses that safety is paramount in “Uber’s mission of bringing safe, reliable transportation to everyone, everywhere”. It launched a #ThinkAndRide campaign against drink-driving with Mothers Against Drunk Driving in the US. It is also active in urban mobility solutions for safe and efficient transport.
Nevertheless, there have been high-profile cases that have shone a light on safety (or a lack of it). In the US, the company follows a 3-step screening process for background checks on its drivers for the previous seven years. The app also enables anonymous feedback and driver profiles are delivered upon allocation of a cab.
In India, an alleged rape of a woman by a driver led to taxi-hailing apps being temporarily banned in New Delhi. Uber was quick to respond to the allegations and, notwithstanding the ban, refocused its business in the city as a radio cab firm. The company also put procedures in place in India so that the Uber app contains a panic button and the rider’s location can also be shared with five other people in case of emergency. The sharing of geo-location may contravene data privacy and shows the need to strike the balance between passenger safety and privacy concerns. Considering that the female demographic is an important one, it will be interesting to see whether the panic button available on the app will be rolled out globally.
Long legal road ahead
At the end of the day, Uber’s terms and conditions state that the company is not liable and that consumers use Uber services at their own risk. It will take many years to update existing laws, or even draw up new laws, to ensure that new business models – including peer-to-peer models – put consumer protection and passenger safety at the top of the agenda. As seen with the business models over the past 20 years, such as online travel agencies, bed banks and dynamic packaging, the wrangling over who is ultimately responsible for consumer safety and, ultimately, for liability will take years to sort out.
Uber is expected to continue its core focus on global urban mobility, but also explore new areas, and already there are signs that the company will diversify into delivery services with brands like UberRush and UberEats. With the company expected to face ongoing challenges at a local level, it is time to batten down the hatches as it will be a long, acrimonious battle ahead.