Uber Technologies Business Analysis Report

Running
head:
UBER
TECHNOLOGIES,
INC.
BUSINESS
ANALYSIS
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Uber Technologies, Inc.
Business Analysis
For Transportation With Technology
Omar Khafagy
December 2014

UBER TECHNOLOGIES, INC BUSINESS ANALYSIS

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Abstract
This paper will explore Uber Technologies, Inc. company’s detailed analysis of all
aspects of the organization as regards the business model of its service in the ridesharing
and transportation market, the company’s structure, operational and marketing strategies
pursued as well as challenges and future potential opportunities. Building on its available
financials, recent growth and some market findings, conclusions for stakeholders and
potential investors are made. Uber’s controversial valuation is reviewed in the light of
current information in attempt to justify or deny.


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The ridesharing industry underwent very little change let alone innovation in the
last century until Uber Technologies, Inc. penetrated the market with its creative
technology resulting in a revolutionary super service for consumers. Its fast spread and
success came along in spite of governmental oppositions, market challenges and
competitors arising. Whether Uber will continue to succeed with its exceptional pace in
such circumstances or not; its current and future market valuation is phenomenal and
worth analysis to uncover the company’s business methodology behind.
Executive Summary
Uber Technologies Inc. is a startup founded in 2009 and was officially launched in
San Francisco in 2010. Uber is a matchmaker smartphone app that provides a platform to
both drivers and passengers allowing them to deliver a ridesharing service in more
efficient means. Uber operates in the shared (Collaborative) economy market given its
business model and continues to successfully take advantage of the efficiency perks
associated with such market.
Uber currently in its rapid-growth stage has managed to capture a remarkable
market share, as it is now present in 50 countries covering over 200 cities (Uber.com,
2014a). Being market leaders of a ridesharing service operating in a market that is
relatively new, Uber landed several strong funding rounds attracting lucrative Venture
Capitals such as Google Venture.


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Google Ventures has invested showing confidence in the startup with a $258 million
investment (86% of their $300 million annual budget). Uber’s revenue is up 18% month
over month, and in the past year alone they’ve grown from just 75 employees to more
than 300 (GrowthHackers, 2014).
Travis Kalanick, Uber’s IPO and CEO, has previously stated that the company’s revenues
are doubling every six months (Blodget, 2014a). Uber is now seeking a new round of
funding to raise up to $1.8 billion which will value Uber at $41 billion, from its previous
$18.2 billion valuation in its last funding round (Mossberg, 2014). Uber will use this
money for further growth and expansion as well as penetrating the “on-demand package
delivery” logistics’ industry (Bidnessetc.com, 2014).
Due to the modernization methodology used by Uber, it is exposed to a highly
variable legal environment globally. However a significant increase in the demand for
several shared economy firms’ services will lead to changes of regulations in their favor
made possible. This eliminates a significant obstacle in Uber’s growth, positioning it as a
remunerative investment.
An analysis of the value proposition of the company and its differentiation to stay
ahead of potential competitors and defy regulated services will provide details to
potential investors with a fair understanding for further investment.


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Brief Description of The Business Model
Uber is not a conventional taxi business as it owns no cabs or has employed
drivers. However it is simply a platform that allows riders to hail a cab through a
smartphone application to summon the ride of their preference by choosing from several
brands provided by Uber. After clicking on a “request an Uber” button on the app the
user is automatically assigned a driver. Uber users have the ability of tracking the driver’s
position on a Google map and vice versa. First users subscribe to Uber by submitting
their personal and credit card information to utilize Ubers’ service. The service can be
obtained in any place Uber operates and at all times. The fare is automatically charged to
the users’ credit card and is calculated using pre-set rates for distance travelled, demand
and length of the trips. Uber charges users different rates according to the type of service
requested taking its revenue as 20% of each fare.
Uber brands. A more detailed description of these services is provided in the
company summary:
• UberBlack
• UberLux
• UberSUV
• UberXL
• UberTaxi
• Uber for Business


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Approximately a quarter of the drivers are self-employed driving their own
vehicles. These self-employed drivers have contracts with companies responsible for
referring the passengers requesting a service. Other drivers are directly employed by a
company, which provides them with the vehicle. In May 2012, the median annual wage
for taxi drivers and chauffeurs was $22,820 (Bls.gov, 2014)
Brief Description of The Market
Uber, the Ride-sharing app, operates in the Taxi& Limousine service industry.
The industry has total revenues of $11 billion in the U.S alone, $14 Billion in the UK and
$25 billion in Japan (Techinvestingdaily.com, 2014). Various products and services are
offered within this industry such as; Taxi Services, leasing to taxi operators, “special
needs” transportation services, stretch Limousine services, also Luxury and corporate
Sedan services. This industry underwent changes in the 20th century’s second half: Taxi
companies made drivers independent contractors, and cities permitted medallions to be
leased to cabdrivers for a fee. The industry also comprises other app-based rides such as
Lyft , Hailo, GetTaxi, LeCab and many more .
Uber’s Uniqueness
Various differences make Uber unique in the Taxi &Limousine service industry.
The way the app simply works adds fun to necessary short waiting times. As the
customer waits, the app shows a Google map image of his exact location and tracks the
location of his assigned driver. Unlike regular Taxi services, the app gives the users
beneficial data they did not ask for including the length of the trip, miles traveled and the
average speed. These differences also include; reliability, wages, accessibility, legal and


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registration differences (Egan: Started determined nun et al., 2014).
Uber vs. local taxi
Uber Taxi
Reliability Uber is more reliable and
offers a great advantage for
those who value time.
In April:
1) 94.62% cars arrive
within 15 minutes.
2) 99.98% cars arrive
within 30 minutes.
Cabs have worse statistics
indicating less reliability
1) 27% cabs arrive
within 15 minutes
2) 63% cabs arrive
within 30 minutes
According to the City
and County of San
Francisco Office of the
Controller 2005 Taxi
Commission Survey
Report:
1) 34% of the surveyed
“almost always get a
cab.
2) 43% sometimes get
a cab
3) 23% usually never
get a cab
Wages Uber reported that UberX
(Uber’s cheapest tier
service) drivers can make a
median income of $90,000 a
year in New York if they
work at least 40 hours per
week. It says drivers can
make up to $60,000 per year
in Dallas. UberX is the
startup's cheaper tier
service.
Income varies by the
number of hours drivers
work and the fees they
pay. Drivers renting or
leasing a plate can earn
in between $25,000 to
$30,000 a year if they
work six days a week
Accessibility Uber uses a more efficient
delivery of the service. The
app directly assigns the
closest car to the passenger.
Customers in need of the
service can either go
through a taxi broker that
assigns a car to the


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The app provides a platform
where both the driver and
the passenger have a direct
channel of communication,
the ability to locate each
other on a map using the
GPS technology as well as
easier methods of payment.
passenger or stop a cab on
the street. If assigned a car
through a taxi broker, the
communication is with the
broker and not directly with
the driver which could
result in delays i.e.
inefficiency.
Legalities (Registration) Uber faces some legal
instability regards the
restrictions on the number
of cars operating. In some
cities no medallions or
registration fees are required
which lowers Uber’s and its
drivers expenses.
Taxis and limousines face a
more strict policy. A taxi
medallion, which is a
license that puts a quota on
the number of cars
operating.
Business Strategy For Success
Uber has employed various strategies that lead to their current level of success,
which is relatively high compared for newly established companies. Uber’s entrance
strategy of the market captured a continuously growing customer number spending $100
/month in less than 3 years (Mangalindan, 2012).
Uber understood the growing market of consumers that use smart phones, which is
now estimated to be 50% of the United States, and the fact that early adopters are willing
to pay a premium price for convenience, professionalism, and cleanliness. App
technology is straightforward and there is a very small learning curve for early adopters
to understand the Uber product (Tofel, 2010). Even with a niche customer base of upper
class professionals, Uber has been able to grow its installed base 30-40% per month and
our future growth section will highlight plans for that growth to continue throughout the


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World (Mangalindan, 2012)
Uber pursued a fearless “disruptive” strategy where it played the role of a new
entrant on a status quo market disrupting it and capturing profit excess of such market
(Wohlsen, 2014a) .In addition, Uber used a “noisy” marketing strategy for branding sake,
even fighting legal issues publicly where bad PR and press is considered better than none.
Uber also utilized a strategy of “more rides in more places quickly” where initial
profitability is of less importance than popularity, resulting in undercutting competitive
prices following price wars (Wohlsen, 2014a).
Uber’s investment in technology innovation is believed to be the main driver of
success penetrating an obsolescent transportation industry subsequently resulting in a
revolutionary cab service company. Uber announced recently that the app has been opened
to all developers (UberAPI) to take the advantage of being an open source and
continuously improving the app (Uber Blog, 2014c). Now other apps can process an Uber
request and pass the destination address to the Uber app, display pickup times, provide fare
estimates, and access trip history.
Furthermore, Uber’s emphasized and evident strong public presence and
convenience to use acted as a potent weapon to gain political leverage decreasing its legal
opposition (as more people will complain if the service was stopped) (Wohlsen, 2014a).
In regards to the its political struggles, Uber’s most effective weapon in fighting
back was how Uber was perceived as a force for modernization and freedom and acted
against bureaucrats and politically connected interests.


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Frequent Market studies were performed by Uber to provide evidence that the
service contributes positively to the overall welfare thus holding a strong argument
against regulators and critics. An example of these market studies is a study that analyzes
the correlation between the demand for Ubers’ services and alcohol related accidents.
According to the study, 7,666 alcohol-related motor vehicle accidents in New Jersey,
resulting in 72 deaths and 4,005 injuries. The data showed that the alcohol-related
accidents were more frequent during the weekend with 42.5% of accidents occurring
from midnight Friday through Sunday night, and of those, 34.5% of weekend accidents
occurred between 12am and 4am(Uber Blog, 2014b). An observation made by Uber’s
team is that the number of Uber requests increases significantly during that period of
time. This serves, as evidence that the service Uber provides is highly beneficial as it
promotes safety by delivering a highly accessible option of transportation.
Despite running background checks on the drivers, Uber established an efficient
driver monitoring and rating program to secure the quality of the service, which in turn
vastly impacts Uber’s reputation. Since Uber depends on the Word of mouth, having the
ability to monitor the quality at which their passengers are being served is essential.
Uber broadened their target market by providing the service “ Uber for Business”.
Uber for business has managed to lure their customers by providing them with tools that
help them manage and track any employee transportation expenses. One payment source
per company covers all its employees’ transportation bills thus avoiding the hassle of
requesting reimbursements later on (Uber.com, 2014b).
Also, Uber utilized a strategy of establishing deals with firms or other apps that


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could elevate the quality of the service. Uber recently managed to cut deals with General
Motors, Toyota and various financing firms (Milian, 2013). This move was believed to
highly encourage drivers to obtain cheaper financing costs in buying a car, which would
motivate them in joining Uber’s fleet. Other examples of these deals are contracts with
American Express and PayPal to ensure all electronic methods of payment are covered
(Uber, 2014). A recent deal with Spotify (Music App) can now give the passengers the
luxury of playing their favorite tunes during their Uber ride in 10 cities so far (Uber Blog,
2014m).
Uber’s Management Team Qualifications
Travis Kalanick CEO & Co - Founder at Uber Technologies Inc. He is a
successful entrepreneur who founded Uber in 2009. He dropped out of college at UCLA.
Today he owns 13 investments in 10 companies (Crunchbase.com, 2014)
Ryan Graves -Head of global operations. He holds a B.S. in Economics from Miami
University. He is strategic problem solver that turned Uber’s operations team from a
single employee to an international workforce (Crunchbase.com, 2014).
Garrett Camp - Co-Founder & Chairman. He holds a Masters in Software
Engineering at the University of Calgary, researching interfaces for collaborative
systems, evolutionary algorithms and information retrieval. Garrett co-founded Uber.com
in 2009 with Travis Kalanick (Crunchbase.com, 2014).
Salle Yoo-General Counsel. She is a graduate from Scripps College and Boston
University School of Law. Salle secures Uber’s rapid expansion globally and sustain
growth (Crunchbase.com, 2014).


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Than Pham - Chief Technology Officer. He holds a B.S. in Computer Science and
Engineering and an M.S. in EE/CS from MIT. He creatively solves any challenges that
face Uber’s growth (Crunchbase.com, 2014).
Brent Callinicos - Chief Financial Officer. He is a graduate of University of North
Carolina, Chapel Hill and Ex-VP, Treasurer and Chief Accountant at Google
(Crunchbase.com, 2014).
Jeff Holden -Chief Product Officer .He is Graduate of University of Illinois, Urbana,
Champaign. He is Ex-Senior Vice President of Product Management of Group on since
April 2011 also Ex-CEO and co-founder of Pelago, Ex-VP at D. E. Shaw & Co., L.P. in
New York (Crunchbase.com, 2014).
Revenue Projection
All of Uber’s revenue comes from the taxi business. Recently, several analysts have
valued Uber as an $18.2 billion company (Blodget, 2014b) Uber earned approximately
$26.4 million in revenues providing 1.23 million rides (Borison, 2014).
Uber’s closest competitor (Lyft) made $2.2 million in revenues (Borison, 2014).
The company earns 20% in gross revenue and the drivers claim the rest. (Shontell,
2014a). According to Uber’s CEO Travis Kalanick, revenue growth is high as they
double earnings every six months (Anon, 2014). Considering that Uber operates in a lot
of cities but not at a full scale yet; it is believed that as the company grows and meets
their funding requirements for expansion; growth in revenue will continue to increase
until it reaches the maturity stage. A lot of speculators anticipate that Uber could be soon


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generating $10 billion in revenues ($2 billion net revenue), which justifies the $18.2
billion valuation (Blodget, 2014a). In addition, Uber just started experimenting with on-
demand delivery service, which signals the possibility of tapping into the logistics
industry. This would create more revenue streams for Uber depending on their success
providing this service.
Uber’s Expenses
Given Uber’s structure and their operational plan, the company does not incur
expenses as large as regular Taxi companies. The main expenditures are on R&D with
the goal of creating and sustaining a platform to deliver their services (Damodaran,
2014a). The more Uber expands and builds a more complete infrastructure; a decline in
their efficiency ratio (expenses/revenues) emerges; increasing their overall efficiency.
Uber also spends on marketing as they approach new markets. They concentrate on
launch events and press conferences to get as much exposure as they can. Examples of
other expenses Uber faces are; payment processing, payment fraud, refunds,
customer support, law dispute resolution, cellular handsets and service fees for the
drivers, and local regulatory efforts (Above the Crowd, 2014).
Financial Estimate Required and Implementation
In June 2014, Uber announced a closing of a major financing deal of $1.2 billion of
primary capital and a total of $1.4 billion with a second close of strategic investors. This
round of financing puts Uber at a $17 billion pre-money valuation (Kovach, 2014).
Uber’s financing deal follows their number one competitor’s (Lyft) announcement


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of raising $250 million in Apri(Lawler, 2014) l. Until last August, both companies had
raised over $300 million in funding. According to Kalanic, Uber aims to keep raising
money to secure a dominant position in the market and brush Lyft’s competition off
(Bort, 2014).
Given that Uber completes ten times more trips than Lyft and is significantly bigger
than Lyft in terms of size and market share, having the same capital resources puts Uber
at a disadvantage as they burn through money raised at a faster rate. Another reason that
would drive Uber to keep raising money is to fund future expansion plans and upgrade
their operations. Since Uber only operates in limited markets, it is believed that Uber will
use a huge chunk of the money raised to fund their growth with the goal of increasing
their market share.
Uber may be providing convertible debt and no equity in its latest round of funding.
If so, Uber will gain cash without affecting its old shareholders controlling interest.
Investors who decide to join in this round of funding will receive a discount in coming
rounds, also liquidation preference. This new round will also assist the company to cash
out its old investors with no IPO (Mymeedia.com, 2014).
In addition, Uber has recently started experimenting a new service of “on-demand
package delivery” (UberRush) (Shontell, 2014c). Expanding their products and service
lines to operate in the logistics industry could be the motive for the financing deals as
they would be competing against more established companies such as FedEx, UPS and
Amazon.


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Company Summary
Uber Technologies, Inc. is a venture capital privately –held transportation
application for mobiles designed for the request of a car service by users. The user will be
able to view the drivers name, type of car and it’s ranking upon his request. Uber
Technologies was founded in2009 By Travis Kalanick and Garrett Camp in San
Francisco (Privco.com, 2014).
Mission Statement
“Uber is evolving the way the world moves. By seamlessly connecting riders to
drivers through our apps, we make cities more accessible, opening up more possibilities
for riders and more business for drivers. From our founding in 2009 to our launches in
over 200 cities today, Uber’s rapidly expanding global presence continues to bring people
and their cities closer”(Uber.com, 2014a).


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Company Goals
Uber’s company goals can be summarized as follows (Quora.com, 2014b):
• To penetrate as many markets as possible in the shortest of time
• To improve driver operations’ efficiency (attracting new partners and assisting
present ones)
• Continuous modification of the service to enhance Uber’s quality performance
• Plan how to build a supply of new partners for expansion markets
• Establish analytical benchmarks to support the company in new markets and
products
• Identify weaknesses for better strategic improvements and innovations
• Differentiate products to increase their market visibility
• To continuously monitor users’ needs everywhere for delivering always
efficiently
• To overcome regulatory battles facing further growth and expansion
Company Objectives (Daily Intelligencer, 2013)
• To take over the cab industry by being the most cheap, easy ride all over the
world
• To eliminate private car ownership
• To provide all types of logistical and transportation services where it operates
• To include on demand delivery of goods and services


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Business Philosophy
Uber operates with philosophy of satisfying its employees first to optimize the
customer’s benefits. Uber supports its employees to great limits and in many ways with
the following purposes, principals, methods and rules (Uberether.com, 2014):
Purposes
• Establish a strong business model that can be replicated easily by others.
• Establish a company that is owned by its employees through fairness and
democracy.
• Establish strong bonds with its workers and customers.
Principles
• Egalitarian: equality, inclusivity and non discrimination of all
• Sustainable: caring about each other and supporting everyone’s needs
• Transparent: honest communication and information sharing
• Fun: make the working environment fun
• Agile: flexibility, responsiveness and easy adaptability between team members
and towards customers
• Pragmatic: perfection performance exceeding customers expectations
Methods to adhere to company’s principals
• Decision making that is consensus-based
• Transparency in all corporate processes encouraging sharing of information
• Sharing of company’s profit among employees, partners, customers and the


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society
• Always licensing for the benefit of the company, its team, partners and customers
• Working with people of have values similar to the company’s values
Company rules
• The company’s mere existence is to create a positive environment for all workers
• The company will try to remain small and efficient for an organization with a
healthy size
• The company will establish strong bonds with its workers and customers like a
family
• The company respects individual needs and preferences
• The company hiring process will show no discrimination for any cause but
according to their professional abilities
• The company will not force working on weekends
• The company will promote vacations to avoid over work
• The company will pay double salaries or paid vacation days in highly demanding
projects
• The company may be flexible in employees’ choices of work type and goals
• The company will allow freedom of speech and expression
• The company will try to be publicly transparent
• The company will cherish employees privacy


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The company’s president leads and his actions are supervised by:
1) External experts forming an advisory board
2) Employees and advisory board members forming a governance team
Ownership Structure
Uber obtains funding through seed funding rounds given that it’s an early growth
stage. There are three types of investors that own a stake at Uber; Venture capitalists,
Angels and Private equities (Privco.com, 2014). Uber offers investors two classes of
stock, “Common Stock” and “Preferred Stock”. As of July 2010, Uber has issued a total
of 65,088,840 shares at a value of $0.0001 per share (Privco.com, 2014).
Common stock. (Privco.com, 2014)
Total Common Stocks Class A Common Stock Class B Common stock
50,797858 27,000,000 23,797,858
Preferred stock. (Privco.com, 2014)
Total Preferred
Stocks
Series A
Preferred Stock
Series B
Preferred Stock
Series C-1
Preferred Stock
Series C-2
Preferred Stock
14,290,982 3,811,772 3,439,589 1,913,782 775,092
Dividends. Holders of Preferred Stocks have the right to earn dividends quarterly
prior to holders of any of the Common Stocks classes. Payouts are adjusted for stock
splits, stock dividends and reclassifications (Privco.com, 2014).


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Dividend Payout per Share.
Class A
Common
Stock
Class B
Common
Stock
Series A
Preferred
Stock
Series B
Preferred
Stock
Series C-1
Preferred
Stock
Series C-2
Preferred
Stock
$0.0290 $0.0290 $0.2337 $1.1343 $11.4032 $9.1225
Liquidation. If Uber voluntary or involuntary face a dissolution scenario, holders of
Preferred Stocks have the priority and preference in claiming any proceeds for the sale of
assets or other liquidation transactions. The residual is divided among Common Stocks
holders according to number of shares owned by each shareholder (Privco.com, 2014).
Further details regard investor relations such as: Mechanics of Payment, stock
conversion, voting rights and more, are provided in Uber’s Delware incorporation
document.
Seeding rounds and suppliers of funds. (Privco.com, 2014)
1) First Seeding round
Date: 1st
August 2009
Investors:
• Garret Camp (Angel)
• Travis Kalanick (Angel)
Total Funding Amount: $200,000
Series: Seed


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Investment Type: Equity
2) Series seeding rounds
Round: Seed
-Date: 10th
October 2010
-Investors:
• Josh Spear (Angel)
• Oren Michels (Angel)
• Lowercase Capital (Venture Capital)
• Founder Collective (Business Incubator)
• David Cohen (Angel)
• Mitch Kapor (Angel)
• Alfred Lin (Angel)
• Cyan and Scott Banister (Angel)
• Babak Nivi (Angel)
• Naval Ravikant (Angel)
• Shawn Fanning (Angel)
• Jason Calacanis (Angel)
• Mike Walsh (Angel)
-Total Funding Amount: $1,250,000
-Series: Seed


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-Investment Type: Equity
Round: A
-Date: 14th
February 2011
-Investors:
• Benchmark (Venture Capital)
• Founder Collective (Business Incubator)
• Cyan and Scott Banister (Angel)
• First Round Capital (Venture Capital)
• Alfred Lin (Angel)
-Series: A
-Investment Type: Equity
Round: B
-Date: 7th
December 2011
-Investors:
• Menlo Ventures (Venture Capital)
• Jeff Bezos (Angel)
• Bobby Yazdani (Angel)


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• CrunchFund (Venture Capital)
• Goldman Sachs Private Equity (Private Equity)
• Bezos Expeditions, LLC (Venture Capital)
• Sigma Partners (Venture Capital)
• CampVentures (Venture Capital)
-Series: B
-Investment Type: Preferred Equity
Round: C
-Date: 23rd
December 2013
-Investors:
• Google Ventures (Venture Capital)
• TPG Capital LP (Private Equity)
-Series: C


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Round: D
-Date: 6th
June 2014
-Investors:
• Fidelity Investments (Corporate)
• Wellingtion Management Company LLC (Private Equity) (Corporate)
• Summit Partners (Venture Capital)
• BlackRock, Inc. (Corporate)
• Kleiner, Perkins, Caufield & Byers (KPCB) (Private Equity & Venture Capital)
• Google Ventures (Venture Capital)
• Menlo Ventures (Venture Capital)
-Total Funding Amount: $1,200,000,000
-Series: D
The following table demonstrates Uber Technologies, Inc. owners (Privco.com, 2014)


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Uber’s Service Products
Uber provides the service of ridesharing through several classes’ brands aiming to
satisfy a broader target market. Each brand serves for a different purpose to ensure the
satisfaction of the passengers (Web-strategist.com, 2014a) and are as follows;
1) UberBlack: Provides the passenger with a private driver operating a high-end
sedan that seat up to four people.
2) UberLux: Provides the passenger with the finest vehicles.
3) UberSUV: Provides the passenger with an SUV vehicle that can fit up to 6
passengers.
4) UberXL: Seats up to 6 people for a cheaper price than the Uber SUV.
5) UberTaxi: Users are able to request a regular taxi providing them with a more
accessible method of getting a cab in addition to a more convenient method of
payment, as cash is not required.
6) Uber for Business: Provides business organizations with more convenient
means of transportation for the employees. This service showed great
potential, as Uber was able to deal with lucrative corporations such as Morgan
Stanley. With Uber for Business, employees link to a company-provided
payment source and bill each ride directly to their account. They can even
attach expense codes or memos to their trip information, completely removing
the hassle of saving receipts and filing expense reports. Another advantage to
Uber for Business is that it enables the clients to make decisions about travel
costs based on real-time data, including an overview of expenditures, by
whom, and where. An admin dashboard is set up which allows the company to


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add or remove specific employees from the payment profile which eliminates
time wasted on approving or rejecting a specific transportation transaction.
7) Also uber launched short-term upon market demand services as follows:
• UberPOP was recently launched in Paris, this offers smaller, lower-
priced cars, which look nearly like ride-sharing business models
• Uber Helicopter was used Last summer, wealthy Manhattans who
loathe hours in traffic could take a town car to a helipad and be
whisked away to the Hamptons in minutes
• Uberboat was used by Customers riding ferries between many Boston
wharves in collaboration with Boston Harbor Cruises.
• Uber pool: Drivers pick up riders of similar destination
• Uber ice-cream trucks delivery to different neighborhood
Uber does not own any of the vehicles operated. Uber’s drivers are all independent
agents. Uber’s drivers are independent agents that are either self-employed, or work for
someone who owns multiple cars.


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SWOT Analysis
Strengths
Uber revealed several strengths as regards diverse aspects.
Competitors. Uber in comparison to its competitors showed the following;
• Uber is the first company to provide ridesharing services. Being first in the market
provided Uber with a head start building in its clientele and branding (Hausman,
2013).
• Uber currently has more cars providing its service therefore drivers reach the pick
locations faster (Quora.com, 2014a).
• Uber pays the drivers more than what Uber’s closest competitor Lyft (Huet,
2014).
• Compared to Uber’s competitors, Uber has the widest distribution as it currently
operates in 50 countries and over 200 cities (Uber.com, 2014a).
• Uber has the ability to defy competitors by providing other modified more
affordable services such as UberX, which is believed to be 20% cheaper than its
main competitor Lyft and local taxi rates (Medium, 2014).
• A unique feature that Uber and ride sharing firms possesses is that they are not
required to auction for a Medallion. Taxi companies are required to purchase a
Medallion, which is a cap, set to limit the number of cars operating for this
company.


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Profits. Ubers profits were outstanding for a startup company featuring the following;
• Revenue percentages continue to increase month to month. According to CEO
Kalanick, revenues have been doubling every six months (Rusli, 2014).
• Uber’s potential has been repeatedly proven by investor’s optimism with regards
to future performance and thus raising capital through multiple strong financing
rounds.
• Uber does not own of the vehicles providing the service therefore Uber’s startup
expenses are moderate and are mainly contributed to improving the platform by
which Uber delivers the service (Uber Blog, 2014a).
Service. Uber was unique in many aspects as follows;
• Quality service, safe and comfortable marketed as highly efficient with elegance.
Uber allows its users to rate their drivers giving them the ability to monitor the
quality at which their users are being served (Uber.com, 2014a).
• Uber provides the users with an easier method of payment as users already
submitted the required credit card information. This reduces the hassle of dealing
with cash or making sure that the vehicles credit card machine is working.
• A new feature added to the app called “Fare Split” which helps passengers split
the cost of a ride easily (Uber Blog, 2013b).
• High Transparency regards the pricing rates, and driver’s information. Uber
minimizes any extra charges due to any mistaken or on purpose detours by the
drivers raising credibility (Board of Innovation, 2014).


29

• Uber has a shorter waiting time and a more guaranteed service when compared to
local taxis that currently dominate the Taxi & Limousine industry (CityLab,
2014).
• Continuous availability covering late night hours where most other transportation
means service halt
• The majority of transportation services are under vast regulations which in turn
results in lowering the quality and efficiency of their services and increasing
prices
Technology. Uber’s used technology description is as follows;
• Uber, founded in 2009, is leading in terms of patenting activity, with patent
applications for both driver and passenger-facing aspects of ride -sharing and taxi
scheduling technology (Envision IP, 2014).
• Uber is a technologically driven service in an old standstill industry, which gives
it the potential of changing the means by which the whole industry operates.
• Mobile app – upon demand based service using a push of a button technology
that geo-locates a nearby cab.
• Mobile app is user friendly and provides a medium in which the delivery of the
service is more efficient and convenient to the passengers. The app allows the
passengers to have direct contact with the driver as well as the luxury of tracking
their whereabouts on a map (Hausman, 2013).


30

Drivers. Driver’s recruitment in Uber showed the following aspects;
• Uber’s high revenue growth is due to an increasing demand for its services. This
has a negative impact on local taxi driver’s income, which encourages them to
join the Uber fleet if they are able to meet the requirements.
• Uber has many successful partnership deals with different parties (Refer to
Appendix E) for example with GM, Toyota and financing providers to reduce the
cost of new car ownership for Uber drivers encouraging more drivers to join their
fleet (Uber Blog, 2013a).
• Drivers save time as they are automatically matched with the closest customer
instead of waiting in lines to find customers.
• The nature of the service provided by Uber provides the drivers with the luxury of
flexible working schedules.
Weakness
Uber’s weakness may not be many but are extremely serious to the company’s
further continuity and growth if not resolved which are as follows;
• Uber is recognized as an unregulated service, which is the main reason why Uber
is facing a lot of legal controversy (CTVNews, 2014).
• Insurance and liability concerns frequently raised (Hausman, 2013).
• Company charged in lawsuits for having illegal practices, not following other
standard contracts between cities and cab service providers, and not in parallel
with union laws (Hausman, 2013).


31

• Idea monetizing; limitations to potential market cap may still occur because of
overhead and potential legal costs in spite of the constant demand for cabs
(Hausman, 2013)
• Uber pricing rates are very inconvenient for rides of short distances in some cities
(Hong, 2014).
• Given that Uber is a firm operates in the shared economy market, investors face
difficulty with valuation models regards such business structure due to the recent
emergence and popularity of this market development.
Opportunities
Uber’s unique business model has great opportunity potentials in the market as
follows:
• Uber has expansion plans to have full coverage for cities it is currently operating
in and to cover areas of large populations that reside in less affluent locations with
little or no cab access to decrease wait times and distance coverage to access
services downtown.
• Uber has no limitations on pursing international markets as the service provided is
of better quality and less time consuming than any of the services provided by
existing taxi companies globally (Hausman, 2013).
• Uber’s recently introduced services suggest that the company could be offering
more than ridesharing services. UberRush, a new service introduced in Manhattan
that provides the app users the ability to request pickups and deliveries is an


32

experiment to test the logistics market which Uber could be tapping in the
foreseeable future (Ong, 2014).
Threats
Uber is facing many external threats to its expansion described as follows:
• Any lawsuits won by cities against Uber for illegal taxi practices may destroy the
successful model with subsequent high liabilities and limit its expansion and
growth (Hausman, 2013).
• Due to operating in a variable legal environment it is hard to quantify the costs of
cease-and-desist orders, court injunctions and the impounding of cars.
• Threats of enforcing local bylaws if company refuses to acquire a broker’s license
whereas competitors agree to this condition could increase Uber’s expenses.
• It is illegal to drive any public regular vehicle with a charging meter in some
countries, which could hinder operations (Hype.my, 2014).
• A pre-set fixed hiring charge is mandatory for public passenger vehicles is
allowed (livery vehicles) in some countries
• It is illegal for anyone without a livery license to render a livery service in some
countries
• Taxis are forbidden from doubling or more their rates in some countries as Uber
does which could hinder operations in the future (Wikipedia, 2014).
• Extra fees or a surcharge imposed on customers for non-cash electronic payment
methods is prohibited in some countries.


33

• Collection of any fares above that set by ordinance by anyone is considered
unlawful practice.
• Banned in some countries due to insufficient driver vetting (background checks)
and insurance could hinder expansion plans (Oltermann, 2014).
• Ventures believes sharing-economy companies like Uber and Airbnb that raise
huge amounts of funding will be handicapped by the need to deliver margins that
justify investors’ cost of capital, making them vulnerable to competition by more
lightly capitalized entrants who copy their business models.
• Governmental price control and regulations restricting Uber to enter the regulated
market (Wikipedia, 2014).
• Regulated service perceived only as being safe and quality.
• Drivers can acquire new customers and implore them to call directly instead of
using the app.
• Drivers can work for multiple companies therefore it might be difficult to know
when they use the app and when they don’t.
• The app relies on social media so can easily be affected with negative experiences


34

Marketing Analysis
Marketing Plan
Price. Uber utilizes three pricing strategies; fixed airport rates, standard fees which
include a per mile/minute charge, and “surge (dynamic) pricing”. For each service
provided, Uber keeps 20% while the drivers keep the remaining 80% with no tips
(Iredale, 2014). Prices depend on the service provided with UberX (believed to be 40%
cheaper than local taxis) being the cheapest (Uber Blog, 2014j).
The pricing structure allows an easier method of payment by the passengers due to
the electronic nature of the payment as each passenger has his credit card information
submitted to create an Uber account. Fixed airport rates and standard fees are two pricing
strategies that do not differ from any regular taxi. What makes Uber’s pricing strategy
unique is their use of “surge pricing”. Surge (dynamic) pricing which affects less than
10% of the trips (Dickey, 2014b) is a strategy in which Uber sets highly flexible prices
for the trips based on current market supply and demand for drivers. Uber is able to stay
competitive by changing prices based on algorithms that take into account competitor
pricing, supply and demand, and other external factors. For example, during holidays or
other events such as Halloween, New Year’s and bad weather conditions, Uber notifies
their customers with a slight increase in pricing with an aim to decrease the number of
unfulfilled requests. Each of Uber’s brands, which serve to satisfy different preferences
of passengers, has a different pricing structure.


35

Table showing the pricing for Uber’s services in Toronto (Uber.com, 2014d)
UberX UberXL UberBlack UberSUV
Base Fare $2.75 $5 $8 $23
Per min $0.30 $0.30 $0.80 $0.80
Per Km $0.90 $1.55 $2.50 $2.50
Safe ride fees $1 $1 N/A N/A
Min Fare $2.75 $5 $15 $30
Cancellation
fee
$5 $5 $10 $10
• Uber’s formula for calculating the total fare = base fare + the maximum of per
minute or per kilometer value.
• For UberTaxi the passengers pay standard meter rates plus a 20% gratuity
automatically added for the driver.
• Passengers can incur charges such as a cancellation fees and safe ride fees
Product. Described above in the company summary


36

Promotion. Uber implements various promotional strategies to attract its target
market as follows ( Refer to Appendix D);
A) Referral. Each user is assigned a referral code, which is then used by new signups
crediting both the original user and the new user $20(Uber Blog, 2014f).
B) Extensive launch campaigns at each new city. Launching in new cities, Uber
applies a lot of marketing, create a lot of launching events and press conferences.
Examples of these events are:
• Motorcades for President's Day: On President’s Day in DC, Uber picked random
users who requested a ride on that day and gave them a replica of the Presidential
motorcade ride with drivers acting as if they are working for the Secret Services.
This ride was under the name of UberCade (Uber Blog, 2014g).
• Roses for Valentine's Day: On Valentine’s day, they picked random users who
requested a ride and provided them with a free ride to and from their Valentine’s
Day plans. With the ride a bouquet of dozen roses was delivered (Uber Blog,
2014k).
• Lemonade Stand: Uber users can use the application to request information
regards the closest lemonade stand and showing the exact location on the map.
The app also provides information regards the ETA to the lemonade stand. The
Uber Lemonade stand also offers UberDogs, pretzels and various options of
chilled beverages (Uber Blog, 2014d).
• Ice Cream truck: Users can request ice-cream trucks to show up at specific
locations. The user simply requests a truck at the location preferred and will


37

receive an ETA on when the truck will show up. In addition, the user has a direct
communication channel with the ice-cream truck driver. The driver can only
deliver 5 ice- creams per order but users can also order more when the truck
arrives (Uber Blog, 2013c).
• Mariachi band, margaritas, & piñatas: A service similar to the ice-cream truck
but instead provided users with “On-Demand Mariachi Fiestas”(Uber Blog,
2012).
C) Word of mouth. The majority of Uber’s success is contributed to its customer’s
word of mouth. According to CEO Kalanick 95% of Uber riders have heard of Uber
through other Uber users (GrowthHackers, 2014). Coupled with the launch events the
word of mouth strategy utilized by Uber has been a major driver in Uber’s revenue
growth.
Place. Uber was founded in 2009 and officially launched in San Francisco in 2010,
however now available in urban areas throughout the United States. The company
expanded internationally( Refer to Appendix H) operating in cities such as Paris (Dec
2011), Toronto (March 2012) , London ( July 2012),Sydney (Nov 2012), Singapore(Jan
2013),South Korea (August 2013), Beijing (July 2014), Warsaw (August 2014), and Rio
de Janeiro(Wikipedia, 2014). Today Uber operates in 50 countries and over 200 cities
and further plans of expansion (Uber.com, 2014a).


38

Competition and Buying Patterns
Uber’s competitors in the U.S market include Lyft, Inc., Sidecar Communications,
Inc., GetTaxi, Inc., and the regular Taxi . The smartphone enabled transportation business
is spreading fast especially in U.S cities, the homeland of Uber. A comparative test
between those most famous ride-sharing apps’ services (UberX, Lyft, Sidecar) against
local cabs in six main U.S cities was performed (Fowler, 2014). The test utilized the 3
relevant apps and hailing a street local taxi over 30 rides covering the same trip at the
same traffic time to same destinations.
Some rides were triple or four times more expensive than local taxis especially in
rush hours where their prices were typically increased; UberX was 20% above local taxi
price, Lyft came in second place as regards pricing with a minimal rise above the local
taxi, however Sidecar came first with a 10% value less than the local taxi (Fowler,
2014).
Lyft and Uber apps do not calculate your fare immediately but will give alerts of
price raise due to peak traffic times and rush hours, Sidecars doesn’t raise its prices under
these conditions and unlike the other 2 apps, it calculates your estimated fare to chose to
take that ride or not. Sidecar drivers are less liable to increase their prices especially with
their knowledge of other competitors (Fowler, 2014).
In regular traffic, both Lyft and UberX rates were less than local cabs, with UberX
the cheapest and known waiting time to be never more than 13 minutes. Local taxis knew
the most quickest and shortest routes followed by UberX while Sidecar and Lyft drivers
were 20% longer in time. UberX drivers were like chauffeurs with user siting in the back


39

unlike Lyft and Sidecar (Fowler, 2014).
Service Name Least expensive most expensive Best time
Chicago Sidecar$4.00 Taxi$7.65 Taxi8: 20
Boston UberX$7.45 Sidecar$12.00 Taxi & Lyft 9:00
Los Anglos Sidecar$11.0 Taxi$ 15.05 UberX 16:52
New York Taxi$9.50 UberX $39.00 Taxi 10:53
San Francisco Sidecar $8.00 Taxi$ 14.10 Sidecar 7:59
Washington. D.C. Taxi&UberX Lyft $15.00 Taxi 8:56
$8.90
Main Competitor “Lyft”
Lyft Inc. and its service are recognized as the most potent competitor to Uber in the
ridesharing industry. Lyft was launched in San Francisco 3 years after Uber. However,
Uber is operational in three times as more markets as Lyft (Saxena, 2014), four times the
number of working drivers and five times in investor funds (MacMillan, 2014).
Spending done on car services studied by the Investment Advisory Firm revealed
that there were $3.8 million in credit card users in the U.S over the past year; $96,000
million were Uber or Lyft with the majority being Uber users (Griffith, 2014).
Revenues revealed that its users spent $26.4 million on 1.2 million Uber rides
whereas just $2.2 million on 170,000 Lyft rides by its users (Griffith, 2014). However,


40

the average cost of Uber’s ride was higher than others and Kalanick stated that the
company adds more riders faster than the regular average with 50,000 new drivers each
month (Griffith, 2014).
UberX during most times is 20-25% cheaper than Lyft with more UberX cars than
Lyft to intentionally put Lyft out of business except during rush hours where it exercises
its surge pricing where it becomes 1.5 times to 3 times as much (Quora.com, 2014a).
Uber riders pay 25% less than the regular UberX fare whereas the drivers still get
their 80% cut, this means where users get a cheaper ride $11.25 instead of $15 ride the
driver gets $12 surprisingly more than they earn (Huet, 2014).
Uber lowered its UberX prices by 20 percent last January, lowering its commission
from 20% to 5 % and Lyft also dropped its prices in April, by not getting its 20 %
commission at all which is clearly translated that not only both companies are losing
money on their rides but Uber is actually paying the their drivers a 5% extra on every ride
(Huet, 2014).
A more general comparison between the two services revealed the following:
Service type. Both companies provide the full range of rides; luxury, premium and
limos and they are different from city to city, rides are $1 initially, $1.50/mile, and
$0.25/min. In general, it is approximately $2/mile or 20-30% cheaper than regular cabs
and is more expensive in big cities with more demand (LA and San Francisco)
(Lyftvsuber.com, 2014).


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“Prime Time” in Lyft vs. “Surge Pricing” in Uber cost.In peak traffic times and in
certain locations the cost of both Lyft and Uber increases significantly. This dynamic
pricing is termed “Prime Time” in Lyft and “Surge pricing” in Uber. For Lyft, "Prime
Time" can increase the cost of a ride by 25 to 200% and is clearly evident to users before
a ride however Uber’s "Surge Pricing" can increase the cost of a ride up to 7 to 8 times
were observed and more difficult to note before the ride. In conclusion Lyft’s "Prime
Time" is more efficient and convenient than Uber’s "Surge Pricing" (Lyftvsuber.com,
2014).
Company funds. Lyft to date has raised approximately $330 million in total to value
it at $700 million whereas Uber raised $1.6 million to date with a $18.2 million valuation.
Taking in consideration that Uber is more recognized and popular to investors, Uber is
offering bonuses to Lyft drivers upon sign-ups to their teams instead (Lyftvsuber.com,
2014).
Service experience. Lyft offers a friendly, fun, and social ride in comparison to a
classic back seat ride with Uber. Lyft drivers greet their passengers upon riding with a fist
bump, attaches a pink mustache to their cars and has diverse fun themes such as Harry
Potter Lyft, the Karaoke Lyft, etc. whereas Uber drivers open the back door for you and
are classically dressed. In conclusion Lyft might be more appealing to some than others
Ride safety. Both Lyft and Uber drivers must own a car with a recent insurance as
well as a valid driver's license. Drivers are DMV and criminal background checked and
their car inspected. For Uber, drivers are at least 23 and own a 4-door car, 2003 or newer
while Lyft drivers are at least 21 and own a 4-door car, 2001 or newer. Both


42

companies rate their drivers to rapidly exclude bad drivers. Lyft seems to have more
female drivers and passengers. A risk is always present, but both rides are perceived so
far to be safe (Lyftvsuber.com, 2014).
Driver benefits. Both companies provide their drivers with excellent benefits.
Different perks are offered in both companies, which include discounts on movie tickets,
gym memberships up to offers on new car purchases. Uber also offers incentives to
drivers in busy weekends and holidays. Both companies treat their drivers generously
The software. Lyft app is more users friendly and easy for both drivers and
passengers also they can use their own smartphone while Uber drivers must use the
provided 3G iPhone. These restrict the drivers from using any non-"Uber" apps while as
well as being charged $10 / week to use them. Also Lyft allows via its app a custom tip
after the ride trip while Uber offers a percentage choice before the ride starts
Taxi Regulations and Legal Issues
Uber is up against the Taxi and Limousine industry regulations and laws that
protect their rights, that both restrictive locally and globally. Controlled Taxi medallions
differ from one country to another but was primarily introduced in NYC and was meant
to regulate the number of taxis entering the city to maintain their economical status. The
values of taxi medallions continued to rise in accordance with rising taxi demands
reaching a value in December 2011 to be above $1 million (Gastaldo, 2014). This
medallion policy is present in U.S and other big cities worldwide.
The dispute arises from whether such regulations are applicable to a service such as


43

Uber with no owned cars or hired employees but simply a mobile application. Uber
argues that it is a technology company and should not comply with taxi service
regulations which old fashion and damaging to consumer demands (The Globe and Mail,
2014). Vast investments in such medallions for registration, driver’s licenses and other
maintenance costs make any new competitor not abiding with the same rules and has a
great potential to steal a large market share a real threat.
As a result, Uber received its first cease-and-desist order in 2010 in its homeland
San Francisco that didn’t stop its operation (Wikipedia, 2014). Later in 2012 the
Washington D.C Cab Commission aimed to stop Uber from launching its service based
on the fact that its pricing scheme doesn’t follow city regulations but failed to do so
(Privco.com, 2014). Also in 2012, an Uber driver was fined by Cambridge officials
(Massachusetts) for the operation of an unlicensed livery service and different fare
structure, the state’s Division Of Standards also put a halt to the application but the
governor’s office later removed all penalties (Privco.com, 2014). Taxi regulators on a
committee formed from 15 cities, (New York, Los Angeles, San Francisco, Washington,
Chicago etc) suggested laws that would directly stop Uber’s operation in the U.S (CHEN,
2014). Also taxi drivers all over the world broke up in strikes and protests opposing the
Uber service (Cbc.ca, 2014).
Facing fines, airport picks up bans and lawsuits (Refer to Appendix J), Uber started
strong lobbying efforts by hiring U.S politicians that may be involved in the regulation of
the business (Stone, 2014).
However, Uber may suffer in places like Canada where a new Bill affecting the
ridesharing industry may hinders Ubers’s operations (CP24, 2014).


44

Operational Strategies
Market Share and Approach
Due to the legal differences regards each taxi industry in which Uber operates in,
Uber’s launch has to be planned to match and convey with each of these market’s
regulations. Uber is facing various legal obstacles as the regular cab drivers in each city
fight back as Uber drives away a significant amount of their rides. According to
Kalanick, the demand for Uber’s services has been constantly increasing and this was an
enough motive for Uber to fight back as the only explanation behind this increase is that
customers are unsatisfied by the other means of transportation. Determining Uber’s
market share could be a bit tricky due to the nature of Uber’s operations. Given that Uber
operates in 50 countries, it has performed differently in each market. Further more,
Uber’s presence has not matured in all of the cities, as some services are not offered in all
of the cities due to lack of drivers.
According to an IBIS industry report, the Taxi & Limousine industry generates
revenue of $11 billion in the US, $14 Billion in the UK and $25 billion in Japan
(NovoEd, 2014). Assuming that the rest of the world would add another $50 billion,
totals up to a $100 Billion for the Taxi & Limousine market. Given that Uber is projected
to make $10 billion in revenues next year (Shontell, 2014b), Uber currently owns %10 of
the global Taxi industry (Damodaran et al., 2014b) with the potential of increasing as
their operations mature in all the cities it is operating in.
There are several factors that affect Uber’s market share. First, the efficiency of its
operations; the bigger Uber gets the more it benefits from the economies of scale till a
certain point. The second factor is the available competition in the market such as Lyft


45

and Hailo who are backed with sufficient funds. Another factor that imposes a high risk
on Uber’s market share is the impact of any legal issues they are currently facing and will
continue to face as their operations expand. It is difficult to quantify the risk imposed as
these legalities could take years in courts and that each taxi industry has different
regulations. On the positive side, since operating in 2009 Uber has not shutdown their
operations in any of the cities except for one.
Facing regulatory obstacles. Several tactics dealing with the government as a shared
economy firm can be applied to create a mutually beneficial and co-operative relationship
with the government. Suggested examples of these tactics include:
a) Proactive: Most shared economy firms are perceived as new concepts that
require plenty of explanation to regulators. A beneficial proactive move is to
provide accurate and complete explanation on how they operate. Taking Uber
as an example, the company is categorized as a communication platform
instead of a transportation firm. This has been explained given the nature of
Uber’s operations, as they own none of the vehicles running but only act as
market matchmaker for the drivers and users. So Uber is an intermediary
(Uber.com, 2014a).
b) Responsive: Various sharing economy business models face serious concerns
regards user safety, privacy and access. In regard to ridesharing firms, excessive
care should be taken to avoid any additional concerns raised by the regulators.
Taking all required precautions when dealing with providing safe and insured
rides is essential as it acts as a positive response to any regulatory concerns. Uber


46

has created a blog where it addresses any raised concerns and provides detailed
information to eliminate any misconceptions ( Refer to Appendix F).
c) Provide evidence: Presenting their case with a well-established market study, as
a proof of beneficial results is desirable in the battle against regulators. Having the
public perception of being more eco-friendly could encourage a better level of
support. Recently, Susan Shaheen, an expert from U.C. Berkeley, conducted a
study that concluded that car sharers report reducing their vehicle miles travelled
by 44%, which reduces the level of harmful emissions (Harvard Business Review,
2014). Using similar types of studies for example the study of the correlation
between the decrease in alcohol related accidents( Refer to Appendix G) and the
demand on Uber during the late hours of the weekend known as the “Uber Effect”
(Effect and Oberman, 2014) is another source that ride sharing firms could pursue
to pressure regulators to adjust current regulations in favour of newly introduced
market efficiency developments
Competitive Edge
In the current standing market and existing system, taxi drivers get a relatively
small part of their whole revenue (5-10%). On the other hand, there are a significant
amount of customers located in several underserved cities with no taxis available or
extremely long waiting times. Thus, Ubers’ service has a competitive edge in fulfilling
both of those two target groups needs providing everywhere service at cheaper rates and
good driver’s pay (Damodaran, 2014a).


47

In addition, Uber presents itself as a technology company not a transportation one
(The Globe and Mail, 2014), although this causes confrontation with regulated services
and governmental challenges but provides Uber with the freedom to provide the kind of
transportation service that is really demanded; cost, quality, efficiency and availability
wise.
Pricing
Strategy

Uber’s has followed a pricing strategy to become a low price leader of the market
by the launching of its UberX service. UberX is currently the company’s fastest,
strategic, largest and most growing service offered in many cities around the world with
intentionally lowering its price as often as it can be done (already was decreased 4 times
in some cities) to maintain that status.
In addition “Surge pricing” (discussed before) is kept at levels to affect less than
10 % of Ubers rides in attempt to both provide an efficient service at peak times yet hold
with UberX as the main price focus for the service the rest of the times(Above the
Crowd, 2014).
Sales
Strategy

In sales, Uber is strongly working to launch more rides in as many places as
possible regardless of profits. This strategy towards popularity rather than revenue is
common to technology companies’ start-ups, falling in the footsteps of Amazon
(Wohlsen, 2014a).
The company is also determined to keep its wheels running on the road by simply
ignoring the many cease-and-desist demands from regulators. Since this strategy was
successful in San Francisco (first cease-and-desist order) the company survived many


48

attempts to restrict its service both locally and globally (Wohlsen, 2014a).
Also Uber focuses on getting political leverage by hiring or attracting high-
powered lobbyists to assist the company’s stand up against its many law suits and battles
as well as strengthening its public convenience (pricewise) to discourage decision-makers
and politicians from pursuing their case fearing public rage (Wohlsen, 2014a).
One of Ubers’ sales strategies is to reach elimination of car ownership by offering
enough affordable services to cover enough places making car ownership unnecessary
(Wohlsen, 2014b).
Strategic
Alliances
Strategy

Uber significantly seeks partnership with a number of strategic partners both
globally and locally to enhance its sales growth strategy and increase its users numbers
yet in a mutual gain relationship. The following are some successful examples:
• Partnership deals with Auto manufacturers and dealers for drivers to purchase
cars at better rates. This in turn increases Uber’s workforce and revenues (Milian,
2013)
• Partnership with American Express to gain points in the membership rewards
program hence increasing clientele base (Uber, 2014).
• Partnership with Red Cross in disaster times to help save people joining other
disaster relief actions (Uber Blog, 2014e).
• Partnership with Microsoft in launching an Uber’s app for the window phone to
further serve convenience (Uber Blog, 2014h).


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Uber’s Management

Beyond all strategies, Kalanick has assembled a highly professional management
team that emphasises measuring as many data inputs and outputs collected every second
of the day. Uber uses advanced mapping technology, sophisticated algorithms, GPS, and
a whole math department to measure these metrics related to all aspects of their service to
maximise its use and improve its quality (Tc.umn.edu, 2014).

Travis Kalanick CEO & Co - Founder at Uber Technologies Inc.
• Travis Kalanick is a successful entrepreneur who founded Uber in 2009.
• Started to code in sixth grade however dropped out of college at UCLA
• Before Uber, Travis established Red Swoosh, which was an enterprise content
delivery company sold to Akamai Technologies in 2007.
• Previously founded Scour, the world's first p2p search engine where
• Today owns 13 investments in 10 companies
Ryan Graves -Head of Global Operations
• Ryan holds a B.S. in Economics from Miami University
• He led enterprise resource planning and corporate restructuring at General
Electric and CNA Insurance
• He also focused on growth and business development for Foursquare and Social
Dreamium
• A strategic problem solver that turned Uber’s operations team from a single
employee to an international workforce.


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Garrett Camp Co-Founder & Chairman
• Garrett holds a Masters in Software Engineering at the University of Calgary,
researching interfaces for collaborative systems, evolutionary algorithms and
information retrieval. In 2007 he received MIT Technology Review's TR35
award.
• Garrett founded ‘Expa’, a startup studio working with founders to launch new
products for 10 years successfully.
• Garrett co-founded Uber.com in 2009 with Travis Kalanick
Salle Yoo-General Counsel
• A graduated from Scripps College and Boston University School of Law
• Salle as partner at Davis Wright Tremaine LLP, represented leading energy,
telecommunications and technology firms
• She serves the Asian American Bar Association of the Greater Bay Area and the
Museum Council for the Asian Art Museum boards
• Salle secures Uber’s rapid expansion globally and sustain growth
Than Pham - Chief Technology officer
• He holds a B.S. in Computer Science and Engineering and an M.S. in EE/CS from
MIT
• Ex-VP of Engineering at VMWare, Westbridge and DoubleClick,
• He creatively solves any challenges that face Uber’s growth.


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Brent Callinicos - Chief Financial Officer
• Graduate of University of North Carolina, Chapel Hill
• Ex-VP, Treasurer and Chief Accountant at Google
Jeff Holden -Chief Product Officer
• Graduate of University of Illinois, Urbana, Champaign
• Ex-Senior Vice President of Product Management of Group on since April 2011
• Ex-CEO and co-founder of Pelago
• Worked at Amazon.com, as Senior Vice President of Consumer Websites,
Worldwide (worldwide consumer website experience, personalization,
ordering/Amazon Prime, (Associates, SEM/SEO).
• Ex-VP at D. E. Shaw & Co., L.P. in New York (front office software
infrastructure)


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Key Project Assumptions
Several assumptions have been made throughout this project. These assumptions
are crucial in determining if Uber is a financially feasible venture. The following is a
brief summary of these assumptions:
Service
• Uber is registered as a firm operating in the technology industry but given the
nature of Uber’s main operations we assume that Uber competes in the Taxi &
Limousine services industry that had suffered a long time standstill leading to
unsatisfactory service giving Uber the competitive advantage.
• Uber is also exploring and trying all forms of consumer logistical services
expanding on the ones that show success even if it means fierce competition with
already established competitors.
• International expansion is unique to Uber in comparison to its other homeland
U.S competitors, always competing mainly against regulated taxis in other
countries, which even if varies from country to country still stands a high rate of
success.
Target market
• Claims by CEO Kalanick describe how Uber is generating 20% in gross revenue
and doubling revenue every six months. The accuracy of such statement is key in
the projection of future revenue figures.


53

• Uber’s growth is not only fast but also vastly exceeds its competitors; its position
in the market attracts strong investors supporting its capital in its price wars
against its competitors gaining more market share and higher revenues.
• Various studies have been done to try to analyse different relevant internal and
external factors affecting Uber and its future. Their data mentioned predicts high
valuations and great potentials for the company’s success.
• Due to increase in popularity and demand for shared economy services in addition
to the fact that their service provision is done more efficiently, suggests that a
regulatory change in favour of Uber’s future operations in some countries but not
worldwide but this will add up to reach its final valuation.
Profitability
• Uber’s so far valutions are growing big and in short times ; such continuous
progress is solid and confirmed with the evidence from investment rounds
completed and proposed and leaks on the companies behalf.
Leading Management
• Uber’s leading management team are of diverse , professional expertise that
confidently lead the company and have shown so far nothing but success.


54

Economic Impacts
Shared Economy
Sharing economy is a socio-economic system built around the sharing of human
and physical resources. Recently sharing economy firms have been disrupting traditional
industries across the globe. Other apps such as Airbnb, which operate in the same fashion
as Uber, have been valued at $10 billion (Lunden, 2014). Uber operating only since 2009
has managed to receive a valuation of $18.2 billion relative to car rental firms such
as Hertz at $12.5 billion and Avis at $5.2 billion (Harvard Business Review, 2014).
Firms operating in the sharing economy have been questionable regards issues
such as privacy and security of sensitive information in addition to safety when it is a
company like Uber. These concerns are similar to concerns customers faced when they
started online shopping; recently these customers are a bit more comfortable using this
service. According to a recent study the sharing economy was valued at $26 billion with a
projection of growing to $110 billion in the near future (Harvard Business Review,
2014).
The business structure of sharing economy firms utilize, where peers can offer and
purchase goods and services from each other using an online platform has witnessed a
broader application in various industries. These firms generate significant economic,
environmental, and entrepreneurial benefits including an increase in employment and a
reduction in harmful emissions (in the case of car sharing services). Jeremiah Owyang
Founder of Crowd Companies Council conducted a survey analysing the global shared
economy market, on Oct 25th, 2013(Refer to Appendix C). The survey targeted adults
under the age 35 as they are the most digitally savvy. This target group would prefer the


55

opportunity of sharing or renting rather than owing. It was found that 77% of the
participants agreed that using sharing economy is an efficient way to save money. Among
who have took advantage of shared economy services, 36% were encouraged to use it for
their overall convenience rather than financial motives ( strategist.com, 2014a).
All the previous statistics and numbers regards the future of the shared economy
and increased demand for its services are signals of potential growth of revenues that can
be captured by shared economy firms.
An obstacle that hinders these firms from taking advantage of this opportunity is
the resistance various city governments have showed. Firms are facing an increase in
subpoenas and cease-and-desist orders issued against them in addition to incurring more
fines.
According to an April 2013 study by the Center for Automotive Research, the
auto industry generated around $91.5 billion in state taxes in 2010(Auto Alliance, 2014).
Transactions of new and used cars contributed by $30 and $20 billion from vehicle
registration fees.
The U.S. Department of Transportation reports that 51.2% of new cars in 2010
were for the purpose of personal use (Primack, 2013). Assuming that ride-sharing firms
are able to sustain their current business model while minimizing the impacts of
regulatory criticism, the number of cars purchased for personal use would decrease as a
more convenient option of transportation is offered compared to current Taxi services.
This would subsequently impose a negative economic impact on the government’s annual
tax revenue.


56

In addition, Uber and other ride-sharing firms are facing significant resistance
from local Taxi companies and drivers after successfully capturing a significant market
share. Fearing future expansion plans and identifying current negative impacts on their
incomes, local taxi drivers organized strikes in several cities. The local taxi drivers called
for legal action against the ride-sharing firms claiming that the ride sharing firms are not
following the current regulations accurately.
Venture Capitalists Contribution to Shared Economy
The process of shared economy firms valuation is complicated, especially Uber
since it is a private company. Common fundamentals used such as revenue growth is
essential but harder to account for it’s full potential. The uniqueness in which these firms
operate has not been fully uncovered in addition to a highly variable regulatory
environment globally. Considering the current downsides in assigning a value to shared
economy firms, Venture capitalists have shown strong support as various shared
economy start-ups managed to obtain financing through large funding rounds. Examples
of these firms include:
1) Care.com. A public company that assists families with child care, senior care,
special needs care, pet care and housekeeping.Care.com is founded in October 1,
2006 and just went public in January 2014.It raised $109 million in total funding,
most recently a $50 million round in August (VatorNews, 2014)
2) Airbnb. A website founded in August 2008, that provides the users with ability to
rent out lodging. AirBnb has raised $326 million altogether at a $2.5 billion
valuation (VatorNews, 2014).


57

3) Lyft. Uber’s main competitor offering ride-sharing services. Lyft raised $333
million, with the majority of its funding raised last year (Weber, 2014).
4) TaskRabbit.A web and mobile platform helps users to outsourcing small jobs
and tasks to other people in their area. TaskRabbit has raised $38 million,
including $17.8 million in Series B funding in December 2011 (Siliconangle.com,
2014).
5) Uber. Raised a total of $307 million, including a recent $258 million from Google
Venture (Dickey, 2014a).
A recent survey on the future of shared/collaborative economy future was
executed by the partnership between Crowed Companies; a brand council that help large
corporation explore the collaborative economy and Vision Critical; cloud-based customer
intelligence platform that allows companies to build engaged, secure communities of
customers they can use continuously, across the enterprise, for ongoing, real-time
feedback and insight (Web-strategist.com, 2014). The survey covered 90,112 people the
US, Canada and the UK and targeted three categories of users of shared economy:
1) Re-sharers. Those who buy and/or sell pre-owned goods online, but have not yet
explored other services of the shared economy.
2) Neo-sharers. People, who use the newer generation of sharing sites and apps, like
Etsy, TaskRabbit, Uber, Airbnb and Kick-starter.
3) Non-sharers. People haven’t yet participated in the shared economy.
The results from this survey signal an overall increase in participation in shared
economy. The results provide statistics regard the current demand for the services and the


58

reasons encouraging more people to build a higher dependency on it. In addition, a
projection of the future increase in demand for shared economy services has been
forecasted (Web-strategist.com, 2014a).
Financial Plan
Uber as a five-year-old company raised fierce competition between potential
investors to be included in its exceptional growth. Uber announced on the 6th
of June this
year that they have closed a round of financing comprised of major investors with a total
raise of $1.2 billion of primary capital, thus a $17billion pre-money valuation (Uber
Blog, 2014l) with $3.5 billion financial rise from last year. In total, investors put Uber at
an $18.2 billion valuation with Wellington Management & Fidelity Investments owning
most of the investments (Kovach, 2014). Investors claim that with this evaluation, Uber
set the record in the U.S technology market of start up business (Saitto, 2014). However
Uber is now seeking a new round of funding to raise up to $1.8 billion which will value
Uber at $41 billion, from its previous $18.2 billion valuation in its last funding round
(Mossberg, 2014). Uber will use this money for further growth and expansion as well as
penetrating the “on-demand package delivery” logistics’ industry (Bidnessetc.com,
2014).
Uber’s financials remain confidential with an exception of a leak made in
December 2013 was a screenshot of Uber’s dashboard but confirmed by Uber (Gannes,
2014) although not covering all of its services.


59

(Tiku, 2014)
The figures in the leaked screenshot revealed that over a period of 5 weeks
between December and November 2013 a growth of above 11% in growth revenue,
above 398,000 new signups below 80,000 every week. If this is the case year round then
the company is gaining above $1billion gross booking with revenue of $213 million per
year (Panzarino, 2014). This was in the year 2013, a definite expected increase is
anticipated in 2014. In fact, investors predict that Uber will be able to generate $10
billion in 2014-2015, keeping a 20% of this translates Uber’s net $2 billion (Shontell,
2014b). To fully comprehend, compare this with Facebook’s 2014 year’s expectancy to
reach the $10 billion mark after 10 years of fully operating (Shontell, 2014b).
Other leaked internal data for December 2013 (Shontell, 2014a) detailed city data
as regards working drivers, revenues, average fares, users etc concluded the following:
• Uber’s main revenue comes from its well-developed markets; Uber gained $11.7
million from Washington, D.C. (141 million annual run rate), $26 million from
New York City, (annual run rate of $312 million) $12.7 million in Chicago,


60

(annual run rate of $152.4 million), $17.7 million in San Francisco (a run rate of
$212.4 million)(Refer to Appendix I).
• The top five markets or cities (excluding 2014 expansions) would generate
$1billion per year ).
• Uber’s one year estimated growth rate was 369% (Shontell, 2014a).
• In the big cities over 100,000 trips were made every week (Shontell, 2014a).
• In one day (New years eve 2013) Uber ‘s revenue was$ 10.6 million across 60
operational areas around the world (Refer to Appendix I).
Key Financial Assumptions & Indicators
Although there are no official information for Uber’ operational data we may conclude
from their annul financials and leaked (verified by Uber) data some valuable assumptions
and indications:
1) Uber’s revenue growth rate was estimated to be 300% in 2013 with a provisional
estimation of another 300% in 2014 (Blodget, 2014a).
2) In 2013 through leaked information on a dashboard Uber was gaining $20 million
in revenue every week (Moss, 2013).


61

3) The number of cities the service is operational is growing (61 in 2013 to over 200
to date) subsequently the average rides /month is increasing with the expected
revenue /user. Also Uber is growing faster than its competitor Lyft with more U.S
cities (90) than Lyft (70) (Bidnessetc.com, 2014) ( see appendix fp )
4) Most of the revenues come from a number of strategic cities, which are not even
fully covered (Refer to Appendix G), further coverage expansion to other
countries will increase revenues (Blodget, 2014b).
5) Operational expenses are limited to setting the technology infrastructure, which is
once set, the operational costs usually decline.
6) Uber has a product /service business model is creating revenues with almost no
debts yet a cash cushon capital ($1.2 billion recently).
7) Uber’s pricing strategy to lead the market as the lowest significantly exhausts its
competitors in the ride sharing industry.
8) Uber is generating revenues faster than its main competitors (refer to Appendix B)
Controversial Future Revenue Projections
Controversy about Uber’s outstanding valuation has set several arguments about its
justification since it will place it same as Kraft Foods Group Inc, Delta Airlines Inc, one
and half times the capital of Twitter and no comparison with Hertz (Saitto, 2014).
Uber has stated to its investors that its gross revenue for 2014 had exceeded $4
billion and hence expected to be $10 billion in 2015(Mossberg, 2014). Ilan Mochar, Inc’s
.com magazine writer argued that is very common for Uber as many other start up
companies to flourish quickly then fail up to bankruptcy; it happened to daily deals


62

“Groupon” that was actually valued $17 billion once now $4billion and many more failed
up to bankruptcy (Oremus, 2014). However he also argued that with Uber’s rate of growth
as a good alternative in the $11 billion revenue Taxi & Limousine industry (U.S), it has
great potential to reach its valuations. Also with the idea of ending car ownership in mind
will certainly assist to reach its valuations (Oremus, 2014)..
However, two other scenarios described by Aswath Damodaren, a Finance
Professor in Stem School of Business at NYU tried to justify Uber’s current valuation of
17 billion (Damodaran, 2014a) (refer to Appendix B for more information on Uber’s
valuation) by the either following;
• The Taxi & Limousine industry total revenues must be three times his
estimate of $100 billion or,
• Uber’s market share of the industry must be double his estimate of 10% of
the total market.
Assuming that Uber’s market share is fixed at 10%, a valuation of $17 billion is still
unjustified even if the industry generates $300 billion in revenues (Damodaran, 2014a).
Conclusion
Given that the goal of the project is to determine if the venture is financially
feasible; after completing this business plan I developed my conclusion through
analysing the pros and cons of Uber’s current position as a rapid growth start-up valued
at $18.2 by several analysts. The strong financing rounds and current investor’s optimism
promotes Uber as a financially feasible venture. All data obtained about Uber’s revenue
growth suggests solid strength translated by the fact that the firm managed to generate


63

incomparably high revenues in a short period of time operating with low expenses not
just locally but globally as well. The growth rate of the more efficient shared economy
market coupled with Uber’s position, as a market leader in the ride sharing market is a
signal that Uber is yet to mature and capture a higher percentage of the market share.
Competitors are only taking a small fraction of Uber’s target market, which Uber
overcomes by continuously changing its pricing strategies proven to be successful so far.
Further potentials also reside in Uber’s possible future attempts to penetrate the
logistics industry, if pursed with calculated expenses, Uber may become a fierce
competitor in this industry and gain another great market share with more revenues
verifying its valuation.
The only significant barrier that might face Uber’s growth is governmental
opposition and regulations in some countries, but again this will not be worldwide or
absolute, on the contrary regulations under public pressure (where Uber is most
successful and resisted ) may come in Uber’s favour finally.
Finally, Uber’s technology driven success will never seize to scale in proportional
to consumers’ thirst for services or products with technological convenience. Revenues
of this century belongs to companies similar to Uber, Facebook, etc
I believe that Uber is an attractive investment opportunity. If Uber is to go public
issuing an IPO, I would recommend investors to buy in to take advantage of the projected
increase in the firm’s value


64

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