For the user, it’s friction-free, just like having a private driver.
Unless you live under a rock, you’re probably aware of the phenomenon that is Uber. Simply put, Uber is a car service for people with smartphones (its tagline is “Everyone’s Private Driver”).
You download the Uber app onto your phone and provide it with your credit card details (an important element of the service requires this). Then, next time you need to be driven somewhere, instead of calling a taxi, you pull out your phone and open the app. You set your location and request an Uber driver to pick you up. Once a driver takes your request, you can track his or her location on your phone, so there’s none of the uncertainty you get when waiting for a taxi to arrive. The driver shows up, drives you to your destination and you get out of the car. No exchange of cash or credit card, no tipping. That’s the first element of Uber: For the user, it’s friction-free, just like having a private driver. It costs about the same as a taxi ride, but the experience is much more pleasant.
Disclaimer: I’ve never used Uber, so let me quote an actual Uber user from Boston (my pal, Fritz): “I’m an Uber convert and near-zealot. To a large extent, what I love about Uber is all the ways it’s not a taxi. No need to worry about cash. No being told I can’t use my American Express business card for that business trip to the airport. No tipping. Nice cars. No crazy paper receipt I have to save—the receipt arrives automatically by email!
“Mostly, though, when I need a ride somewhere, I don’t want to wonder whether the meter is rigged and the driver is taking me the long way around to charge more. I don’t want to do a slow burn because they charge $3 extra just to use a credit card. I don’t want to fret about whether a taxi will actually arrive after I call at 5 a.m. and talk to some grumpy dispatcher who doesn’t sound like he gives a hoot as he hangs up on me.
“All that stuff goes away with Uber. Before I take the ride, I see an estimate of what it will cost. I can actually see the car coming my way on a map. My business credit card is already in the system. The cars are in decent shape; some are quite nice. The drivers even seem to have been told that you probably don’t want to chat. I just get my nice, simple ride.Uber is a lot better than taxis.”
The flip side is that Uber drivers aren’t Uber employees. They’re independent contractors. so the app also connects idle drivers to people needing a ride. At the end of 2014, Uber had approximately 160,000 drivers who gave at least four rides during a one-month sample period. Drivers are paid weekly via direct deposit, and Uber takes 20 percent of the fare as commission. So, Uber is in the business of connecting people who need a ride with people who can drive them.
Uber has also captured the fancy of the investment community: The company has raised an astounding $5.9 billion in 10 rounds of investment funding since its founding in 2009 and is currently valued at approximately $50 billion. Investors justify this valuation on the fact that Uber dominates its market, is aggressively expanding worldwide and, finally, because of its potential for expansion into on-demand delivery and logistics. Personally, I see another, longer-term, play: Uber has made people more comfortable with the idea of being driven somewhere and has built a market of people willing to use the service. Imagine Uber partnering with a company—cough, Google, cough—that provides driverless vehicles.
Inspired by the success of Uber, other companies have sprung up to connect service providers and people who need that service, on demand, in a friction-free fashion. Call it “Uber for Everything” (as The Wall St. Journal did in a recent article): “There’s an Uber for everything now. Washio is for having someone do your laundry, Sprig and SpoonRocket cook your dinner and Shyp will mail things out so you don’t have to brave the post office. Zeel delivers a massage therapist (complete with table). Heal sends a doctor on a house call, while Saucey will rush over alcohol. And by Jeeves, cutesy names are part of the schtick—Dufl will pack your suitcase and Eaze will reup a medical marijuana supply.” Each driven, of course, by an app on your smartphone.
In each of these cases, the service provider also has an app. And if there are multiple Uber-like offerings (for example, Lyft and Sidercar), a provider can sign up with all of them to maximize its access to customers. It’s a strange, new aspect of the “gig economy,” where you’re paid for each short-term engagement.
Next month, a little more about Uber. In the meantime, send your questions, comments and suggestions to me at mduffy@northbaybiz.com.
