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11
Mar
2014

Uber: Mobile Redefines the Market for Taxis

POSTED BY Analyst Team
Start-up Uber has been not-so-quietly redefining the market for taxis since its inception in 2009, and has spurred a number of similar companies – most notably Lyft and Sidecar – to success as well. The premise of San Francisco-based Uber is straightforward: after downloading the app, users simply request a ride and the nearest Uber driver of their specified car (from an ‘everyday car’ to an SUV or ‘luxury’ car) will be with them in a short time. The phone’s GPS is used to find the pickup location, and the taxi driver can be tracked using a map in the app. Users can then pay using their mobile device, rate their driver, and receive promotions on their device for money off their next ride.

Uber doesn’t describe itself as a taxi company – it merely connects users of its app to licensed drivers, who are either independent or affiliated with other taxi companies. And the number of cities where Uber is available is rapidly growing – users can request lifts in locations as far ranging as Abu Dhabi and Zurich.

Smooth sailing right? Unfortunately not; Uber and their competitors have run into a number of difficulties since their formation, and the challenges seem to keep on coming as they expand to more cities. This is to do with the legal ‘grey areas’ which surround these taxi apps – in a nutshell, people can’t pick others up from wherever they like. In addition to this, Uber have run into difficulties given the lack of background checks on their drivers, which came to the fore when an Uber driver in San Francisco killed a six-year-old girl (Uber does not accept liability given that the car was not carrying an Uber passenger at the time of the tragedy).

Furthermore, Uber’s business model is questionable: The company operates ‘surge pricing’, which means that at times of peak demand (eg during a heavy rain shower) prices increase. Uber argues that this is to encourage its drivers to work when they might otherwise rather not, however it presents some debatable approaches to safety.

However even given these practices, it is clear to see the Uber, Lyft and Sidecar are successfully revolutionising a market that had been stuck in its ways for a number of years; indeed, Uber has confirmed that it is generating gross revenues of more than $20 million a week. Arguably, the consumer benefits from this, with faster pickups and cheaper rides, which begs the questions – which industry will mobile work its magic on next?