Uberization: The Rise of Sharing Economy

Uber on Smart Phone
"Uber company logo on smartphone screen over the face masks. Global company during coronavirus crisis" by wuestenigel is licensed under CC BY 2.0

The ridesharing company Uber could be considered as one of the most significant transportation service platforms within the concept of sharing economy, which offers the “production and consumption of goods and services” (Valente, Patrus, & Guimaraes, 2019, pp.143) as a mobile application to increase the use of “underutilized durable assets” (Albinsson & Perera, 2018, pp.4).

Such innovated business model is supported by digital technologies and has turning to be highly influential all over the world. While everyone’s life become easier by using Uber, its effect to alter online business model also highlights the fact that Uber’s unique operation strategy and social ecosystem under the context of sharing economy is worthy to be investigated.

This critical analysis will thus look at the history of Uber’s development, its business model as a service platform within the internet ecosystem, and moreover its institutional transformation and impacts on transforming into a gig economy (Laurell & Sandstorm, 2015). Uber’s debatable issues on data privacy and also safety concerns will also be discussed.

 

What is Uber?

Uber is a car transportation service platform that connects the passenger and the driver. It offers the navigated route, arrival time estimation, the calculation of fares and also payment through the use of digital technology on mobile app (Dudley, Banister, & Schwanen, 2017). This service has now been extended to over 785 metropolitan areas and more than 10000 cities around the world (Uber Newsroom, 2019).

uber facts
Screenshot of Facts and Figures of Uber in 2018, 14th November 2020

Uber’s initial intention is allowing everyone to travel across the town by just a simple click on their phone (Allen & Berg, 2014). Its function is also keep upgrading which more services and a wide range of prices have now been offered.

 

Historical Overview:

Uber was officially launched in 2009 in San Francisco by two founders Garrett Camp and Travis Kalanick. They first met at the LeWeb technology conference in Paris in 2008, and in 2009, Camp built up this service’s first version “UberCab” with his two graduates’ friends and it then quickly gets hit (Hartman & Leskin, 2019).

In 2010, UberCab was then renamed as Uber to avoid its over advertising within the taxi industry and it started to grow more internationally afterwards (Hartman & Leskin, 2019).

More services were then created including UberX being the best option for a private ride, UberPool for sharing one ride with people who are travelling in similar routes, and also UberEats for food delivery. Those features have successfully made Uber turning to be an unavoidable application to use in daily lives (Uber Offerings, n.d.)

 

Business model of Uber

Uber’s business model demonstrates a more collaborative ecosystem which the most iconic features are its instant service, the two-sided market, and the dynamic pricing.

Instant Service:

The nature of instance in Uber’s service is very essential to maximise the efficiency of vehicle utilisation. As the passenger placed its order on the app, Uber will automatically assign the closest drivers to customer’s location. Such “on-demand availability” (Smith, 2016, pp.385) makes it can quickly get a new order when the previous one is finished to reduce the empty driving time that occurs commonly in traditional taxi industry.

uber price
Screenshot of Varied prices of Uber rides on the app, 15th November 2020

 

Two-sided Market:

Uber’s operation of the two-sided market has also contributed to the increase of its service’s efficiency. This business strategy requires a continuous attraction for new buyers and seller, and this also emphasises that “users’ acquisition and retention” are critical (Bogen, 2017). Through this asset sharing method, the utilisation rate of cabs could also keep increasing when the group size of both drivers and passengers are quickly expanding (Bashir, Yousaf, & Verma, 2016).

Dynamic pricing:

Dynamic pricing is a pricing algorithms Uber uses to allow rates varied in different time and locations. This encourages more drivers to get on the road since they have more flexible working time and such pricing system also fulfil various customers’ requests (Uber Blog, 2019).

 

 

 

Watch the following Video to have a deeper understanding of Uber’s business model canvas.

Uber’s Social Ecology:

Ownership   

The current two leaders of Uber are its CEO Dara Khosrowshahi who joined in August 2017 and Garrett Camp who founded Uber. He created the company with his friend, the former CEO and co-founder Travis Kalanick, who has left since 2017 but is still currently the largest individual shareholder of the company (Mascarenhas & Wilhelm, 2019).

Ecosystem:

Uber as an iconic example of business situating in sharing economy, involves the transformational concept of “collaborative consumption” (Albinsson & Perera, 2018, pp.4), which offers consumers a third-party platform to interact with each other for certain services.

Supplier and User: The main suppliers of Uber are drivers, they are in charge of providing service and also the car for Uber’s customers, and users are passengers who take the rides. According to the official website (n.d.), the purchased order will be sent directly to suppliers and an invoice would then send to purchasers once the order is completed.

A rating system is also given to the customer which they could provide feedback on their rides’ experience in order to encourage drivers working harder. Such “reputation mechanism” is able to protect both passengers and drivers through giving feedbacks on their actions (Allen & Berg, 2014, pp.8).

Regulation:  Every state government in Australia is taking responsible of the “ridesharing regulatory regimes” (Department of Industry, Innovation and Science, 2018), and many people suggested that more regulatory issues should be considered for uber due to their concern upon digitalisation’s transformational and disruptive effect on other industries’ development.However, Regulation can be seen as a barrier for sharing economy business like Uber since some city governments may resisted these companies by issuing cease-and-desist orders (Cannon & Summers ,2014).

Read this news article to see how Pennsylvania regulates and fines Uber: Pennsylvania fines Uber $11M for operating despite cease-and-desist order

Business Partners: Drivers provides their own car for the business which Uber does not need to pay any capital cost for it and moreover, Uber also have technology partner for their platform’s basic operation, this includes map, GPS system from Google Map and also the payment system inside the software (“Business Model Canvas Uber”, 2020).

Competitors: An exact data given by Royal Morgan (2020) shows that out of Australian who have used ridesharing service in the past three months in 2019, 93% of them is using Uber and its competitors Ola and DiDi occupies only 20% and 14% of the group. According to this statistic, it shows that Uber is still the leading business of the ridesharing industry in Australia.

 

UBER SOCIAL ECOSYSTEM

Uber Ecosystem Graph

 

Institutional Transformation:

According to Laurell and Sandstorm (2015), new technology’s appearance may also have a profound impact on the “institutional setup” for a certain industry. Uber as an innovated ridesharing service increases the difficulty to be regulated by government in a political aspect, and this type of platforms required a transformation on institutions.

The sharing economy principle of Uber has resulted a more complicated regulatory regimes to fit within such innovative operators. Its business ecosystem does not fit into any existed templates since it challenges everyone’s previous notion upon “organisation, employment, and patterns of life” (Dudley et al., 2017, pp.493).

Social Debate 1: Safety Issues

According to Uber’s claim, the company received more than 3,000 sexual assault reports in 2019 within 1.3 billion rides in the US (Reuters, 2019). Read the following news article for further details.

Related News Article: Uber releases report confirming more than 3,000 alleged sexual assaults by its US drivers or passengers

For a fast-growing company like Uber, sexual harassment cases could easily exploit the image of the brand. This problem may result in the consequence that proper checks on drivers’ background information when hiring them are likely to became one of Uber’s main focus and concern (Uber Drive, n.d.).

Regulation on uber drivers is very important since this is a personal service that may raise safety issues, and uber has done this in a strict way to protect both drivers, customers and also the car (Uber Drive, n.d.).

It claims that to register as an Uber driver needs to provide a large number of documents including identity card, health reports, criminal record, car information and many others to prove whether you are qualified for this role. Similarly, driver also has their rights to reject certain customers when they feel that they are in an unsafe circumstance (Yun et al., 2020, pp.7).

Social Debate 2: Users’ Data Privacy

DATA PRIVACY
“atelier-data-privacy” by DJANDYW.COM is licensed under CC BY-SA 2.0

This somehow gives opportunities for hackers and such breaches of privacy are not only destroying Uber’s customer information security, but also breaking users’ trust with the company (Goggin et al, 2017).

As more engagement involved under this sharing economy, everyone’s private data has also been exposed into the pubic and businesses. This somehow reveals the problem of digital rights causing by such innovative platform, since the regulation upon “behavioural analytics” and “users’ data on-selling” remains unclear (Goggin et al, 2017, pp.5).

 

Uber transforming our lives

Uber has revolutionarily altered people’s daily transportation method which is also quite controversial as people who support it think that Uber makes everyone’s life more convenient and it also save the money to purchase a car. In the other hand, others argue that it encourages more consumption and both suppliers and consumers are actually affording more risks (Albinsson & Perera, 2018).

Gig Economy

gig work
Tables from Digital Rights in Australia revealing Gig work jobs leave workers financially insecure. Copyright (2017) by University of Sydney Press.

In an economic aspect, uber has accelerated the gig economy which increase the flexibility of work butcausing a more precarious working environment at the same time (Burger, Frey, Levin & Danda, 2018). Doubters criticise that Uber in fact is an “unregulated and exploitative system” (John, 2016) which drivers from Uber work without any employee protection and social rights, it also shows that the relationship between business and labour force has now been subverted.

According to the Digital Right in Australia (2017), 50% people believes that gig works is a “good entry-level job” for people to enter but only 13% disagreed that gig-work is insecure, which most people believe that such work type brings up a financial insecurity (Goggin et al, 2017, pp.43-44).

Therefore, Uber refuses to treat its drivers as employees could be a major issue as it leads to tensions of working hours, payment benefits and also social security (Dudley et al., 2017). The increase of gig-workers has resulted in increasing difficulty for them to enjoy work insurance, compensations, and also retirement benefits. It is questionable whether such economy may weaken the economic development of a country (Steinberger, 2018).

However, many people take this role as a second job due to its time flexibility, and thus it gives everyone an opportunity to earn additional income benefit (Albinsson & Perera, 2018).

 

Conclusion:

Overall, through a deep study on Uber, the investigation of this internet service demonstrates that it has a transformational impact on today’s digital society due to its unique business model with a sharing economy concept, how it alters people’s lives through the appearance of gig workers and also debates upon its privacy and safety concerns (Laurell & Sandstorm, 2015).

 

Work Cited:

Albinsson, P., & Perera, B. (2018). Introduction: Sharing in Modern Societies. In The rise of the sharing economy: exploring the challenges and opportunities of collaborative consumption. Praeger, 3-71. 

Allen, D., & Berg, C. (2014). The Sharing Economy: How over-regulation could destroy an economic revolution. Retrieved from http://www.ipa.org.au/

Bashir, M., Yousaf, A., & Verma, R. (2016). Disruptive business model innovation: How a tech firm is changing the traditional taxi service industry. Indian Journal of Marketing, 49-59.

Berger, T., Frey, C., Levin, G., & Danda, S. (2018). Uber happy? Work and well-being in the “Gig Economy.” Economic Policy, 34(99), 429–477.

Bogen, M. (2017). Uber and “The Taking Economy”. Medium. Retrieved from https://medium.com/equal-future/uber-and-the-taking-economy-b75d0b978bf8.

Business Model Canvas Uber. (2020). Innovation Tactics. Retrieved from https://innovationtactics.com/

Cannon, S., & Summers, L. (2014). How Uber and the Sharing Economy Can Win Over Regulators. Harvard Business Review. Retrieved from https://hbsp.harvard.edu/home/

Department of Industry, Innovation and Science. (2018). Uber in Australia. Retrieved from https://www.industry.gov.au/data-and-publications/uber-in-australia

Dudley, G., Banister, D., & Schwanen, T. (2017). The Rise of Uber and Regulating the Disruptive Innovator. The Political Quarterly, 88(3), 492-499.

Goggin, G., Vromen, A., Weatherall, K., Martin, F., Webb, A., Sunman, L., & Bailo, F. (2017). Digital Rights in Australia. Retrieved from https://ses.library.usyd.edu.au/handle/2123/17587

Hartman, A., & Leskin, P. (2019, May 19). The history of how Uber went from the most feared startup in the world to its massive IPO. Business Insider. Retrieved from https://www.businessinsider.com/ubers-history?r=AU&IR=T

Hopkins, C. (n.d.). Understanding the ‘gig economy’ and the changing world of work. Seek Employer. Retrieved from https://talent.seek.com.au/

John, N. A. (2016). Sharing Economics. In The Age of Sharing. ProQuest Ebook Central, 69-97.

Kagan, J. (2020). Two-sided Market Defined. Investopedia. Retrieved from https://www.investopedia.com/

Khan, J. (2015). What Is Dynamic Pricing & How Does It Affect Ecommerce. Business.com. Retrieved from https://www.business.com/entrepreneurship/

Laurell, C., & Sandstorm, C. (2015). Analysing Uber in Social Media – disruptive technology or institutional disruption? ISPIM Innovation Symposium, 1(1), 1-17.

Mascarenhas, N., & Wilhelm, A. (2019, April 11). Inside The Uber S-1: Who Owns What. CrunchBase News. Retrieved from https://news.crunchbase.com/

Railsware. (2019, July 31). Business Model Canvas Tutorial – Uber Business Model [Video file]. Retrieved from https://www.youtube.com/watch?v=dtf61YDCXDY

Reuters. (2019, December 6). Uber releases report confirming more than 3,000 alleged sexual assaults by its US drivers or passengers. ABC News. Retrieved from https://www.abc.net.au/news/2019-12-06/uber-sexual-assault-cases-over-3000-safety-report-reveals/11774474

Smith, J. (2016). The Uber-All Economy of the Future. The Independent Review, 20(3), 383-390.

Steinberger, B. (2018). Redefining “Employee” in the Gig Economy: Shielding Workers from the Uber Model. Fordham Journal of Corporate & Financial Law, 23(2), 577–596.

The Associated Press. (2016, April 21). Pennsylvania fines Uber $11M for operating despite cease-and-desist order. PennLive. Retrieved from https://www.pennlive.com/news/2016/04/pennsylvania_fines_uber_11m_fo.html

Uber Blog. (2019). How Uber’s dynamic pricing model works. Retrieved from https://www.uber.com/en-GB/blog/uber-dynamic-pricing/

Uber dominates but faces growing competition from Ola and DiDi in an expanding rideshare market. (2020). Roy Morgan. Retrieved from http://www.roymorgan.com/

Uber Drive. (n.d.). Background Check. Retrieved from https://www.uber.com/au/en/drive/requirements/background-check/

Uber Newsroom. (2019). Company Information. Retrieved from https://www.uber.com/en-AU/newsroom/company-info/

Uber Offerings. (n.d.). Retrieved from https://www.uber.com/au/en/about/uber-offerings/

Uber Suppliers. (n.d.). Retrieved from https://www.uber.com/au/en/suppliers/

Valente, E., Patrus, R., & Guimaraes, R. C. (2019). Revista de Gestao, 26(2), 143-160.

Yun, J., Zhao, X., Wu, J., Yi, J., Park, K. & Jung, W. (2020). Business Model, Open Innovation, and Sustainability in Car Sharing Industry—Comparing Three Economies. Sustainability, 12(5). doi:10.3390/su12051883

Xinglin Ge
About Xinglin Ge 2 Articles
A university student from University of Sydney who is studying Digital Culture and Film Studies.