Platform Business – Uber Technologies Inc.
Information technology has merited the business world in several ways that include the abilities of e-commerce. That is, the business now can fully operate in an online space and consumers do not need to make physical visits to grocery stores. Even more, the age of advertising has tremendously evolved from the traditional means such as TV and radio broadcasting, print media such as news and magazines, outdoor billboards, and telemarketing, to what we are currently experiencing as digital marketing that is guided by social media platforms and the big tech companies. Thanks to Artificial Intelligence (AI) algorithms, digital advertisement has further been tailor-made to be targeted to the relevant audience. This shift to the online space has proved to be the foundation of most platform businesses. What then, are platform businesses? Platform businesses are types of businesses that invest in creating value for consumers by enabling or rather facilitating the exchange between two or more independent stakeholders (Täuscher & Laudien, 2018). These participants are usually consumers and producers. As its name suggests, platform businesses provide a platform on which consumers and producers can trade or exchange. Platform businesses thrive in creating a large and scalable network of users (consumers and producers) and availing resources that can be accessed by these parties upon demand to enable seamless exchange. Moreover, they’re characterized by not owning or directly creating and controlling inventory through a sound supply chain. Examples of platform businesses include Facebook, Google, YouTube, Uber, Alibaba, Amazon, among other online platform retailers. In this article, I will focus on discussing Uber Technologies Inc., which is commonly referred to as Uber as a platform business with emphasis on its history, the company’s primary fields of operation, how it makes money, and the concerns that have been raised on its operation.
Traced back to their encounter in Paris in the year 2008, Uber Technologies Inc. was founded in 2009 by Garret Camp and his colleague Travis Kalanick after attending the LeWeb, an annual tech conference. The duo could not get a ride after the LeWeb conference and thought of the possibilities of accessing a ride via one’s phone. The business idea was found on the grounds of reducing the cost of direct transportation as well as incorporating the Mobile Application technology into getting transportation services (Shontell, 2014). The first Uber ride was occasioned on July 5, 2010, and it was a trip across San Francisco. In 2011, Uber had grown vastly and was ready to launch its international coverage. This was marked by its presence in Paris, where the idea was first developed. Since then, the company has tremendously grown with a variety of services that include UberPOOL and UberEats that were launched in 2015 and 2015 respectively. Later in 2019, the company went public with its IPO (Initial Public Offer) that saw Uber’s shares drop by 11%. To date, the company has centered its operations on offering a platform where riders can easily order for rides at the tap of a button and car owners can commercialize their cars as taxis where they offer rides via the Uber platform. Currently, Uber offers transport services that include ride-hailing, food delivery under the UberEats and Postmates products, package delivery, Couriers as well as freight transportation. The company’s global operation in more than 69 countries, which account for over 700 cities, has made Uber a big name in the transport and technology industries.
The company’s primary field of operation is within the transport industry. As stated above, Uber Technologies Inc. has a lion-share in the transport industry where it operates in the fields of ride-hailing, running deliveries under the UberEats and Uber Package modules, as well as the freight shipment services under the Uber Freight module. The company’s success can be evaluated by its operations, the global coverage, and its position against its competitors such as Taxify. To begin, Uber’s success can be assessed by the global print that the company has made. According to the written by Carson (2019) in her article on Forbes, Uber is the majority ride-hailing company in major states in Europe where Uber experiences regulation risks. This is true as indicated for the UK, Germany, Russia, Spain, and France. Moreover, the company has targeted and invested in the opportunities in Africa and the Middle East, where it has also dominated the ride-hailing service in major Nations in Africa Such as Kenya, South Africa, Egypt, and Nigeria. In its home region, the Americas, where competition is stiff with competing companies such as Taxify, and Lyft which own a good share of the market, Uber has successfully managed to dominate these areas. This, without a doubt, is a clear indication that the growth and success of Uber Technologies have been consistent. The success of the company can also be observed in the manner in which it is handling its competitors. That is, Uber seeks to merge with its competition such as Yandex in Russia, or outright acquire its struggling competitors such as Careem in the Middle East. This is in a bid to increase its market share against other giant competitors such as the Chinese Didi Chuxing. In a nutshell, the global coverage and domination in the transport industry, as well as the variety of services offered by the company is true proof of the success of Uber Technologies. Despite the success in the expansion of its operations, the company has reported losses and scandals that have equally damaged its progress since its IPO in 2019 where it lost 11% in shares.
How does Uber make money from its activities? This is a question that most people could like to get a detailed response to. As stated earlier, and the objective of this article is to discuss Uber as a platform business. With the platform business model, Uber offers a platform where producers (who are car owners in the Uber context) and consumers who include people in need of rides, and home deliveries, meet and exchange this service. With this, it is therefore established that Uber does not own any aircraft or fleet of cars as they belong to the drivers. Neither does Uber own any restaurants for the UberEats food delivery services? The company charges these stakeholders a 25% commission on rider’s fares or payment for deliveries made, for using its software or rather an app.
Just like any multinational tech company, Uber is no exception to criticism, legal suits, and well as public concerns on its operations. In 2014, Kalanick, the company’s CEO faced regulatory opposition based on his principled confrontation strategy. This principle entailed the company starting operations in cities without compliance or regard for the local regulations. If opposed, the company could seek lobbyists and public participation to campaign against the authorities and change the local regulations in its favor. Moreover, in the same year, 2014, the company was in the limelight for attacking its competitor, Gett, by deliberating fake orders to its competitor’s App through its employees, which they could later cancel. This was aimed at delaying service to Gett’s legitimate customers as well as waste the drivers’ time. Uber later offered an apology to Gett. On another account, Uber was accused of misleading the drivers on the amount of compensation and this led to the company paying a sum of $20 million to the US government (Carson, 2017). In the same year, the company was also accused of short-changing the drivers whereby their company did not give drivers the 80% of the fares they were entitled to. The company also handled customer data including the location of customers while in transit. It was found that Uber employees not only used this ability recreationally but also to track the location of some journalists and politicians. In the latest concerns, the company was sued in London, for allegedly having a racially biased facial recognition technology. This was a new feature that Uber introduced to ensure riders conformed to the Covid-19 precautions of wearing a mask. The technology entailed scanning the user’s face to detect a mask, after which the user could proceed with his or her ride. Users in London complained that the software was discriminating against people of color.
Bhuiyan, J. (2014, November 19). “God View”: Uber investigates its top New York executive for privacy violations. BuzzFeed News. Retrieved October 13, 2021, from https://www.buzzfeednews.com/article/johanabhuiyan/uber-is-investigating-its-top-new-york-executive-for-privacy.
Carson, B. (2017, January 19). Uber to pay $20 Million to FTC to Settle Claims that it exaggerated how much Drivers would make. Business Insider. Retrieved October 13, 2021, from https://www.businessinsider.com/uber-to-pay-20-million-to-ftc-over-driver-earning-claims-2017-1?r=US&IR=T.
Carson, B. (2019, February 21). Where Uber is Winning the World, and where it has Lost. Forbes. Retrieved October 13, 2021, from https://www.forbes.com/sites/bizcarson/2018/09/19/where-uber-is-winning-the-world-and-where-it-has-lost/?sh=6434a4e54d6e.
Shontell, Alyson (January 11, 2014). All Hail The Uber Man! How Sharp-Elbowed Salesman Travis Kalanick Became Silicon Valley’s Newest Star. Business Insider. Archived from the original on September 8, 2018. Retrieved September 8, 2018 from https://www.businessinsider.com/uber-travis-kalanick-bio-2014-1
Täuscher, K., & Laudien, S. M. (2018). Understanding platform business models: A mixed methods study of marketplaces. European Management Journal, 36(3), 319-329.