Rated as the second most disruptive company in the world in 2018, Uber was able to gain recognition and dominance at an early stage. Ever since there has been an explosion of vehicles on the roads, fewer parking spaces, and increasing pollution, the concept of ride-sharing began spreading. People who once feared sitting in a car with a stranger, now comfortably hail a ride alone or with other strangers. Sharing a ride with different people getting down at different stops has now become a norm.
Ridesharing has brought great convenience in the lives of people who look for instant gratification when it comes to online services. Uber enables users to book a private or shared car and have it pick them up at their desired location just with a few taps on their phone. The security and safety of the users and their personal details is of high priority and this has instilled trust of people in the ride sharing system. With more and more companies joining in the competition, the ride sharing market has been booming.
What is the profitability of the ride sharing market?
The market is expected to reach a market size of US$ 218 billion by 2025 at a CAGR of 19.87% (2018-2025). The profitability of the ride sharing market is driven by the rising demand for personal mobility and a declining rate of car ownership. Other factors that contribute to the success of the ride sharing market are the increasing penetration of smartphones and internet, and CO2 reduction targets.
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Uber was founded by Travis Kalanick and Garrett Camp in 2009 and rapidly gained traction. It is one of the leading ridesharing apps in the world that provides a major convenience to the public at large. Uber being the pioneer of ridesharing business, remains to be at the top due to its offerings.
Grabbing the right opportunities at the right time and understanding the needs of its users, Uber introduced peer-to-peer rides with UberPop and ridesharing with UberPool. Taking into consideration the luxuries of its diversified users, Uber offers a variety of rides such as Uber Black, Uber SUV, Uber X, and UberChopper. The company with a futuristic vision is now funding research on autonomous vehicles to enhance their services.
How profitable is Uber?
Being able to hold its position as the dominant ride sharing business since 2009, Uber has grown rapidly. Uber has established a strong market in over 700 cities and 65 countries around the world. In 2019, the revenue of Uber amounted to US$14.15 billion. With 75 billion Uber riders and 3.9 million full-time drivers, Uber is the most-loved ridesharing app. Here are a few statistics that reveal the profitability of Uber:
- Every day about 14 million Uber trips are completed.
- The share of Uber in the ride-sharing market in the US is 70%.
- Uber holds a 25% market share in the delivery market of the US.
- The self-driving unit of Uber is valued at over US$7 billion.
- Over 10 billion trips have been completed worldwide.
- The average income of an Uber driver is US$364 per month.
- The pre-IPO investment level of Uber stands at US$24.7 billion.
- In 2018, Uber was valued at US$72 billion.
What is the business model used by a ride sharing business like Uber?
Like most of the ride sharing businesses, Uber’s business model also consists of a driver, passenger, and the payments. The business model of Uber is outlined below:
- The passenger – Users download and register on the Uber app in their smartphones. They are able to book a ride through the app, track the ride, and make payment on completion of the ride.
- The driver – Anyone can download the app for Uber driver and register with a valid driving license. The driver is screened and enlisted in the system. The driver can then use their vehicle to offer rides to Uber passengers.
- Payments and fares – Uber sets fares based on the kilometers and charges a base fare. It also changes fares during peak hours. The passengers can make payments through direct debit from account, using a card, or even through cash in some countries like India.
What is the revenue model of Uber?
The revenue model used by most of the ride sharing businesses is similar. They use a combination of different revenue streams to earn their revenue. Uber uses the most effective revenue model which is a combination of commission from drivers, ads, and affiliated marketing.
- Uber charges 20% of the trip fare, as commission from the drivers.
- The company also increases the fare by 1.5-3 times during peak hours and high-demand hours.
- Uber also charges the passengers for any cancellation of rides.
- Lastly, Uber charges other businesses for affiliated marketing and advertisements on its app.
Uber has not only gained profitability due to the ride sharing business but has also expanded their services across multiple business verticals. Some of these segments are: UberEats for food delivery, UberRush for courier delivery, UberPets for pet transportation, UberKids for kids that require a child safety seat, UberMoto for transportation by motorcycles, and a few more. The diversification has helped Uber earn more revenue and gain the trust of millions.
Therefore, the profitability of a ride sharing business like Uber is immense provided that the business grabs the right opportunities, offers unique services to customers, and invests in diversification. The ride sharing market will continue to grow in the future, holding immense potential for new entrants, while the competition gets stronger.