What is UBER?

Uber Technologies Inc. is an American international transportation network company

headquartered in San Francisco, California and founded as "UberCab" by Travis Kalanick and
Garrett Camp in March 2009. It develops, markets and operates the Uber mobile app, which
allows consumers with smartphones to submit a trip request which is then routed to Uber
drivers who use their own cars. As of May 28, 2015, the service was available in 58 countries
and 300 cities worldwide. Since Uber's launch, several other companies have emulated its
business model, a trend that has come to be referred to as "Uberification".

Beginning in 2012, Uber expanded internationally. In 2014, it experimented with carpooling

features and made other updates. By mid-2015, Uber was estimated to be worth $50B. Many
governments and taxi companies have protested against Uber, alleging that its use of
unlicensed, crowd-sourced drivers was unsafe and illegal. It is estimated that Uber will
generate $10 billion in revenue by the end of 2015.

Uber Fund Raising and Investment Pattern

Total funding received till May 2015 is $ 5.9 Billion in 10 Rounds from 43 Investors.

1. Seed Funding- $200K on Aug 1 by founders Garrett Camp and Travis Kalanick.
2. First Round-$1.3M in Angel funding on Oct 15, 2010.
3. Series A -$11M on Feb 14, 2011 lead by Benchmark and partner Bill Gurley.
4. Series B - $37M on Dec 7, 2011 lead by Menlo Ventures and Benchmark.
5. Series C - $258M on Aug 23, 2013 lead by Google Ventures And Benchmark.
6. Series D-$1.2B on Jun 6, 2014 lead by BlackRock And Google Ventures.
7. Series E-
a. $1B on Feb 18, 2015 by Foundation Capital, Times Internet.
b. $1.6B / Debt Financing on Jan 21, 2015 by Goldman Sachs.
c. $600M on Dec 16, 2014 by Baidu.
d. $1.2B on Dec 4, 2014 by Lone Pine Capital, New Enterprise Associates, Qatar
Investment Authority, SherpaCapital, Valiant Capital Partners.

The company could further raise $1.5 to $2 B in funding and raise its valuation to $50 B.
Revenue Generation Model
Uber has three main pricing structures-

1. Fixed airport rates- For example, the fixed airport fee from downtown Chicago to

Midway is $65 and $75 to O’Hare, slightly less than two times that of cabs.

2. Standard fees which include per km and per minute charge.

3. Surge pricing- meaning that during times of high demand, Uber raises its prices up to 8

times the base fare. It uses surge pricing not only to exploit demand but to increase supply.

This pricing structure does not differ much from other car services but the convenience factor

provides it with a competitive edge.

PAYMENT OPTIONS FOR USERS IN INDIA

Uber India is experimenting with all different type of payment options. They started with
credit card payment option which was revoked by RBI as they were not following two factor
authentication or pin based authentication for payment. Actually Uber was using a loophole
in payment system, where pin or other authentication was not needed for foreign
payments.
Paytm Wallet

Then Uber India came with online wallet option with Paytm wallet which became quite
successful and paytm gained a lot of new customers, and uber lost of enough money in fake
account and real free rides worth Rs 600/- each initially. People used th fake account till the
uber didn't stop banning their account.
Cash Payment

Then Uber came with Cash payment system in Hyderabad, soon it will be rolled to other
cities if successfull in Hyderabad. Cash system is costing uber in revenue in trip cancellation.
They have no way to charge customer if customer refuses to take ride even after given 5
min grace period of cancellation.
Credit Card Payment

Now Uber is again here with Credit Card payment with two factor authentication like all
other merchant sites have. This time is as safe to use credit card with Uber as any other
website for e-commerce or any payment system in india.

The company usually keeps 20% of the revenue collected and rest with the drivers.

Many of the drivers are earning anywhere between Rs 75,000 and Rs 1 lakh per month.
Take the case of Lokesh R in Bengaluru. His income, he says, goes up to as much as Rs 1.25
lakh in some months. “On an average I earn around Rs 80,000 per month and if there is some
luck on my side in terms of faster pick-up, my earnings can beyond Rs 1 lakh,” he said. Before
the advent of these taxi-hailing services he was making somewhere around Rs 15,000-20,000
a month.

MARKETING STRATEGY
Uber’s business strategies mimic successful technology firms much more than transportation
firms. From the beginning, Kalanick did not want Uber to be viewed as a typical cab or car
service. He saw a largely unperceived opportunity to revolutionize a technologically stagnant
industry. Kalanick uncovered a way to use his employees’ technological abilities and
innovativeness to challenge the way the transportation industry works, which has left
established firms vulnerable to the Uber experience.

Uber came out of nowhere in India and made waves in a notoriously moody market
surprising the regulators, police and its competitors.

The secret of its fleet-footed business model was a killer phone application that made it
easy to book, track and pay for rides and tiny management teams which would target new
cities.

Uber would generally use three people to launch in a new city: one local CEO or general
manager, one community manager for marketing and customer support and one operations
manager for recruiting training and managing drivers. With a few extra support staff, Uber
was running India with only 40 employees in recent months, managers said.

The small teams would usually work out of temporary offices. Their base in Delhi for
example was three rooms in a small hotel in a New Delhi suburb.
To generate buzz, Uber held posh launch parties on the roofs of the Oberoi in New Delhi and
Four Seasons Hotel in Mumbai. In the first months of service Uber’s new customers gushed
as they were chauffeured around in Mercedes, BMW and Audi cars.

Its streamlined management teams would recruit drivers and train them on their system
that uses smartphones. Drivers said all they needed was the right paperwork and a few
hours of training to get on the Uber system.

As word spread that drivers could join Uber easily, make good money and get paid weekly—
a rarity in India–the number of drivers switching to Uber exploded. Some drivers said they
had even taken loans to buy new cars to become part of the system.

Uber used its popularity to roll out a medium-priced service and then an even cheaper car
service called that cost less than a ride in a three-wheeled auto rickshaws. With local
lenders, it even started offering loans to drivers that wanted to get new cars.

Technology

Technology can be divided into two components, the app technology for

consumers and the demand calculation technology at the firm. The app

technology is available for iPhone/Android devices and uses GPS from the

requested pickup destination to display a map of all available Uber cars in

the area. Uber calculates the nearest driver and plots your pickup time

accordingly. Each driver is also given an iPhone with an app to manage

incoming customer requests.

The firm employs prediction algorithms and heat maps to predict expected demand at

different times of the day. It analyzes how many times the

app is open and where clusters are located to help manage

taxi supply and demand. The result: “shorter waits for

riders and busier, more efficient days for drivers”. Another

source of operations management is what the firm calls

“God View”, which displays all the active Uber drivers and

pending customer requests in real time to ensure quality is maintained on the system (see

above).

Uber’s most important innovation is the way it prices its services-

“Surge pricing”— meaning that during times of high demand, Uber raises its prices, often
sharply—the company has been accused of profiteering and exploiting its customers. When
Uber jacked up prices during a snowstorm in New York last December, for instance, there
was an eruption of complaints, the general mood being summed up by a tweet calling
Uber “price-gouging assholes.”

In most cases, after all, dynamic pricing is a way for companies to maximize profits by
exploiting demand—charging higher prices to people who can and will pay more. As MIT
professor Yossi Sheffi has put it, it’s the “science of squeezing every possible dollar from
customers.”

That’s because most industries that use dynamic pricing have a limited inventory (an airline
flight has a set number of seats, a hotel a set number of rooms) and are trying to make as
much money from selling that inventory as possible. Uber’s case is different. While the
company also wants to make as much money as possible, it uses surge pricing not only to
exploit demand but to increase supply.

NISHANT AGARWAL

2014EE10464